The literature on psychological well-being has progressed rapidly since the emergence of the field over five decades ago. As recent surveys show psychologists and other social scientists have taken huge steps in their understanding of the factors influencing psychological/ subjective well-being.

Psychological well-being refers to how people evaluate their lives. According to Diener (1997), these evaluations may be in the form of cognitions or in the form of affect. The cognitive part is an information based appraisal of one’s life that is when a person gives conscious evaluative judgments about one’s satisfaction with life as a whole. The affective part is a hedonic evaluation guided by emotions and feelings such as frequency with which people experience pleasant/unpleasant moods in reaction to their lives. The assumption behind this is that most people evaluate their life as either good or bad, so they are normally able to offer judgments. Further, people invariably experience moods and emotions, which have a positive effect or a negative effect. Thus, people have a level of subjective well-being even if they do not often consciously think about it, and the psychological system offers virtually a constant evaluation of what is happening to the person.

In this paper we have defined psychological well-being in terms of internal experience of the respondent and their own perception of their lives. We focused both on momentary moods and long term states of their mental well-being.

Current social indicators can capture phenomena such as crime, divorce, environmental problems, infant mortality, gender equality, etc. Thus, they can capture aspects of quality of life that add to the description drawn by economic indicators. However, these social indicators fail to capture the subjective well-being of people because they do not reflect the actual experiences such as the quality of relationships, the regulation of their emotions and whether feelings of isolation and depression pervade in their daily life. On the other hand, economic indicators fail to include side effects and the tradeoffs of market production and consumption. For example, the environmental costs of industries certainly are not observed from the national accounts. Another disadvantage of economic and social measures in terms of their links to psychological well-being is that they are based on models of rational choice, whereby people follow a set of logical rules when making development plans. However, works by Kahneman (1994) in psychology and economics reveal that people do not always make rational choices, and that these choices do not necessarily enhance psychological well-being.

Currently in Bhutan, economic and social indicators are available and frequently updated as most organisations do some research on it.  Even the media and policies provide emphasis on such indicators, while no national measures of psychological well-being exist. The measurement of psychological well-being has advanced so much over the years that it is time to give a privileged place to people’s well-being in policy debates. A GNH society calls for the inclusion of well-being indicators at par with economic ones. Media should provide attention to how a society is progressing in terms of psychological well-being and politicians should base their campaigns on their plans for reducing distress, increasing life satisfaction and happiness level.

Psychological well-being leads to desirable outcomes, even economic ones, and does not necessarily follow from them. In a very intensive research done by Diener and his colleagues, people who score high in psychological well-being later earn high income and perform better at work then people who score low in well-being. It is also found to be related to physical health. In addition, it is often noticed that what a society measures will in turn influence the things that it seeks. If a society takes great effort to measure productivity, people in the society are likely to focus more on it and sometimes even to the detriment of other values. If a society regularly assesses well-being, people will provide their attention on it and learn more about its causes. Psychological well-being is therefore valuable not only because it assesses well-being more directly but it has beneficial consequences.