Well-being and the future, A starting point

notes from a meeting at UCL (pdf)

It would be fair to say that well-being, however defined, is trending strongly. There are a number of reasons for its advancement into the foreground of policymakers attention, as well as its diffusion into wider society as a concept that is worth considering, amongst these a dissatisfaction with economic methods of measurement, cheaper and better technology allowing the processing of multiple dimensions of information, and some well established but challenging observations from the field of economics itself.

The first country to assess well-being on these lines in the context of a national economy is Bhutan, which has recently gained plaudits for developing a measure of “gross national happiness” which is based on the weighted average model. This assesses GNH as an index of 72 variables covering everything from health to the value of social relationships. It is unclear as yet how this will affect the Kingdom of Bhutan, or even whether it will cause change or inhibit it.

The broad consensus is that
• Richer countries are happier than poorer ones, at an aggregate level.
• Within richer countries, however, richer people are not significantly happier than
poorer people.
• Loss of income hurts more than a gain in income generates happiness. (People exhibit loss aversion)
• The role of expectations conditions the value gained from consuming something. So if I expected something to make

me a lot happier and it only makes me marginally happier than I was before, I will experience a degree of hurt.

Looking at inequality makes the position even more murky. Inequality, even if narrowly defined as an economic concept, is multi-dimensional. A concept of well-being as applied to the debate on inequality has the potential to create even more murk. While evidence has been adduced that more equal societies have greater levels of well-being, an equal and opposite body of evidence claims little relationship.

While we have lots of data on people?s levels of subjective, reported well-being, context is elusive. In their 2004 paper on Wellbeing and National accounts, Kahneman et al point out that many of the results that are robust, are plausible, yet puzzling. For instance, subjective well-being comparisons between Denmark and France show four times as many Danes as rating themselves ?very satisfied, as French citizens, a gap not explained by any economic data. Understanding why would be a useful thing for a policy maker to know, but at this point we have far more questions than we have answers.

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