development

Innovation + City = Prosperity

By Rider Foley For thousands of years thriving cities have fostered inventors and creators from which wealth is generated (1). Yet, in some cases, once prosperous cities have receded into the annals of history by turning inwards, threatened by change (2). There are lessons here to be learned for Phoenix.

Metropolitan Phoenix emerged from innovations in large dam construction that both generated electricity and provided a consistent supply of water to the desert landscape (3). Initially, the young city’s broad boulevards gave wide berth for horse drawn carriages to turnabout. This feature, coupled with the one-mile by one-mile grid of agricultural plots gave rise to a quilt-like pattern of uniform construction practices making inexpensive homes available to many newcomers (4). Combined, these innovations generated prosperity for land owning farmers, land developers and production-oriented home builders (5).

In the last thirty years, the construction industry drove cyclical booms and busts with higher highs and lower lows than almost every other city in America (6). The urban fringe was pushed outward, forcing citizens to cover more miles in their daily journeys to and from the suburbs. Phoenix’s economy followed the construction industry’s lead causing the enrichment of some and cyclical elation and suffering for all others (7). In 2006, 244,000 people worked within the construction sector, that dropped to 115,000 in the last quarter of 2011, across Arizona (8). In Maricopa County this translated into the lowest unemployment rate of 3.6% in the summer of 2006 and the highest unemployment rate of 10.3% in 2009 (9).

There are a number of ways to respond to a recurring problem. One is to ignore the lows and focus efforts on climbing back up to the peak. If you were here in the early 1990’s, you might remember a similar story of collapse in the construction sector written in the city’s history. By allowing the construction industry to boom and expand further afield to the exurbs of Maricopa, Buckeye and Surprise the crash in 2006 was steeper and more painful than the first time around.

So, will Phoenicians get back on the construction industry’s bucking-bronco ride? Sure, some may jump back on for a quick thrill, risking another painfully abrupt crash. For the rest of us I want to discuss an alternative, an alternative to the complete reliance on residential construction as the single most powerful factor in the economic sustainability of Phoenix.

To foster sustainable economy we need to assess the resources available upon which we can build. To take a lesson from history, we must not turn inwards and isolate our community from diverse and innovative ideas, inventions and creations. A wealth of smart, talented people in Phoenix need to be educated and supported in their entrepreneurial efforts. How do we do this? There are 39.5 million square feet of empty commercial space—16.8% of the total commercial/industry space—in metro Phoenix (10). Our cities must partner with private landowners to incubate small entrepreneurs. An example of this proposal can be found in the incubator space for small businesses in Chandler created from the skeletal remains of an old Motorola facility. Yes, it cost $5.7 million in renovations, but it drew talented and creative people to that city (11). Chandler is not alone, Scottsdale partnered with ASU at SkySong, offering mentoring, coaching and space for talented entrepreneurs to grow (12). Chandler and Scottsdale are not competing along the 101 corridor; metropolitan Phoenix is competing with San Diego, Boston, London, Shanghai, Mumbai, the world.

In Phoenix’s financial center, our bankers, lenders, venture capitalists and angel investors need to avert their longing gaze from the siren’s song of real estate investment. They must open themselves to the opportunities inherent in supporting the creatives, the innovators, the entrepreneurs that are fighting to have their ideas heard. A small investment would further an entrepreneur’s efforts, providing them the space to expand, and hire additional talent to produce, refine and ultimately sell their creations.

These resources (space, government commitment and funding) are dispersed throughout metro Phoenix and need to be marshaled for economic growth. I propose that we focus on developing the existing community assets to encourage the birth and growth of small businesses and in turn, redesign our future economic model. We can try to attract corporate divisions to Phoenix. Those types of efforts should not stop. But our emphasis should be on demonstrable support for local entrepreneurs. The future challenges for the Greater Phoenix Economic Council (and their municipal counterparts in economic development) might be to keep our local companies here, rather than working so hard to bring in another distribution center. Retaining local companies, already embedded in the social, cultural and talented pool of local employees, might just be an easier task than always seeking to lure in large corporations.

One society here already faded into the Valley’s desert sands: the Hohokam (13). Communities often turn insular, closed to new ideas or unable to adapt to stress, when faced with internal or external pressures, and fade into history (14). Phoenix could vanish once again.

The world has changed. Your neighboring cities are not the competition; they are a source of future prosperity. Investing in our regional community will enable the most creative citizens to overcome today’s challenges, while taking the lessons learned from the past, and building our capacity to invent the future.

Contributor Biography

Rider W. Foley, a Graduate Student at the School of Sustainability and Research Assistant at the Center for Nanotechnology in Society at Arizona State University

References:

1. Kotkin, J. 2005. The city: a global history. Random House Inc. New York, New York.

2. Kennedy, P. 1987. The rise and fall of the great powers. Random House Inc. New York, New York.

3. Dutton, A.A. 2002. Arizona now and then. Westcliffe Publishers. Boulder, CO.

4. Gober, P. and Trapido-Lurie, B. 2006. Metropolitan Phoenix: place making and community in the desert. University of Pennsylvania Press. Philadelphia, PA.

5. Gammage Jr., G. 1999. Phoenix in perspective: reflections on developing the desert. Herberger Center for Design Excellence. Tempe, AZ.

6. The Economist. 2005. The south-western economy: dreams in the desert. Published Nov. 24.

7. Henig, C. 2010. Real-estate boom-bust: lessons learned. Phoenix Business Journal. Published March 26.

8. Bureau of Labor Statistics. 2011. Databases, tables, and calculators by subject. Retrieved from: http://data.bls.gov

9. Arizona Department of Administration. 2011. Arizona’s workforce employment rate – employment & population statistics. Retrieved from: http://www.workforce.az.gov/pubs/labor/PrNov11.pdf

10. Colliers International. 2011. Q3 2011 Industrial: Phoenix research and forecast report. Retrieved from: http://dsg.colliers.com/document.aspx?report=1853.pdf

11. Scott, L. 2011. Chandler business incubator is nearly full at 95%. Arizona Republic. Published May 7.

12. Casacchia, C. 2008. SkySong Arizona State University Scottsdale Innovation Center celebrates first building opening. Phoenix Business Journal. March 27.

13. Redman, C. 1999. Human impact on ancient environments. University of Arizona Press. Tucson, AZ.

14. Tainter, J.A. 1988. The collapse of complex societies. Cambridge University Press. NY, NY

Digital Farm Collective

By Matthew Moore The Digital Farm Collective is an international initiative to record and share footage, philosophies and scientific data on the growth of produce. Using time-lapse films, interviews with farmers and agricultural data, artist Matthew Moore hopes to contribute to a more sustainable global food system by sharing and preserving the growing practices of produce farmers from all over the world.

Moore is a fourth generation farmer whose land and agricultural practice are quickly being overcome by suburbia. He was inspired by his personal experiences and interactions with other farmers to create the "Digital Farm Collective." Using time-lapse photography, Moore began filming everything he grows and inviting other farmers to do the same. The arranged short films show a single production cycle of each plant or tree. These films, along with interviews with farmers and measurements of the conditions in which the plants are grown, will be compiled to create an international database, or living library, to engage, educate and reconnect people with their food by sharing the stories of the plants and of the farmers and families that grow them.

The website, digitalfarmcollective.org, will be the repository for all of the footage and data that are garnered from efforts to document cultivated plants from around the world. Each selected farmer is sent a time-lapse video package to record the lifecycles of selected crops from seed to harvest as well as a system that monitors the environmental conditions under which each plant is grown. Their personal growing history and philosophies are also recorded in order to retain and share the cultural knowledge of farmers from around the world. In a time of shifting growing regions and movement away from individualized farming practices, the images and information gathered will serve as important sources for consumer engagement and education, curriculum development and scientific research, and as a social network of involved growers and farming professionals.

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Contributor's Biography:

Matthew Moore was born in 1976 in San Jose, California. He lives and works in Phoenix, Arizona. He received a B.A. in studio art and art history from Santa Clara University, California, in 1998 and a M.F.A. in sculpture from San Francisco State University in 2003. His work has been shown around the country, including at the Armory Center for the Arts, Pasadena, California (2009), the Walker Art Center, Minneapolis, Minnesota (2008), and MASS MoCA, North Adams, Massachusetts (2005). He has been featured in international publications including Metropolis Magazine, Dwell and Architecture Magazine, as well as Mark Magazine and Dazed and Confused of Europe.

Building Businesses through Cleaner Cooking Fuels in Ghana

by Edward Burgess, Research Editor for The Sustainability Review For this interview, we spoke with Dr. Mark Henderson, Director of the Global Resolve project at Arizona State University. We discussed some of his latest research efforts in Ghana, Africa where he and his colleagues are working with local villages to design technologies and businesses that could improve the health and well-being of the local people and their environment.

The Sustainability Review: Dr. Henderson, you direct the Global Resolve program at Arizona State University. Can you tell us about it?

Dr. Mark Henderson: The purpose of Global Resolve is to help start sustainable economic development projects in the developing world. The way our process works is that we first visit communities in the developing world to conduct interviews and really immerse ourselves there. We want to find out what the community needs and help solve the actual problems they face, usually through the development of some technology. Ultimately, we also want to convert that technology into a business venture for the community. The hope is that the community could benefit from these ventures in several ways. First, they could get employment. Second, it could solve a problem they face. Third, they could sell the products and get income. And finally, they could be a role model for other communities and spread the business.

TSR: What projects are you currently working on?smoky cooking fuel pull-quote

MH: The two latest examples we have are the "gel fuel" and the "twig light" projects. I’ll talk about gel fuel first. In a nutshell, this idea grew out of a UN development project to use ethanol as a smokeless cooking fuel and reduce the incidence of respiratory disease by replacing wood and charcoal. The main problem with liquid ethanol is that if it spills it can spread a fire throughout the whole house. In order to make it safer and a better product, we gel it—or make it like a jelly. Have you heard of Sterno?

TSR: You mean the little cans for keeping food warm?

MH: Yes it’s similar to those but using ethanol instead of methanol. Part of the reason we want to provide a new fuel source is that smoky cooking fuel is a leading cause of death among children worldwide. If we can remove the smoke from the fuel then hopefully we can save some lives. And perhaps we can also create some businesses around producing the fuel. Right now, many villages create charcoal fuel to sell by pruning branches from trees and smoldering them. But it’s very smoky and it’s also deforesting the jungle, so it’s not a sustainable solution.

The gel fuel actually is a sustainable solution if we can use biomass that can be converted to ethanol. Corn is one example that is used in the U.S., but you can also use sugarcane and many other plants. And if we can make the process of converting cellulose more affordable then we can use any cellulosic plant—maybe grass or bamboo, which grows very fast, like a weed. Using cellulose removes the competition between food and fuel.

TSR: So the technology is not quite there yet for cellulosic ethanol?

MH: You can do it, but it’s expensive because of the special enzymes needed. We’ve just concentrated on using starchy and sugary biomass like sugarcane or corn.

TSR: In terms of sustainable harvesting, are there implications for land use if this takes off?

MH: Sure, those are definitely issues we need to consider. And there are also issues to consider for social sustainability, too. If you start creating this gel fuel, you might create unintended consequences that disturb the cultural activities in the community, and we want to avoid that. For example, women often spend several hours a day gathering wood. If we try to implement gel fuel, we have now taken that social time away from the women. That time spent gathering wood is like their "coffee klatch." Interfering with this social time would be an unintended consequence of the technology and may be a bad thing.

TSR: Are there any other unintended problems with the gel fuel technology?

MH: Another problem is that if you remove smoke from houses, the incidence of malaria increases. The smoke drives away the mosquitoes that transmit the disease and they come back if you take it away. So how do we balance this? Just think—in the U.S., how do we drive away mosquitoes from your patio?

TSR: (laughing) Well, we build a whole screen around it!

MH: Yes we do! But what else might we do?

TSR: Well, maybe we could use one of those scented candles.

MH: Right, maybe we could add something like Citronella in the gel fuel. Right now, we’re not sure if that would be toxic since the fuel is used for cooking. I always assumed it was safe, but those are things we need to find out when we think about how to minimize the disruption in the community.efficient stove pull-quote

In addition to simply producing the fuel, we have to make sure it’s an affordable solution. Nobody is going to buy it if it’s more expensive than what they already have. Right now, harvesting wood is free, which is a hard price to beat. So instead we want to see if the village could actually sell the gel fuel to the nearest larger city where people have to pay for wood and charcoal. We’re trying to arrive at economic parity with those other fuels. There is a stove being built in South Africa that is about 15% efficient, but that wasn’t quite good enough, and the gel fuel was too expensive. To help bring the price of the fuel down, we designed and built a stove that’s more than twice as efficient as the existing South African stoves. Brad Rogers, another professor in Global Resolve was in charge of this. He’s the one who really understands the thermodynamics of the gel fuel process.

TSR: Do you have any trips planned for the near future?

MH: We’re going to the village of Domeabra in Ghana in a few weeks with the new stove design. Our plan is to find out if we can produce the stoves there. We’re also going to try to ratchet up the production of gel fuel in the village and hopefully help them start a business. We are bringing a great team including myself Brad, John Takamura in design and Dan O’Neill in technological entrepreneurship and eight students and two teaching assistants. We also have five MBA students from Thunderbird School of Global Management who are staying longer to help develop a business plan.

TSR: So are they connecting the villagers with the market in the city?

MH: Yes, eventually. Right now, we’re supplying fuel to a school that we’ve partnered with in Kumasi, Ghana. The School Director works with other schools in the area, so if we can start with her, I think the village could start using the schools to create a larger business that would be successful.

TSR: How did you get started on this type of research?

MH: Well the first step was deciding to do it. I’m an engineering faculty, and so is Brad, and we had another faculty member in Global Studies (David Jacobson) and another in Business (Rajiv Sinha). We all had coffee at Starbucks one day in 2005 and asked ourselves how we could match our interests together.  We soon realized we’d all been having similar ideas about helping sustainable development in the "base of the pyramid" countries. Once we realized we’d been thinking the same thing, we began to build upon that to create a program that would not only help the countries but could also bring in other faculty and students.

TSR: Were there any breakthroughs in technology that helped Global Resolve projects?

MH: Yes—a year ago a grad student at our Polytech campus developed the concept for the "twig light" that I mentioned earlier. It’s a device that generates electricity from heat without a battery. You don’t need the sun either. All you need is heat. In many places, a household might be cooking with charcoal as the sun is going down, and there’s a need for a light source. With the twig light, all you need to do is put a few hot coals in the top, put the bottom in water as a cooling source and in the middle there is a "thermoelectric generator." It produces enough voltage to power LED lights or a cell phone. This is different from solar devices, which can be quite expensive and which have a battery that wears out. And of course, you can’t recharge a solar device at night.

TSR: What’s the reception to having visitors? Is there any negative reaction along the lines of: "Who are these Americans that think they know all the answers to our problems?"

MH: Well, the truth is that we honestly don’t know the answers to their problems. Only they know what they need, so they help us come up with solutions, and we offer what we can by trying to help out. We enter the community as learners. It’s very important to make that distinction because we don’t have the answers, and they truly are the experts in their lives and needs.

One exercise we’ve used in the past to help convey this notion is Rural Village Appraisal, which includes a collaboration exercise to have the community help us draw a map of their village. We might use charcoal or colored paper or sometimes just twigs and leaves to have them show us where the chief’s house is, where the toilets are, the church or mosques, the water sources, the rivers, roads, etc. Through this exercise they show us something about themselves and their needs. We show that we’re there to learn, and hopefully we can become trusted partners. That’s the key—to have trust on both sides. But in general the community members are welcoming and excited about the possibilities of improving their lives.

TSR: What are the biggest challenges the projects face now?

MH: Right now, our big challenge is starting the businesses. The way people in Ghana do business is not necessarily the way we do it. Even after testing out the solutions, we still have to really see how business practices work and see if there is a way to help. Often, it can be very difficult for someone in Ghana to start a business. If someone there is living on a dollar a day, on the brink of starvation, they don’t have time to spend 24/7 starting a new business. We have to help the communities understand how to create a business at a low risk. There are ways to do that: one option is micro-finance through groups like Grameen Bank.

Also, we can’t just go and then come back and ignore the project. There has to be continued partnership with the community. We have set up a partnership with the Center for Energy the Environment and Sustainable Development (CEESD) in Ghana. It’s run by two faculty members at Kumasi Polytechnic University who did graduate fellowships with Global Resolve. It’s a great partnership because we need local partners for this to work and they can receive some funding from Global Resolve.

TSR: Where do you think this might be in five to ten years?

MH: There are so many problems in the developing world. In the past, there has been over a trillion dollars put forth to solve these problems, mostly through government aid and philanthropy. But what you often find is that this results in a lot of abandoned technology. Maybe a tractor was donated, but it stopped working, and there was no plan or funding set aside for maintenance. People have no choice but to just leave it to rust in the jungle. It could be a result of how the aid is administered. Sometimes the way aid filters down through the governments to the people doesn’t address what people need. It may never actually "trickle down" if there is corruption.

There are a few books I use to illustrate the problem to students. One is Jeffrey Sachs’ The End of Poverty, which suggests a top-down aid approach. Another is Creating a World Without Poverty by Mohammed Yunus, the founder of Grameen Bank. He supports a more bottom-up approach through micro-loans. There is also William Easterly’s White Man’s Burden, which advocates for more village-level interaction, which is primarily what we try to follow. It’s slower because you’re dealing with one community at a time, but if it’s successful, the solutions should propagate out and spread. Additionally, we’re more certain the aid gets to the people who need it. And if we’re smart, we can sit back and listen to the community's needs directly, not force our solutions onto someone else. If we get this gel fuel business off and running, we hope there would be other gel fuel businesses popping up around it.

TSR: How has your thinking about sustainability problems shifted through the course of this research?

MH: For a long time, I thought sustainability meant only environmental sustainability. But now we talk about other aspects like cultural and social sustainability. And economic sustainability—it can’t be a flash in the pan that has big success and then dies. It has to grow rationally and reasonably over a period time. We also want to have sustainability in other areas like education—giving people the opportunity to educate themselves about the business, the technology, the supply chain and so on.

TSR: So you’re really talking about building capacity here.

MH: That’s right—we’re trying to build capacity in the villages. And sometimes building capacity means doing something like providing clean water. The community won’t be able to produce gel fuel, for example, if they are primarily worried about their health. To help bring up the capacity of the village we just had donations from Desert Cross Lutheran Church in Tempe provide about 700 water filters and by holding a benefit concert to collect funds to bring electricity to the village. Sometimes, you have to provide some basic needs before people can start to think about building a business.

TSR: Are there any important skills that are helpful this type of work?

MH: We love diversity. We can’t do this with just engineering or business or sustainability students. We need English majors, film and video, nursing, global health, you name it! Anthropology is especially important since we do a lot of ethnographic work. There are no prerequisites.

TSR: Are there any memorable stories to share from one of your trips to Ghana?

MH: Probably the most memorable time was the first trip I took to Ghana. I went by myself to a small village of 500, called Fawomanye. It was somewhat intimidating since it was my first visit to Africa. When I got there, the villagers held a meeting under the large fig tree near the chief’s house.  When I talked to the chief, it was actually through a "linguist" who then communicated to the chief. I started simply by saying, "I am here from Arizona State and Global Resolve." I told the village that I was there to understand their problems and hopefully provide solutions. They said, "We need two things: clean water and lights at night. We don’t want to have to go to bed when the sun goes down. We want a social life like the rest of the world. And we want our kids to be able to do homework at night." It was an extraordinary experience just being able to connect immediately like that without going through a government or university; we just went straight to the village. That experience helped guide the approach we take now.

Contributor Information:

Mark Henderson is a professor of Engineering at Arizona State University at the Polytechnic campus. He founded the ASU Global Engineering Design Team and also is co-founder of GlobalResolve (http://globalresolve.asu.edu). His research has led to over 60 papers and a textbook in computer-aided design and global engineering.

Too Much of a Good Thing: The Relationship between Money and Happiness in a Post-Industrial Society

By Alison Dalton Smith Happiness is considered a universal human aspiration, but the means to achieving happiness has become inexorably entangled with gaining material possessions.  In common paradigms of economic development, Gross Domestic Product is used as a proxy for measuring the well-being of a nation’s citizens.  While this is often true in impoverished nations where basic needs are not met, there is a threshold point past which increasing economic gains no longer necessarily deliver increases in human well-being.  Beyond this threshold, economic measures are no longer adequate for accurate measurement of a nation’s human well-being. In fact, this myopic focus on economic growth has created an unsustainable way of life that is increasingly unfulfilling for those that are engaged in the cycles of consumption.  In this paper, I will address both recent patterns in human well-being in industrialized nations and more comprehensive indexes that quantify human well-being.

Sustainability is the interaction of three aspects of life: environmental, economic, and social. Citizens and researchers alike accept there are causal effects of increasing economic activity and resulting environmental degradation. The link between the social aspect of life and economic activity was long thought to be a positive one;  I contend that this assumption only holds up to a certain point.  I will not try to pinpoint the threshold in this paper, but will only bring together different sources of information to show that increasing economic growth does not bring positive social returns in all cases.  The growth of literature on this topic began with psychology and has recently been developed by economists.  I will explain the terminology used and data sources in the first part of the paper, examine the data trends in the next part, and finally make recommendations for how we can address the issues presented in the paper.

The concepts of happiness, well-being, and life satisfaction have been used interchangeably in the literature addressing connections between economic growth and social returns, although recent studies show that there are significant differences between happiness and life satisfaction (Veenhoven, 1991; Diener & Biswas-Diener, 2002). Peggy Schyns (1998) found the correlation between life satisfaction and happiness to be .90, which supports this interchangeable use.  However, as quality of life studies have progressed, some researchers have begun to separate the two.  Happiness has been defined as affective (influenced or resulting from emotion), and life satisfaction as cognitive (the process of thought) (Diener, 2004).  Happiness research has generally been based on surveys that ask just one question.  Subjective well-being (SWB) is a term often used to indicate a more comprehensive approach to life satisfaction that incorporates happiness and other judgments of the overall quality of life (Hoorn & André, 2007).

The national accounts of well-being, created by the New Economic Foundation, is a completely different approach to well-being assessment.  People are asked not one, but 50 questions about well-being from personal and social aspects of their lives.  This approach is especially important because it can be used across socio-political scales, from tribal to national levels. (New Economics Foundation, 2009).

Amartya Sen’s capabilities approach is another atypical approach to human well-being assessment.  This approach, developed in the 1980s, is different from the data analysis approach. The freedoms of individuals are the building blocks and, "attention is thus paid particularly to the expansion of the ‘capabilities’ of persons to lead the kind of lives they value and have reason to value," (Sen, 1999, p. 18).  The benefit of using this paradigm is that it can be applied across values systems, cultures, languages, and scales because it allows the user to define the values intrinsic to the evaluation (Sen, 1999).

Richard Easterlin challenged the perception that economic growth would lead to increases in happiness in his seminal paper, Does Economic Growth Improve the Human Lot? (1974). The findings of his paper are known as the Easterlin Paradox.  He made three conclusions that led to debate and research for the next thirty years.  The first was that people with higher incomes are happier than those with lower incomes within the same country. He claims causality from these findings from income to happiness (Easterlin, 1974).

Second, he concludes that his findings for individuals does not hold up for countries; "…if there is a positive association among countries between income and happiness it is not very clear," Easterlin, 108, 1974).  His third conclusion is that as a country’s GNP increases, its population does not get happier.  He only has data from the United States, as there were no other countries with time-series data on this issue.  These last two findings have not held up over time. In-depth analysis on this topic can be found in Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox (Stevensen & Wolfers, 2008) and Subjective Well-Being: Three Decades of Progress (Diener, Suh, Lucas, & Smith, 1999).

Easterlin’s first finding that rich people tend to be much happier than poor people was corroborated by subsequent research (Diener & Biswas-Diener, 2002).  While rich people tend to be happier, this is only part of the picture.  Rich people do not get any happier with more money (Scitovsky, 1992). In fact, from 1946- 1970, per capita real income rose by 62 per cent in the US, but reported happiness did not change substantially (Scitovsky, 1992).  In the rest of the paper, I will address this occurrence.

Between 1946 and 1996, per-capita real income rose by a factor of 2.5, but average happiness has remained the same (Frey & Stutzer, 2002). Figure 1 shows a perplexing trend that has occurred in the United States.  Since the mid-1960s, the percentage of very happy people in the United States has actually decreased slightly while GDP per capita has skyrocketed. Figure 2 shows that a similar trend has occurred in Japan.

income_and_happiness

satisfaction

Figure 3 shows cross-national data of a nation’s GDP per capita and SWB Index.  From the graph, we can see that GDP is not the most significant determinant of a country’s SWB.  Countries with similar cultural patterns and political states tend to cluster together.  While high SWB does not rely solely on high per capita GDP (there are both rich and poor countries with high SWB), it does appear true that low SWB does not occur in countries with high per capita GDP. In countries where large numbers of the population are extremely poor, people have too little to eat, or are homeless, happiness measures do increase when everyone’s income rises (Frank, 2007).

"]Figure 3: GDP per capita vs. Subjective Well-Being for the Different Societies (Inglehart, R. Foa, C. Peterson & C. Welzel (2008).)[A1]In developed countries, Richard Layard found a peculiar occurrence: as people gained more income, their perceived income requirement rose.  People base their satisfaction on their current income based on what they have and what they want to have.  As the gap between their wants and needs widen, their current incomes become insufficient.  Because of this phenomenon, Layard concludes, it is difficult for economic growth to improve happiness (Layard, 2005).

Ruut Veenhoven suggests that wealth is subject to the law of diminishing returns after a country surpasses industrialization (Veenhoven, 1991).  This finding was repeated in Ed Denier’s international study.  He showed that happiness rose sharply as GDP per capita increased when GDP was at a basic subsistence level, but after a nation industrialized, happiness rose at a slower rate (Diener & Biswas-Diener, 2002).

In addition to the diminishing returns on income, people tend to adapt to their circumstances, thereby negating the gains in happiness that they initially experienced (Myers, 2000). Figure 4 shows how people adapt to an increase in income and form new aspirations based on their income level.  An increase in income brings about a downward shift in the aspiration curve, which neutralizes increases in happiness (Frey & Stutzer, 2002). This may lead one to believe that any policy aimed to improved people’s happiness is futile. However, Brickman and Campbell contrarily show that after people experience an initial uptick in their happiness due to life circumstances, they do not go all the way back to a point of neutrality, but to a point slightly higher than they were before (Brickman & Campbell, 1971).

Figure 4: Happiness and Aspiration Shifts (Frey & Stutzer, 2002)

The following explains the scenario above:

"Initially, people have a certain aspiration level A1 so that income Y1 produces happiness H1. Raising income, say from Y1 to Y2, raises happiness from H1 to H2… However, over time, aspiration adjusts to the higher income level.  The aspiration level curve A1 shifts downward to Am. Ex post, the rise in income from Y1 to Y2 does not produce any increase in happiness…" (Frey & Stutzer, 2002).

Income inequality within a society can lead to unhappiness through failure to meet aspirations.  Juliet Schor noted that in the late 1980’s income inequality grew and people were feeling deprived in comparison to those at the top.  Even people who made $100,000 a year felt poor because they were comparing themselves to the nuevo riche of the day (Schor J. , 1998).

Other factors have also contributed to stagnation or decrease in overall happiness in developed countries.  Both men and women have increased their working hours since the 1950s.  From 1969 - 1987 women have increased their hours yearly by 305 hours and men's hours have increased by 98.  In addition, Americans are working more overtime, and paid time off has been decreasing since the 1980s (Schor J. B., 1991).  The time spent to get to these jobs has also increased.  Commuting is often a solitary and stress-inducing activity (Baker, 2004).

Perhaps the strongest explanation to the paradox of money and happiness lies in how GDP is calculated. GDP analysis shows that the United States has gotten much wealthier as a whole over the past thirty years.  However, by aggregating incomes across classes, GDP masks income distribution.  At the same time that happiness began to stagnate in the US, so did real household wages among the working classes.  Figures 5 and 6 show that prior to 1979 all income brackets were growing relativly equally, but since the 1980s incomes at the top have increased incredibly, while the bottom and middle classes have seen much lower growth rates.   So, while GDP steadily increased, most Americans were not getting significantly richer.

Figure 5: Changes in before-tax household incomes, 1949-1979 (Frank, 2007)

Figure 6: Changes in before-tax incomes, 1979-2003 (Frank, 2007)

Indexes other than GDP may be more suited to capturing life as most humans experience it. Below I will briefly describe a few alternative indicators: the General Progress Indicator, the Happy Planet Index, and the National Accounts of Well-Being.  I have intentionally left out the much-cited Human Development Index.  While the index does indeed provide another perspective on development progress, it uses GDP as an indicator, which does not get us to a new paradigm of progress or development.

Each of these indicators has been accused of being biased towards one policy agenda or another--that they each incorporate value judgments.  Cobb, Halstead, and Rowe point out in If the GDP is up, Why is America so Down? that GDP is also not value-free; in fact, it values the social and environmental aspects of life at zero. It also fails to differentiate between money spent on negative circumstances--such as the revenue from a divorce and the cleanup and restoration efforts after a natural disaster--and money spent positive events (Cobb, Halstead, & Rowe, 1995).

The General Progress Indicator begins with personal consumption expenditures, weighted by an index of inequality in the distribution of income.  Additions to production are made for non-market benefits associated with volunteer work, housework, parenting, and other socially productive efforts as well as services from both household capital and public infrastructure (Talberth, Cobb, & Slattery, 2007).

The Happy Planet Index (HPI) is another more comprehensive index.  It focuses more on the ecological cost of development.  The indicators used are ecological footprint, life-satisfaction and life expectancy (New Economics Foundation, 2009).  The HPI was created by the same organization responsible for the National Accounts of Well-Being and can be used a policy tools in tandem with them.

Development directly affects human well-being. Studies have shown that increasing wealth, whether measured in income growth, GDP, or GDP per capita, does lead to increases in well-being when basic needs are not met.  However, that link has led our policy makers, politicians, and academics to ignore an equally obvious occurrence that after a threshold point in industrial development, that relationship no longer holds up; increasing wealth then has diminishing returns to human well-being.

An increasing awareness of a growing global environmental crisis has prompted worldwide movements to change destructive behaviors. However, the idea of "cutting back" is often falsely associated with reducing one’s happiness or well-being.   Human well-being is at the forefront of development policy and incredibly important to governments around the world, as shown by the Millennium Development Goals.   Development policies need to expand to address the whole spectrum of development—both in developed and developing nations.  By recognizing that increased consumption may not increase human well-being in developed nations, policies may be designed that not only benefit people, but reduce their impact on the planet that sustains them.

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Contributor's Biography:

Alison Dalton Smith works in international higher education development at the University Design Consortium at ASU.  Her interest in international development results from having lived in Latin America, Asia, and Europe.  She is particularly interested in the link between consumption and standards of living.