על כלכלה ואושר אנושי – מנקודת מבט סינית עם נגיעה ישראלית

Increasing the Peng Coefficient can help boosting the economic activities, promoting the humanistic development and social happiness.

One Shabbat afternoon last month in Dubai, I was sitting on the 90th floor balcony of a skyscraper that overlooks Palm Island and Marina Bay. I had a magnificent sunset view. I saw many parachutes dropping from the sky just a few hundred meters away. Airplanes carrying skydivers took off from the small airport based on an artificial island close to Palm Jumeirah, the most alluring artificial island in the world, and yachts cruised around the Marina Bay, which is delicately designed and constructed.

Undoubtedly, the infrastructure in Dubai is among the world’s most advanced and this novel city looks elegant and appealing. However, this infrastructure doesn’t make Dubai’s residents happier. According to the World Happiness Report, Dubai is not among the world’s happiest cities. It only ranks 39^th, just after Mexico City.

Another example along these lines is Hong Kong. It has the world’s most billionaires per capita, but its happiness index rank is 114^th. Hong Kong is a rich city with developed metropolitan lifestyle, but its residents feel relatively unhappy.

The cases of Dubai and Hong Kong tell us that an advanced material civilization cannot guarantee people’s happiness or at least it’s not the most important factor for happiness. However, happiness should be the most important metric of human development. According to Aristotle, the pursuit of happiness is the very purpose and ultimate goal of life.

Of course, the satisfaction of basic needs is an essential factor for human happiness, but there is something more important and meaningful after the fundamental material conditions are satisfied. The pursuit of happiness can also be the motivation for human beings to drive the economy to a higher level. Happiness can be a powerful engine for economic growth.

Psychologist Abraham Maslow coined the concept of Hierarchy of Needs. To study how people are motivated, Maslow used the factors "physiology", "safety", "belonging and love", "social needs or esteem", "self-actualization" and "transcendence" to describe the dynamics of human needs. His framework also reflects how people are satisfied by external conditions.

Happiness is not necessarily correlated with the extent of human needs satisfaction, but the more levels of needs are met, the more happiness people can feel, and the highest happiness level is reached at the stage of self-actualization.

Pyramid of Needs. Credit: Joshua Seong / Verywell

Maslow's hierarchy of needs can be divided into two types: basic needs on the lower levels and growth needs on the higher levels. People can hardly feel happy if the lower levels of needs are not met, if they lack food and safety. Thus, physiological needs are the basis of the hierarchy, these needs are the biological conditions for human survival.

While people can feel more happiness when more needs are met, can they feel even happier after all the levels of needs of this pyramid are met? Yes, people also have cultural or spiritual needs, and satisfaction of these needs can bring even higher happiness than the satisfaction of lower needs of the pyramid.

Modern people are not just spending money on material needs like food, shopping, and housing but also on cultural and spiritual needs like books, movies, concerts, tourism and learning. Cultural and spiritual needs are also inherent needs for all people but they are usually neglected.

The cultural amusements and spiritual enjoyments are not the privileges of high-income people. They are affordable for middle-class people who want them. Even some low-income people spend money on these activities, but their financial capacity definitely limits their willingness and ability to enjoy them.

According to Engel’s Law, when household income increases, the percentage spent on food will decrease. With expenditures on other daily life necessities unchanged, the amount spent on cultural activities, like education and recreation, will increase. The lower the Engel Coefficient, the more affordable the other expenditure items can be and the more willing people can spend on cultural items.

Over the past decades, global GDP has grown, individual income has increased, the conditions of human life have improved, but people do not necessarily feel proportionally happier. This is because society’s material abundance cannot guarantee people’s happiness.

In 2007, I developed a concept called Peng Coefficient. It refers to the share of spending on cultural and spiritual areas such as learning, entertainment and recreation and so forth. The inspiration came from my personal experience. I used to attend lots of cultural events, like concerts, which I enjoyed very much. I found that while the audience was not large, more and more people attended these activities as household incomes rose. In such instances, the Peng Coefficient is increasing. The Peng Coefficient is inversely proportional to Engel Coefficient, because the more proportion people have to spend on food, the less they are able to spend on cultural and spiritual activities. Religious activities are out of scope of Peng Coefficient.

On the other hand, as the economy grows, people spend a smaller percentage of their incomes on food, and more and more on cultural and spiritual products or services. They watch movies or attend concerts more often. People travel more for leisure, and they spend more on learning to enhance their personal growth or self-actualization. Therefore, the higher the Peng Coefficient, the more enjoyable daily life, the happier people can be.

Engel Coefficient is not talked about so much these days because of much improved economy and living standards. I believe the Peng Coefficient should be promoted because it will help improve the quality of people’s lives and increase the society’s happiness. Moreover, it will help create a happiness economy which can contribute to a virtuous circle for human development.

According to the World Happiness Report, many northern European countries and Israel are among the top-10 ranked countries for happiness. That is because they have relatively high Peng Coefficients. Even though they are not necessarily the wealthiest countries, they do spend more on culture and spirit. According to OECD country data, Iceland, Norway, Denmark, Finland, Sweden are in the top 7 countries in total government spending on culture and recreation. They also rank in the top-10 happiest countries in the world.

Cultural events are essential for a high-quality life. For example, the quality of life in Vienna is among the highest in the world and that is because of its abundant cultural life.

Global Peace Index, the above-mentioned Nordic countries are the safest countries in the world. And those cities which tend to have higher Peng Coefficients also have lower crime rates. For example, Shoham, a small city with population of merely 21,000 in the central area of Israel, has many cinemas and performing centers. People there love music and arts. They live in relatively harmonious neighborhoods and the crime rate in Shoham is very low.

If people enjoyed more high-quality cultural and spiritual activities, they would become more intellectual and gentle. They would refrain from illegal or improper behavior. Their communities would be more harmonious, respectful, and happier. People from such communities can be deeply creative and work at a high standard of professionalism.

Increasing the Peng Coefficient can help boost cultural and economic activities. It would be very helpful for promoting human development and social happiness. Thus, it can create a virtuous circle and move community in better directions.

Affluent countries and families tend to spend more on culture and spirit. They get better educations and pursue cultural and

intangible services. While cultural and spiritual products and services have become increasingly affordable, they remain relatively expensive and intangible. So, some people may not realize their importance and think they are simply a waste of money.

Currently, there is widespread angst over a global economic downturn, especially in the developing countries. This makes it more difficult to raise the Peng Coefficient. Since fewer people are willing to pay for “unnecessary” cultural and spiritual activities, a vicious circle may result. Therefore, even though the global economy is going through challenging times, we still need to find ways to increase the Peng Coefficient.

Benjamin Peng, CEO of Chinabridge Investment and Mathlevi Financial Education, MBA of Reichman University of Israel. He is an economic researcher and commentator; his articles and interviews can be seen on international news media including Jerusalem Post and CCTV.

Investment  ChinaBridge ו Mathlevi Financial Education.

בנג'מין פנג הוא מנכ"ל Investment ChinaBridge ו Mathlevi Financial Education.

בנג'מין הוא בעל תואר MBA מאוניברסיטת רייכמן בהרצליה, מבקר קבוע בישראל וגם חי כאן במהלך לימודיו בהרצליה. מאמריו מתפרסמים מדי פעם בתקשורת הישראלית ובימים אלו ישתתף וירצה בכנס החדשנות בתל אביב.