MATIJA FRANKLIN, TEISI TAMMING, SOPHIA GRAEFF BUHL-NIELSEN: WELL-BEING: RETHINKING THE AIMS OF A SUCCESSFUL POLICY – Aug 9th, 2018
Whatever the form or constitution of government may be, it ought to have no other object than the general happiness. -Thomas Paine, 1833
GDP: The existing approach to measuring government policy success
There is no single policy measure that can comprehensively capture the state of a society at a given point in time. Currently, GDP is mainly being used as a global proxy for national progress. We argue that this is an incomplete proxy, given that GDP is simply a measure for “the total market value of the goods and services produced by a nation’s economy during a given year”. Most notably, Simon Kuznets, the economist responsible for the development of GDP as an indicator of societal progress, contended that such a measure held value only insofar as it could contribute to an understanding of the well-being of the people of a nation. How can we know whether a policy is successful with such limited measures?
Using GDP as the only measure for a nation’s welfare has two noteworthy issues. First, not all market activities can be monetized. Specifically, there are several public goods and services that produce psychological, rather than economic, costs and benefits, and thus are not easily captured by more traditional economic indicators such as GDP. Many externalities may substantially improve or decrease citizens’ quality of life, and are thus important to take account of. To give an example, one famous study measured self-reported life satisfaction of people living in areas with different airport noise. The study found that this externality had a significant effect of life-satisfaction. Another case that is not fully captured by GDP is unemployment. Unemployment can have serious financial implications, but its impact on well-being has been shown to go beyond the loss in income. Unemployment leads to a myriad of negative psychological and sociological effects, including a loss of self-esteem, social status, and confidence. Altogether, it is evident that certain market activities are not quantifiable in terms GDP, and thus it cannot capture the many psychological factors that occur as the outcome of market activities.
Second, GDP provides a limited reflection of an individual’s’ quality of life. This was first noted by Richard Easterlin (1974) who published data that questioned whether GDP growth leads to more well-being. His results revealed that past a certain threshold, there is a minimal correlation between GDP and life satisfaction. Since then, this finding has been replicated multiple times. A famous meta-analysis explored the link between GDP per capita and well-being around the world using results from all available surveys conducted from 1995 to 2007. The meta-analysis integrated findings from 111 independent samples from 54 economically developing countries. The study found that the average economic status-SWB relation was strongest among low-income developing countries (r = .28) compared to high-income developing countries where the relation was weaker (r = .1). These same findings were replicated with a meta-analysis of data from the World Values Survey. The findings were interpreted with need theory. Need theory proposes that assets and income have a larger influence on SWB when they are able to satisfy the most basic physiological needs, such as food, water, sanitation, shelter and clothing. Once these basic needs are met, the additional economic resources have a lesser effect on SWB. Thus, a country’s GDP would not be able to fully measure the effects of income on life-satisfaction and happiness, once people’s basic needs were met.
Therefore, if GDP is complemented with measures that capture a nation’s well-being, policy makers will have a more complete, multi-dimensional and precise reflection of the state of a society. Psychological research on well-being is both empirically and theoretically developed enough to complement economic measures of prosperity for public policy. Thus, we propose that well-being provides valuable information to complement existing economic measures of national progress. Well-being can allow policy makers to better design policies that improve individual’s lives, according to what individuals value.
Subjective well-being: A solution to the measurement problem
Thanks to an increasing amount of reliable data and improvements in measurement techniques, subjective well-being (SWB) can be used as a more direct measure of a society’s well-being, and thus be used to inform policy decisions. As previously discussed, GDP, income and poverty levels are limited in what they can tell us about how people evaluate the quality of their own lives. That is why an increasing amount of evidence shows that SWB can be an effective way of estimating how people respond to changes in policy. Policy-makers have the opportunity to capture the multiple facets of public well-being in order to comprehensively assess and design policy according to what the public values.
Most well-being researches converges at this conclusion – well-being is a multidimensional construct, comprised of both hedonic and eudaimonic well-being. Hedonic well-being is the pleasure attainment and pain avoidance aspect of well-being. It reflects person’s life satisfaction and the experience of positive and negative emotions. Eudaimonic well-being is a person’s experience of meaningfulness and self-realisation. It includes aspects of well-being such as the perceived meaning in life, autonomy, competence and self-acceptance.
There are many reasons why policy makers should aim to measure well-being. First and foremost, measuring the average SWB of citizens within a nation is a more direct way of gauging well-being. Since governments and policy makers should serve their citizens, SWB is a desirable policy outcome measure. Furthermore, increased population SWB can have many spillover effects in other important sociological, psychological and behavioural domains. A meta-analysis of numerous studies has shown that happy individuals are more likely to be successful across multiple life domains, namely friendship, income, marriage, health and work performance. This happiness-success link does not only exist because success makes people happy, but also because positive affect causes an increase in success. Happiness is associated with and proceeds many successful outcome, as well as behaviours which promote success.
Thus, measuring SWB is not only a good proxy of people’s life-satisfaction and happiness, but can also increase positive outcomes in other domains such as health and work performance. Well-being is affected by many factors, but also affects many other domains in people’s lives. Thus, by measuring policies in terms of increases or decreases in well-being, one could better tailor policies. These policies would not only be aimed at increasing well-being, but also the many other life domains that come along with it. These other behavioural and psychological domains have not been captured successfully by GDP measures.
Previous utilisation of subjective well-being in policy
Just as the OECD was a principal proponent of the adoption of GDP as an indicator of societal progress, it has been at the forefront of promoting a transition to the use of a measure of well-being to inform policy decisions. Indeed, there has been a rapid rise in commitment to the measurement of well-being from a multitude of institutions: following the 2007 Istanbul World Forum, other supranational organisations including the European Commission, the United Nations, the UN Development Programme and the World Bank pledged recognition to the importance of measuring well-being for the purposes of public policy. Declarations of the importance of collection of such data has in part stemmed from the high calibre research in the field of well-being, demonstrating the possibility of meaningful gauging this concept on a population-level. However, it also came to the fore due to the aforementioned limitations of current indicators, which provoked conferences such as the European Union’s ‘Beyond GDP’ (November 2007), where possible alternative indicators were discussed.
The measurement of well-being has not exclusively been promoted by international groups, but has seen significant progress made by a number of national governments. One particularly notable example in this respect was the decision by the French government in 2008 to convene a special commission involving the participation of Joseph Stiglitz and Amartya Sen to review the indicators of economic and social progress used in France. Amongst the conclusions of this Commission was that the time was suitable to make a transition toward a system of measurement that emphasises individual experience and well-being over economic production. This conclusion received great endorsement by the then President Sarkozy, who oversaw the updating of the French national statistics body in accordance with the final findings of the report, and claimed he would encourage other nations to do similarly. Other nations have carried out parallel initiatives emphasising the need to collect well-being data, including Luxemburg and Hungary. Country-specific assessments allow for autonomy in terms of determining what might be more culturally significant in a particular region, however might be limited in terms of making international comparisons.
Certain individual pioneers of well-being have also been met with success in shaping policy. For example, in the United Kingdom Economist Richard Layard established the Centre for Economic Progress after becoming persuaded by the notion that we should aim to use assessments of well-being as a supreme indicator of societal progress. He campaigned vigorously for the importance of mental health and well-being, and was critical in improving government allocation of resources in this domain: he played a crucial role in implementing the governmental programme Increasing Access to Psychological Therapies (IAPT). It was in part due to his efforts that in 2010 David Cameron announced that well-being would be integral to government policy and that regular collection of these data would be undertaken. Beyond his work domestically within the United Kingdom, Layard co-founded an international movement known as ‘Action for Happiness’ that actively involves over 90,000 individuals worldwide. In both popular and political domains, the call for a focus on well-being has attracted dedicated adherents.
Measuring subjective well-being
An extensive set of tools has been developed to measure different aspects of well-being, both hedonic and eudaimonic separately, and together. The following is an overview of the various measures which can be used selectively measure certain aspects of well-being.
Some SWB measurements allow people to self-determine what they think is important and desirable in their lives, and allow people to express the quality of their own lives accordingly. Such measures include the satisfaction with life scale which has shown to capture both stable influences on well-being, such as personality, and more dynamic influences that change during the life span. Another scale in this category is the Subjective Happiness Scale which measures dispositional happiness.
Eudaimonic well-being can also be assessed separately through a range of scales. The PERMA profiler measures positive emotion, engagement, positive relationships, meaning and achievement. The Ryff’s Well-being Scales encompass autonomy, environmental mastery, personal growth, positive relations with others, purpose in life and self-acceptance.
Various scales have also been developed to capture both hedonic and eudaimonic well-being. These allow individuals, organizations and governments to decide which aspects of well-being to prioritise, observe how they compare to others, and develop ways to enact change in the desired areas. The Healthways Well-being Index includes life evaluation, emotional health, physical health, healthy behaviours, work environment, and access to basic needs, whilst the organization for Economic Cooperation and Development has combined 11 topics which are considered essential to the quality of life and created the Your Better Life Index. In the Better Life Index, individuals can decide how important each of the topics is for them, allowing to evaluate the areas which need improvement. The Social Progress Index has a unique utility in that it ranks countries according to three equally weighted criteria – basic human needs, well-being and opportunity for social mobility. The greatest advantage of these multidimensional indexes is their descriptive nature. Through employing rich data, policy makers can be better equipped to not only decide what factors they should prioritise, but also to design and assess public policy accordingly.
Before outlining our recommendations, we would like to point towards the WEBMAT interactive tool for advising the best well-being measurements for users’ specific needs. It takes into measure purpose, application and length into account. The tool is available here. This tool is essential for the proper utilisation of our recommendations.