By James Gustave Speth, from the Spring 2008 issue of Environment: Yale magazine.

(Editor’s Note: This article is adapted from Dean Gus Speth’s book, The Bridge at the Edge of the World: Capitalism, the Environment, and Crossing from Crisis to Sustainability, published this spring by Yale University Press. For more details, see this article.)

The Edisto River glides gracefully through the South Carolina low country, its dark, tannin-stained waters spread out over both banks into beautiful hardwood bottomlands.

I grew up in a small town on the Edisto in the 1940s and ’50s. Our house was about a mile from a swimming area the town had established down from a high bluff along the river. We swam there every summer. The area from the top of the bluff down to the water had been terraced, and the girls put blankets on the grass and worked on their (one-piece) tans. At the bottom, along the riverbank, benches ran between the large cypress trees, where the mothers sat watching their children play in the shallow water near the edge. A pavilion at the top of the bluff served RCs and hot dogs. We racked up points on the pinball machines there and listened to the juke box play “Sixty Minute Man,” a song to fuel a boy’s fantasy if there ever was one.

Childhood memories like this tumble out of deep storage as I get older. Thoughts of swimming in the Edisto have occurred to me particularly as I have thought about our environmental future. For many years I could not buck the river’s current, but as I grew older and stronger, I was able to make good headway against it. In my environmental work for close to four decades, I’ve always assumed America’s environmental community would do the same–get stronger and prevail against the current pushing in the opposite direction. But in the last few years I have been forced to think hard about whether this assumption is correct. I have concluded it is not. The environmental community has grown in strength and sophistication, but the environment has continued to deteriorate. The current is too swift, and we must find things to do other than always swimming against it.

The need for a new approach to the environment would not be so urgent if environmental conditions were not so urgent. America is a comfortable place for many of us, myself included. But our comforts deceive us. The mounting threats point to an emerging environmental tragedy of unprecedented proportions.

How serious is the threat to the environment? Here is one measure of the problem: all we have to do to destroy the planet’s climate and biota and leave a ruined world to our children and grandchildren is to keep doing exactly what we are doing today, with no growth in the human population or the world economy.

One can only conclude that growth is the enemy of environment. Economy and environment remain in collision.

Just continue to release greenhouse gases at current rates, just continue to impoverish ecosystems and release toxic chemicals at current rates, and the world in the latter part of this century won’t be fit to live in. But, of course, human activities are not holding at current levels–they are accelerating dramatically. It took all of history to build the $7 trillion world economy of 1950; today economic activity grows by that amount every decade. At current rates of growth, the world economy will double in size in less than two decades. We are thus facing the possibility of an enormous increase in environmental deterioration, just when we need to move strongly in the opposite direction.

We live in a world where economic growth is generally seen as both beneficent and necessary–the more, the better; where past growth has brought us to a perilous state environmentally; where we are poised for unprecedented increments in growth; where this growth is proceeding with wildly wrong market signals, including prices that neither incorporate environmental costs nor reflect the needs of future generations; where a failed politics has not meaningfully corrected the market’s obliviousness to environmental needs; where economies are routinely deploying technology that was created in an environmentally unaware era; and where there is no hidden hand or inherent mechanism adequate to correct the destructive tendencies. So, right now, one can only conclude that growth is the enemy of environment. Economy and environment remain in collision.

But is growth in highly affluent societies like ours actually improving our lives? Psychologists have recently turned to measuring life satisfaction, human happiness and, generally, subjective well-being. There is now even a Journal of Happiness Studies. These psychologists have developed measurable concepts of human happiness that are more robust and satisfying than either Benthamite pleasure-seeking or pursuing Stoic civic virtue. For example, they have found very high correlations between self-reported measures of happiness and life satisfaction and an index of psychological well-being that takes into account purpose in life, autonomy, positive relationships, personal growth and self-acceptance. Thus, when the social scientists measure happiness and life satisfaction, they are measuring important things, not superficial ones.

What do these studies tell us? First, there are the studies that compare levels of happiness and life satisfaction among nations, from very poor to very rich. They find that national levels of life satisfaction do increase with rising incomes, although the correlation drops substantially when factors such as quality of governments are statistically controlled.

However, this positive relationship between national well-being and national per capita income disappears when one looks only at countries with GDP per capita over $10,000 per year. In short, once a country achieves a moderate level of income, further growth does not significantly improve perceived well-being.

Even more challenging to the idea that well-being increases with higher incomes is the extensive time series data showing that throughout the entire postwar period, as incomes skyrocketed in the United States and other advanced economies, reported life satisfaction and happiness levels stagnated or even declined slightly.

But that is not all. Psychologists Ed Diener and Martin Seligman note that “even more disparity [between income and well-being] shows up when ill-being measures are considered. For instance, depression rates have increased 10-fold over the same 50-year period, and rates of anxiety are also rising. … There is [also] a decreasing level of social connectedness in society, as evidenced by declining levels of trust in other people and in governmental institutions. Because trust is an important predictor of societal stability and quality of life, the decreases are of considerable concern.”

There is, however, a seemingly paradoxical finding–namely, surveys show that within countries, at any one time, richer individuals tend to be happier than poorer ones. In Happiness: Lessons From a New Science, Richard Layard reports that in the United States, 45 percent of those in the top quarter of incomes say they are “very happy,” whereas only 33 percent of those in the bottom quarter are very happy. In Britain, the numbers are 40 percent versus 29 percent.

How can one explain this? There is, first, good evidence that happier people are more successful and do better financially. The causation thus seems to run in both directions. Second, wealthy individuals have a smaller gap between their incomes and their desires. But how do we account for the fact that richer people within societies are happier, while societies that get richer don’t get happier? Two factors are at play–social positioning and habituation. People constantly compare themselves with others and, if everyone is better off financially, then no one is any happier. If comparative position is what counts, not absolute income, then rising incomes can leave just as many unhappy comparisons. You may be able to buy a new Dodge, but your neighbor just bought a Lexus. You’re moving up to a larger house, but so is everyone else. This human tendency to compare ourselves with others has not escaped the attention of humorists. Ambrose Bierce’s The Devil’s Dictionary defined happiness as “an agreeable sensation arising from contemplating the misery of another.” Numerous studies confirm that happiness levels depend inversely on one’s neighbor’s prosperity.

A second factor is what is called habituation, or the hedonic treadmill. People adapt or habituate to their new incomes. Richard Layard explains this in Happiness: “When I get a new home or a new car, I am excited at first. But then I get used to it, and my mood tends to revert to where it was before. Now I feel I need the bigger house and the better car. If I went back to the old house and car, I would be much less happy than I was before I had experienced something better. … Once your situation becomes stable again, you will revert to your ‘set-point’ level of happiness.

Once a country achieves a moderate level of income, further growth does not significantly improve perceived well-being.

“The things that we get used to most easily and most take for granted are our material possessions–our car, our house. Advertisers understand this and invite us to ‘feed our addiction’ with more and more spending. However, other experiences do not pale in the same way–the time we spend with our family and friends and the quality and security of our job.”

So how do we sum up matters thus far? “Those who say money can’t buy happiness just don’t know where to shop!” the joke goes, but the truth is that the data indicate that money can’t buy happiness or satisfaction in life among the more affluent. Study after study shows that there is a sharply declining marginal utility to extra income. As Diener and Seligman put it: “Economic growth seems to have topped out in its capacity to produce more well-being in developed nations. … Efforts and policies to raise income in wealthy nations are unlikely to increase well-being and might even undermine factors (such as rewarding social relationships or other cherished values) that have higher leverage for producing enhanced well-being. … Income, a good surrogate historically when basic needs were unmet, is now a weak surrogate for well-being in wealthy nations.”

If incomes are such weak generators of well-being in our more affluent societies, what are the things that really do produce happiness and unhappiness? Most importantly, it appears that our genes do. Some of us are just congenitally happy or unhappy. Our genes seem to account for about half the variation in individual happiness.

Regarding things that can be changed, unemployment–getting laid off–is devastating to one’s sense of well-being. For many, even finding a new job does not restore well-being to former levels. Self-reported good health also correlates with well-being, and mental disorders are an increasingly widespread source of human misery. Diener and Seligman also stress the importance of personal relationships: “The quality of people’s social relationships is crucial to their well-being. People need supportive, positive relationships and social belonging to sustain well-being. … The need to belong, to have close and long-term social relationships, is a fundamental human need. … People need social bonds in committed relationships, not simply interactions with strangers, to experience well-being.”

Layard has summed up the factors neatly: “What doesn’t matter: We can begin with five features that on average have a negligible effect on happiness. The first is age. If we trace people though their life, average happiness is remarkably stable, despite the ups and then downs of income and despite increasing ill-health. The second is gender. In nearly every country, men and women are roughly equally happy. Looks too make little difference. Likewise, IQ is only weakly correlated with happiness, as are physical and mental energy (self-rated). Finally, education has only a small direct effect on happiness. … So what really does affect us? Seven factors stand out: our family relationships, our financial situation, our work, our community and friends, our health, our personal freedom and our personal values. Except for health and income, they are all concerned with the quality of our relationships.” An earlier 2002 study by Diener and Seligman found that the most important characteristic shared by the happiest students were their strong ties to friends and family.

Other authorities have put a finer point on the problem of why we’re not getting happier and are getting more depressed and anxious. Sociologist Robert Lane sees a pattern of lock-in and overshoot. In The Loss of Happiness in Market Democracies, he notes that “we get happiness primarily from people; it is their affection or dislike, their good or bad opinion of us, their acceptance or rejection that most influence our moods. … My hypothesis is that there is a kind of famine of warm interpersonal relations, of easy-to-reach neighbors, of encircling, inclusive memberships and of solitary family life.

“Something has gone wrong. The economism that made Americans both rich and happy at one point in history is misleading them, is offering more money, which does not make them happy, instead of more companionship, which probably would.”

Another perceptive national observer, author Bill McKibben, has reached a similar conclusion. In Deep Economy, he notes that “our single-minded focus on increasing wealth has succeeded in driving the planet’s ecological systems to the brink of failure, even as it’s failed to make us happier.” How did it happen? he asks. “The answer is pretty obvious–we kept doing something past the point that it worked. Since happiness had increased with income in the past, we assumed it would inevitably do so in the future.” Instead, McKibben notes, it has led us to become more thoroughly individualistic than we really want to be, increasing social isolation and undermining our sense of community.

If American society has lost its way following the compass provided by Gross Domestic Product (GDP), it is not surprising that many observers have sought to identify the shortcomings of that measure and to develop alternatives that more faithfully gauge human and environmental well-being. First, the system of national economic accounts that gives us GDP has been under attack by analysts who believe that GDP is badly flawed even as a system for measuring economic welfare. They point out a series of shortcomings in GDP as currently measured–shortcomings that are, in fact, widely conceded.

GDP includes everything that can be sold or has monetary value, even if it adds nothing to human well-being or welfare. Imagine a society that spends 20 percent of its GDP on prisons and police, on cleaning up pollution and on the consequences of traffic accidents. Now imagine another society that has no need for these defensive expenditures, for example, because its citizens don’t pollute or drive recklessly and are law-abiding. This second society, instead, allocates that 20 percent of GDP to better schools, on improving life expectancy and on alleviating the problems of the poor. GDP is the same in both countries, but welfare is much higher in the latter case.

Second, GDP does not count the costs and benefits that occur outside the market. For example, a country can consume its natural capital, but that shows up in national income accounts not as capital depreciation but as income. Robert Repetto, professor in the practice of economics and sustainable development at F&ES, has written, “A country could exhaust its mineral resources, cut down its forests, erode its soils, pollute its aquifers and hunt its wildlife and fisheries to extinction, but measured income would not be affected as these assets disappeared. … [The] difference in the treatment of natural resources and other tangible assets confuses the depletion of valuable assets with the generation of income. … The result can be illusory gains in income and permanent losses in wealth.” GDP also neglects to count the real welfare benefits generated by volunteer and household labor.

And third, GDP fails to take into account the distribution of the income measured, despite the fact that for most societies, welfare could be improved by shifting disposable incomes from the very rich to the very poor, where the marginal utility of income is almost certainly higher.

The shortcomings of GDP as a measure of social and environmental conditions have stimulated a proliferation of measures and indicators that seek to improve our understanding of actual conditions. The most interesting efforts to date have been those seeking to create comprehensive alternatives to GDP. One of the first of these is the Index of Sustainable Economic Welfare. It begins with national private consumption expenditures and then adjusts them for distributional inequalities. It then adds in nonmarket contributions to welfare, such as unpaid housework, and subtracts defensive expenditures such as police protection and pollution control, and it also subtracts the depreciation of natural resources and environmental assets.

In the United States, the Index of Sustainable Economic Welfare has been improved under the new label of Genuine Progress Indicator (GPI). The GPI suggests that Americans on average are no better off today than they were in 1970, even though GDP per capita has grown greatly during that period.

It should be stressed that alternative measures like the GPI employ major methodological and data assumptions that are open to dispute and to improvement. Yet, they build on the pioneering work of the best economists, including James Tobin and William Nordhaus; they are serious efforts; and they do tell us something. In short, the GPI tells us that, since the early 1970s, growth’s positive impact on the welfare of Americans has been far, far less than that suggested by GDP.

Another approach to index development is to stop trying to express conditions in dollars and cents, and instead construct composite indicators based on objective, measurable social and environmental conditions. Again, there is an arbitrary element, but we can still learn important things. My colleague Daniel Esty, Hillhouse Professor of Environmental Law and Policy, and his associates have developed an index that evaluates nations’ environmental performance. Among 149 countries Esty ranked in 2008, the United States was down the list at 39th. America’s great wealth is not being translated into stellar environmental performance.

Turning to social conditions, trend information in the United States was collected into a composite index by Marc and Marque-Luisa Miringoff for the 1970-2005 period.

Aggregate economic growth–mere GDP growth–is no longer making us better off, and the data suggest that in some ways it is making us worse off, environmentally, socially and psychologically.

Their index combined 16 measures of social well-being, including data on infant mortality, high school dropouts, poverty, child abuse, teenage suicide, crime, average weekly wages, drug use, alcoholism, unemployment and so on. The Miringoffs’ Index of Social Health shows somewhat deteriorating social conditions despite huge growth in GDP per capita.

Richard Estes at the University of Pennsylvania has developed a Weighted Index of Social Progress for 163 countries going back to 1970. It captures objective measures of both social and environmental conditions. Estes reports that the pace of social development in the United States has been “on hold” since 1980. The overall ranking puts the United States far down the list of the world’s countries, tied with Poland and Slovenia for 27th place. America’s affluence is thus not being translated into either outstanding environmental or social performance.

Taken together, these results suggest the need for a radical rethinking and reordering of priorities. Right now, the reigning policy orientation and mindset hold that the way to address social needs and achieve better, happier lives is to grow –to expand the economy. Productivity, wages, profits, the stock market, employment and consumption must all go up. Growth is good. So good that it is worth all the costs. What Paul Samuelson and William Nordhaus call our “ruthless economy” can undermine families, jobs, communities, the environment, a sense of place and continuity, even mental health, because in the end, it is said, we’ll somehow be better off. And we measure growth by calculating GDP at the national level and sales and profits at the company level. And we get what we measure.

But what the data and the analysts reviewed here are saying is that it is just not so. Aggregate economic growth–mere GDP growth–is no longer making us better off, and the data suggest that in some ways it is making us worse off, environmentally, socially and psychologically. We are substituting GDP growth and more consumption for dealing with the real issues–for doing things that would truly make us better off. Those who preach the gospel of growth undoubtedly believe what they preach. But for those in government, business and the media who call us to worship at the altar of GDP, this incessant demand for ever-more aggregate growth is largely self-serving, and therefore they rarely look beyond the quarterly economic reports to see what they are missing. The result is that society is being misled, literally.

There are huge lessons for public policy in the analyses reviewed here. It is time to chart a new course for the United States. To generate real solutions to our social needs and problems, we need instead to address these problems directly and thoughtfully, with compassion and with generosity. There’s a whole world of new and stronger policies that are needed–measures that strengthen our families and our communities, address the breakdown of social connectedness and favor rootedness over mobility; measures that guarantee good, well-paying jobs and increase employee satisfaction, minimize layoffs and job insecurity and provide for adequate retirement incomes; measures that introduce more family-friendly policies at work, including flextime and easy access to quality child care; measures that provide us with more time for leisure, informal education, the arts, music, drama, sports, hobbies, volunteering, community work, outdoor recreation, exposure to nature and play; measures that provide for universal health care and alleviate the devastating effects of mental illness; measures that provide everyone with a good education, education for life as well as for productivity; measures that provide care and companionship for the chronically ill and incapacitated; measures that address prejudice, exclusion and ostracism; measures that recognize our duties to the half of humanity that lives in poverty, duties now reflected in the Millennium Development Goals; measures that regulate advertising, prohibit advertising to children and provide free airtime for people to talk back; and measures that sharply improve income distribution and tax luxury consumption and environmental damage and put the proceeds into our starved public sector and into strengthened income support and social programs for those at the bottom.

These are among the things America should be striving to increase. These are directions that need to be emphasized in public investments and elsewhere. Yet, if you raise these issues in the councils of our major environmental organizations, the answer could likely be, “These are not environmental issues.” But they are. They are a big part of the alternative to the destructive path we are on and, as such, they should be seen as environmental measures as well as social ones. My hope is that all Americans who care about the environment will come to embrace these measures–these hallmarks of a caring community and a good society–as necessary to moving us beyond money to sustainability and community. Sustaining people, sustaining nature–they are just one cause, inseparable.