The Economics of Happiness.. Where Does Egypt Stand?

By Heba Youssef, Economic Analyst

CAIRO - 19 April 2017: During the past weeks, people in Egypt started hearing about “The International Day of happiness"; a new and unfamiliar term to them. As soon as the celebrations of the International Day of happiness began, Egyptians started showering the social media with humorous and sarcastic posts regarding that issue, as their tradition in making fun of new unfamiliar ideas.. so what is "The International Day of happiness"?

The International day of happiness is a day to be celebrated by the world every year on 20th March. It has been determined by the United Nations, where all its 193 member states have adopted a resolution calling for happiness to be given greater priority. This idea has originated back in 2011, when the UN General Assembly adopted a resolution which recognized happiness as a “fundamental human goal” and called for “a more inclusive, equitable and balanced approach to economic growth that promotes the happiness and well-being of all peoples”. In 2012, the first ever UN conference on Happiness took place and the UN General Assembly adopted a resolution which decreed that the International Day of Happiness would be observed every year on 20 March, and it was celebrated for the first time in 2013.

The evolution of these ideas introduced new concepts to the world, where 'progress' should be about increasing human happiness and wellbeing, not just growing the economy. This, in turn, has surely had its impact on that science called “Economics”. Economics has always been viewed as the branch of knowledge concerned with production, consumption, allocation of resources and transfer of wealth; one that is full of theories, assumptions, and models. And although it is a social science that incorporates human behavior and decisions within its fundamentals, it has always perceived concepts like wealth, income or profit, as the goals to be maximized; hence focused on indicators related to them like growth, GDP, unemployment, inflation… etc. to be tracked, measured and analyzed.

In the past few decades, new areas of research have appeared in Economics, in line with the fast changes occurring in the world, where new technologies have widely spread and information has become easy to access. Meanwhile, international organizations have started new initiatives and programs aiming for achieving prosperity and well-being in the world. One of these areas is The Economics of Happiness; a science that studies happiness, positive and negative feelings, well-being, quality of life, life satisfaction and other related concepts through quantitative and theoretical methods. This science typically treats such happiness-related measures, rather than wealth, income or profit, as something to be maximized. It combines economics with other fields such as psychology, health, demography and sociology. This field has grown considerably since the late 20th century, as methods, surveys and indices to measure happiness and related concepts have developed. These concepts are measured subjectively through surveys and objectively through linking it to income, education and lifespan.

Ever since the evolution of the Economics of Happiness, a number of international organizations and economists have made considerable efforts towards its study and measurement. In June 2016, the Organization of Economic Cooperation and Development (OECD) committed itself “to redefine the growth narrative to put people’s well-being at the center of governments’ efforts”. The OECD has developed its “OECD Better Life Index”; which allows people to visualize and compare well-being across countries, based on 11 topics - like education, housing, environment, and so on – the OECD has identified as essential, in the areas of material living conditions and quality of life. The Index is an interactive tool that allows you to see how countries perform according to the importance you give to each of 11 topics that make for a better life.

In a recent speech, the head of the UN Development Program (UNDP) spoke against what she called the “tyranny of GDP”, arguing that what matters is the quality of growth. Economist Mark Anielski has developed a new and practical economic model called Genuine Wealth, to measure the real determinants of well-being and help redefine progress. In his book, “The Economics of Happiness”, he questions why our measures of economic progress do not reflect the values that make us happy: supportive relationships, meaningful work, a healthy environment and spiritual well-being. He explains how economics, accounting, capitalism, and banking, which dominate our consciousness, can be reoriented towards the pursuit of genuine happiness. He also explains how to measure Genuine Wealth, which consists of five capital assets: human, social, natural, built and financial. He discusses how nations, governments, communities and businesses are using the Genuine Wealth model to build the new economy of well-being.

One of the most developed efforts in this regard is the United Nations “World Happiness Report”, which is released annually on the International Day of Happiness (20th March), since 2012. The report ranks 155 countries by their happiness levels, and it continues to earn global recognition; where happiness indicators got introduced to policy makers in the decision making process. Moreover, happiness is now increasingly considered to be the proper measure of social progress and the goal of public policy. The main purpose of the report was to measure and understand subjective well-being. Analysis of the levels, changes, and determinants of happiness among and within nations are based on individual life evaluations, where roughly 1,000 per year in each of more than 150 countries answer the question asking people to evaluate the quality of their current lives on a ladder where 0 represents the worst possible life and 10 the best possible. Average life evaluation scores are calculated for each country, based on averages from surveys covering the most recent three-year period (2014-2016). The report results are quite interesting and are worth some detailed analysis in the coming paragraphs.

Country rankings depend only on the average scores reported by the respondents, where the scores are explained mainly by six key variables, two of them are objective measures: GDP per capita and healthy life expectancy, in addition to four subjective variables covering different aspects of the social and institutional context expectancy: social support (as measured by having someone to count on in times of trouble), social freedom (perceived freedom to make life decisions), generosity (as measured by recent donations), and absence of corruption (in government and business).

Comparing country rankings in the World Happiness Report 2017 to that of 2016, a lot of year-to-year consistency is noticed in the way people rate their lives in different countries; as no dramatic changes have occurred between both years. The top 10 countries are the same countries that were top-ranked in World Happiness Report 2016 Update, with slight changes in places. The top four countries are Norway, followed by Denmark, then Iceland and Switzerland comes in the fourth place, while the bottom four countries are Syria, Tanzania, Burundi and finally Central African Republic in the last place; where there is a four-point gap between the 10 top-ranked and the 10 bottom-ranked countries.

Ranking of Happiness in 2017 report shows that Egypt has taken the 104th place compared to 120th place in 2016 report, moving up 16 places in level of happiness, showing some improvement in both rank and score, as its score has improved from 4.362 to 4.735. However, this improvement is also caused by more countries becoming unhappier than Egypt, moving down the index and causing Egypt to move up in rank. In fact, measuring the changes in Happiness from 2005-2007 to 2014-2016 shows a decrease in the level of happiness of Egyptians between the two periods by 0.624 points. Egyptians' unhappiness is mainly explained by low levels of income measured by GDP Per capita and lack of social support. Healthy life expectancy explains a smaller portion of Egyptians’ unhappiness followed by freedom to make life choices, while generosity and perception of corruption explain a very minimal amount.

Within the Arab World, Egypt’s rank is the 14th, preceding Sudan, Iraq, South Sudan, Yemen and Syria, while it comes after most of the Gulf, North African and Arab Mediterranean countries. The United Arab Emirates (UAE) comes in first place among Arab countries and the 21st globally, something that is expected after the care it gives to its citizens’ happiness and welfare; lately crowned by appointing a Minister of State for Happiness in the new UAE Cabinet, announced in February 2016. This ministry aims to promote the UAE’s plans, programs and policies to promote the happiness of the UAE society and align and drive government policy to create social good and satisfaction.

As for Africa, Egypt ranks 9th in place preceded by North African Arab countries in addition to Nigeria, Mauritius, South Africa, Somalia. Algeria is ranked as the happiest country in the continent with a score of 5.9, while the Central African Republic takes the last rank in the level of happiness in the continent, and in the world, scoring 2.7.

Although Egypt’s Happiness rank has jumped 16 places between 2016 and 2017, the long term analysis (2005-2007 to 2014-2016) shows deterioration in Egyptians’ happiness levels. Moreover, analysis of Egypt’s position within Arab and African countries shows that the Government of Egypt should be paying more attention towards improving its people’s satisfaction and happiness levels.

Since Egypt’s rank and score are explained mainly by GDP per Capita, the Government needs to seriously find remedies for the unprecedented inflation rates that the Egyptian economy has witnessed in the past months following the economic reform decisions; which in turn had negative impacts on the citizens’ real income. It should also try to bring the foreign exchange crisis to an end; as people have been feeling poorer since the floating of the Egyptian Pound that took place in November 2016. The dollar price increase has largely contributed to the increase in most price levels and to the Egyptians’ feeling that their savings are now of less value. Remedy solutions include increasing sources of foreign currency through supporting local industries and encouraging them to increase their exports, decreasing imports, encouraging tourism and addressing the problems that face the tourists and demotivate them from visiting Egypt.

Another variable that largely explains happiness is “Healthy Life Expectancy’ which draws attention to the mandatory reform that should be directed towards the Health Sector in Egypt. This includes increasing the Health Sector provisions in the budget balance; which in turn will enable the renovation of public hospitals, reform of the Health insurance system so as to cover all Egyptian citizens and also increasing doctors’ salaries. This will surely have a positive impact on the efficiency of health services provided and will reflect on the healthy life expectancy of Egyptians.
 
The social support variable also significantly explains happiness for Egypt, and it is measured by having someone among family and friends to count on in times of trouble. Knowing the nature of the Egyptian society that was always known to be a very interconnected society; where family relations and friendships constitute an important part of Egyptians’ lives, this variable could have scored higher points and improved Egypt’s overall score. However, sadly it seems that life style has changed in Egypt in the past years and more people are feeling less secured than before and are not sure that they will find support in times of trouble.

We truly hope that the future “World Happiness Reports” would witness significant improvement to Egypt’s rank, led by genuine reforms in areas that would positively affect Egyptians’ welfare and satisfaction.


Short Bio: Heba Ahmed Youssef

Work experiences:
Currently:
• Head of Economic Analysis and Studies Unit, Central Department for Information and Decision Support, Ministry of Communications and Information Technology (MCIT).
Formerly:
• Economic Analyst, Information and Decision Support Center (IDSC) - the Egyptian Cabinet.
• Teaching Assistant of Economics, October University for Science and Arts (MSA).
Papers:
• Author and co-author of a number of economic papers and studies in both MCIT and IDSC.
Education
• Master Degree in Economics, Faculty of Economics and Political Sciences. Cairo University.
• Bachelor Degree in Economics, Faculty of Economics and Political Sciences. Cairo University.

Personal:
• Date of Birth: 6 January 1980