Wednesday, June 18, 2014

Well-Being in the 21st Century – a role for policy

Well-Being in the 21st Century – a role for policy
David Bell, Christopher Boyce and Liam Delaney*

What we measure affects what we do; and if our measurements are flawed, decisions may be distorted. Policies should be aimed at increasing societal welfare, not GDP.” Joseph Stiglitz

If the role of policy is to improve societal well-being then focusing on GDP growth seems not to be the best and only way to go about it. Indeed suspicions about the ability of GDP and other economic measures to “measure everything except that which makes life worthwhile” have led to the development of a now vast multidisciplinary literature on human well-being.

This well-being research shows that income is but one component of human welfare and focusing exclusively on income may distort choices and impede the ability to increase well-being via more important sources such as social, health, and environmental factors. Such a perspective has been supported and encouraged by a number of public reports in recent years, including the important “Commission on Well-Being and Policy” in March from the Legatum Institute, a report spearheaded by Lord Gus O’Donnell, influential former Cabinet Secretary and Head of the Civil Service.

Indeed the need for well-being directed policy seems vital yet there are important challenges ahead and debate about possible future developments is crucial. First, we need reliable national indicators of well-being that link to policy outcomes and complement economic measures like GDP; second, we need to understand exactly how policy will affect well-being; and third, we need meaningful public dialogue as to the purpose of well-being policy. These issues will be addressed in the “Well-Being and Public Policy” conference we are holding at the University of Stirling on 27th June, which will provide important input into the approach taken by the Scottish Government through, for example, Scotland Performs and the National Performance Framework.

Measuring what matters
Scotland Performs and the National Performance Framework embody the idea that we need a broad set of national indicators when assessing our performance as a country. But this needs to be taken further through greater public engagement, leadership, and building direct links to policy as recommend in reports such as the Carnegie Trust’s Shifting the Dial in Scotland”.

There is also much to learn from other countries that are developing well-being policy in their own way such as through the Canadian Index of Wellbeing (a composite indicator of well-being which provides a tool to hold government accountable for their actions and decisions). Alternatively there is Bhutan, where the term “Gross National Happiness” was originally coined in 1972, and idea of promoting happiness and well-being seems to permeate throughout society and policy decisions.

However, comparing well-being across different cultures remains somewhat problematic. The OECD have developed guidelines for measuring subjective well-being but differences in cultural conceptions of words like “happy” or “satisfied” need more understanding. Scholars such as Amartya Sen suggest that being satisfied with objectively poor environments may be a product of social conditioning rather than objective well-being. Thus designing multi-layered questions to understand how people are answering these questions is an important ongoing development, and making use of more complex psychometric scales, multidimensional quality-of-life indicators, clinical outcomes, as well as biological markers of health is still a key task for this policy agenda.

Understanding key factors that directly influence well-being
Although there is a part of human well-being that is probably inherently determined experiences and events can have substantial impact on well-being. One important factor that we know influences well-being is having stable employment. Whilst having income explains a small part of this influence, potentially allowing individuals more opportunities, income is certainly not the most important part. The experience of unemployment results in some of the largest observed changes to well-being independent of the loss in income. This effect is comparable to that of a chronic illness and even persists after the person regains employment, thus shattering the myth of unemployment being simply reflecting a rational labour-leisure trade-off. In fact the effect of being unemployed has been shown to be so strong that a key policy conclusion from well-being research of the last two decades should be to change the balance away from targeting inflation and instead focus on reducing unemployment to alleviate psychological distress - a lesson sadly not adhered to in the recent financial crisis.

Other key factors may not be surprising to readers with research demonstrating substantial effects of stable social relationships, physical health and mental health, and environmental quality on a variety of different measures of well-being. While many of these findings are intuitive, they provide a strong basis for thinking further about some of the major policy issues of our day: the extent to which mental and physical healthcare should be prioritised in funding; which public investments have highest returns in terms of human welfare; what policies in particular are detrimental to human welfare. Well-being research provides a greater ability to compare the size of these effects and provide meaningful cost-benefit estimates.

As with any policy variables the issue of causality is important for well-being research. High levels of well-being may be correlated with other factors for a range of reasons. Happy people might sort themselves into different types of occupations, environments and lifestyles and disentangling these effects is a difficult statistical task. However, substantial progress is being made on this dimension with both experimental and quasi-experimental policy designs increasingly being used. Another important step is to understand individual differences in how well-being might react across different groups in society – indeed some policies that look neutral on average may in fact be having large negative effects on some and large positive effects on others.

Public acceptability of well-being policy
Finally, an important challenge for the future will be to meaningfully engage citizens with the broader well-being agenda. Naturally there will be some scepticism with regards to implementing policy based on innovative approaches but not only does well-being research have the potential to empower citizens with greater information about the decisions they personally make in life but actively engaging citizens in the discussion will be essential for future progress.

*David Bell is Professor of Economics at Stirling University. Christopher Boyce is a research fellow at Stirling University Economics Division and School of Management Behavioural Science Centre. Liam Delaney is Professor of Economics and Co-Director of the School of Management Behavioural Science Centre. The three authors are co-organisers for the June 27th Scottish Universities Insights Institute Conference on Well-Being and Policy.  

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