The government says there's a better way to measure happiness than through the money we earn

The coalition believes GDP does not offer a true picture of how happy people in the UK actually are. Who Knows Who looks at the people and the issues involved.

Does rich mean happy? If it does not, is it really better to be unhappy and rich than unhappy and poor? And can such generalisations be applied to countries, just as we apply them to individuals?

Take the UK, for example. The country's gross domestic product – the value of the goods and services it produces every year - has grown almost without interruption since the 1948. Most recent indicators place the UK sixth in the list of wealthiest nations measured by GDP.

The fact is, though, that GDP relies on a model of production and consumption. It is inherently materialist. To believe that wealth and ownership equals happiness is to assume that money can indeed buy love. Not so, argued the late Robert Kennedy, who dismissed gross national product as something which "measures everything, except that which makes life worthwhile".

In recent years the trend has been away from an exclusive reliance on GDP and towards a more nuanced approach to the measure of happiness. The prime minister, David Cameron, announced in 2006 that "It's time we admitted that there's more to life than money, and it's time we focused not just on GDP but on GWB – general well-being."

One of the first people to articulate the values of "happiness economics" was Andrew Oswald, who in 1999 published A Non-Technical Introduction to the Economics of Happiness. It includes the suggestion that taxing conspicuous consumption could increase public joy by reducing envy. Oswald's views on the benefits of fiscal policy have been mirrored more recently by Lord Layard – dubbed the "happiness czar" under the last government – who has argued that taxes help to preserve a good work-life balance by discouraging people from working too hard.

10 years later, Oswald was a member of the Commission on the Measurement of Economic Performance and Social Progress, whose 2009 report is arguably the movement's most influential document to date.

Sponsored by the French government and established by President Sarkozy in 2007, the report was led by Professors Joseph Stiglitz, Armartya Sen and Jean-Paul Fitoussi. Sen is a Nobel prize winner and the pre-eminent proponent of welfare economics; Stiglitz, also a Nobel laureate, has been an outspoken advocate of global financial reform in the wake of the latest financial crisis.

As well as questioning whether GDP is a good measure of living standards, the 2009 report brings new advances to bear on the analysis of what constitutes well-being, highlighting the importance of issues such as sustainability. It notes, for example, that buying petrol boosts GDP but does not lead to an improvement in welfare.

The report was welcomed, among others, by the Paris-based OECD, whose secretary general, Angel Gurria, concurred that "We need better measures of people’s expectations and levels of satisfaction (…) and we need to broaden the range of assets that we consider important to sustain our well-being."

Nor is France the only country to embrace "happiness economics". As early as 1972 Bhutan coined the term "gross national happiness" to define its population's general level of well-being. Canada is also exploring measurements derived from Bhutan's model to apply to its own people. And Thailand has established a happiness index which incorporates educational, family, work and health data.

Back in the UK, the New Economic Foundation, an independent think tank, has been looking at ways of measuring social and economic well-being since its inception in 1986. In 2009 it published National Accounts of Well-being, which "calls for governments to directly and regularly measure people's subjective well-being  (…) as a new way of assessing societal progress."

The coalition government's 2010 budget report states that "there is widespread acknowledgement that GDP is not the ideal measure of well-being,"  while the Office for National Statistics produced a paper in September of this year entitled There's more to life than GDP but how can we measure it?

Channel 4 News economics producer Neil Macdonald predicted at the time of the September paper that the ONS would not actually end up jettisoning economic growth figures but was exploring ways to ask people about how they felt about their lives.

Then, this week, came the statement by Jil Matheson, the National Statistician, acknowledging that "There is a growing international recognition that to measure national well-being and progress, there is a need to develop a more comprehensive view, rather than focusing solely on gross domestic product."

It remains to be seen, though, whether the prospect of a significant future reining-in of public spending provides an ideal basis for the creation of a happiness index.