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Saamah Abdallah is a researcher at nef’s Centre for Well-being.
President Sarkozy: an unlikely revolutionary
Although you wouldn’t have known it from the media coverage at the time, President Sarkozy did something far more remarkable in January 2008 than get engaged to the singer and model Carla Bruni. While angry French leftists were burning Bruni’s CDs on public bonfires, her new fiancé announced his intention to challenge our most intractable economic orthodoxy: Gross Domestic Product.
Soon enough, the President had set up an impressive commission of Nobel Prize-winning economists and social scientists to address the question of how to move beyond GDP as a measure of economic performance and social progress. The group was to be led by former chief economist at the World Bank, Joseph Stiglitz, and would include development guru Amartya Sen, psychologist Daniel Kahneman and the economist-turned-climate-change-hero Lord Stern.
A year and a half on and the Commission has published its final report. The vision is bold – it recognises that “new political narratives are necessary to identify where our societies should go” and advocates “a shift of emphasis from a ‘production-oriented’ measurement system to one focused on the well-being of current and future generations”. Specifically, it recommends that governments should measure subjective well-being – people’s experience of their quality of life – and recognises that these should be textured and multi-dimensional.
These calls are admirable, and echo what nef has long been calling for, particularly in our National Accounts of Well-being report from January 2009.
But there’s a problem. The report carries many recommendations, and there’s a risk that politicians will latch onto the easier ones, without really taking home the big message: namely, that we need to radically shake up our understanding of progress and success. For example, the report shies away from suggesting an overall measure of progress, such as nef’s Happy Planet Index, leading to the risk that GDP will remain unchallenged as the de facto indicator of overall success, despite it never being intended that way.
But for now the Commission, and indeed, dare we say it, Sarkozy, deserve plenty of praise for their boldness. Let’s see if he and other politicians put into practice the advice they are given by the world’s best economists: to move beyond GDP and measure well-being.
nef’s Happy Planet Index is featured in this week’s New Scientist magazine as one of many radical ideas for a better world.
Juliet Michaelson is a researcher at nef’s centre for well-being.
This article first appeared at Policy Innovations.
A sunset in Costa Rica, the nation that topped the Happy Planet Index 2.0. | Image by Alexander Steffler
Governments around the world are caught between the proverbial rock and a hard place: We are now nearly two years into what is widely heralded as the worst global economic crisis since the Great Depression, and the ecological crisis of global warming threatens the foundations of human civilization. Should countries stimulate their economies at any cost? How should they prioritize the health of global and local ecosystems? The debates about whether government money should be used to shore up struggling car industries neatly encapsulate these sorts of dilemmas.
Many in government may feel that the best overall path is far from clear. Part of the problem is that they lack tools for making these sorts of policy decisions. The common yardstick since the 1940s has been GDP growth. Gross Domestic Product reflected the wartime concern with increasing economic productivity, and since then it has become synonymous with progress. As the United Kingdom’s Sustainable Development Commission notes, “The state has become caught up in a belief that growth should trump all other policy goals.”
Yet intrinsic to growing GDP is the need to produce more stuff. This is exactly what our planet cannot sustain. More stuff requires more of the Earth’s dwindling fossil energy supplies, with waste products that threaten the climate.
The kernel of the solution to resolving these competing demands lies within the structure of the problem itself. The fact that economic growth can be conceived of in opposition to the health of the planet suggests that neither can claim to be regarded as the true overall measure of success in human society. A much more convincing case is made by the concept of well-being. The experience of well-being is about feeling that your life is going well, something which is universally important to people everywhere. The concept of well-being enables us to define the ultimate aim of human endeavor to be healthy, happy, and meaningful lives.
The Earth’s resources are the fundamental input to this system. A well-regulated economy is just one means to produce well-being—along with others including community, technology, values, and governance. Systems thinking also shows us that using planetary resources so that they can be sustained into the future is vital to ensuring that human well-being can also be maintained in the long term.
The updated Happy Planet Index (HPI), published last month by nef (the new economics foundation), uses this view of society to formulate an indicator of overall progress. Scores on the HPI represent the amount of human well-being a country produces relative to its resource use. It is measured in terms of long and happy lives. The HPI is thus an efficiency index, measuring how much well-being is achieved per unit of environmental impact:
HPI ≈ (Life expectancy x Life satisfaction) / Ecological footprint
Andrew Simms is nef’s Policy Director and head of nef’s Climate Change programme.
The financial druids are all a flutter. Their worst fears have come true. It’s not only that we can now see the other side of the reckless credit boom: a long legacy of high unemployment, bankruptcy and wrecked public finances. The darkest fear of the priests of high finance is that we will never again trust and follow their sermons. Any faith faces disaster when people stop believing.
The “call to prayer” of conventional economics has been the incantation of economic growth figures: the accumulated monetary value of all the exchanges that take place in the economy. When it heads south, the system knows it has a problem.
Now, it has a real problem. Global economic growth is at its lowest level since shortly after the second world war, and the UK economy is shrinking fastest.
But here’s the problem. The fact that so much went so wrong, so quickly says that the long period of preceding growth hid a deep malaise. Growth conceals more than it reveals. It is about as informative as saying that when it rains things get wet. Yet the indicator retains an unbreakable grip on the imaginations of politicians and policymakers. Over 30 years of critique from the few dissident economists and environmentalists have not shifted its privileged position.
Growth tells us if things are happening, but not whether they are good or bad. Growth can be boosted by war, pollution and all kinds of social breakdown, from divorce to ill health and vandalism. That’s because they all require money to be spent, which shows up in the growth figures. This matters right now because the government is spending money simply to reboot growth, rather than to achieve particular, desirable outcomes, like creating green jobs to rebuild energy security, and tackle fuel poverty and climate change. It needs to get smart.
Juliet Michaelson is a researcher at nef’s centre for well-being.
A letter to the Financial Times, 30 January 2009.
Sir, As John Thornhill notes (“A measure remodelled”, January 28), those such as Simon Kuznets who developed the modern measure of gross domestic product were explicit that it should not be used as an indicator of social progress. More than 60 years on, in a classic example of mission creep, GDP remains the de facto measure of national success and is used as the standard against which virtually all macro-level policy decisions are judged. The consequences of this obsession with economic growth are clear: a financial system disconnected from the real economy, unsustainable levels of debt and intolerable strain placed on the planet by our high-consuming lifestyles.
The new economics foundation has long called for governments to establish national accounts of subjective well-being – systematic measures of how people think and feel about their lives. In a report launched last weekend, we provided the first ever detailed proposal for how they could be structured and implemented – see www.nationalaccountsofwellbeing.org
An approach endorsed by, among others, Enrico Giovannini, the Organisation for Economic Co-operation and Development’s chief statistician, and Prof Daniel Kahneman, the economics Nobel laureate, national well-being accounts provide a direct measure of meaningful outcomes in people’s lives.
By enabling policymakers to understand the real impact of their actions on people’s experience, such accounts would reconnect government with its core purpose: improving the lot of the people it serves. It is a reconnection that must be swiftly expedited. As we enter uncharted territory it is clear that we need a better compass to guide us; National Accounts of Well-being would be a significant step in the right direction.
Juliet Michaelson
Sam Thompson
Centre for Well-being,
nef (new economics foundation),
London SE11, UK
See also: Reuters, ‘On wealth versus well-being’
Juliet Michaelson is a researcher at nef’s centre for well-being.
Today’s Financial Times includes a full page of analysis discussing the growing movement among economists and others towards producing alternative measures of economic performance and social progress. If you’ve already read our National Accounts of Well-being report , published last weekend, or looked at the accompanying website, much of the content will be familiar: the strong caution issued by Simon Kuznets, the designer of the original GDP measure, that it should not be used to infer the welfare of a nation; the perverse nature of the way GDP is calculated by mechanically counting productivity, so that spending on things like divorce proceedings is counted as a benefit; and the current work of the commission headed by Nobel-laureate economists Joseph Stiglitz and Amartya Sen to develop new measures to enable us to change “our political priorities and build happier, greener, societies”.
The article concludes by highlighting what it describes as “perhaps the most controversial issue” being examined by the commission, namely “whether to create some kind of ‘happiness index’ based on surveys of people’s attitudes”. What it doesn’t mention is that this is precisely what we have done in our work on National Accounts of Well-being. While we don’t claim that our indicators are the final word on how governments should measure people’s experiences of their lives, they certainly show how, by using high-quality survey data, robust and detailed measures of well-being are not only possible, but now a reality.
It remains to be seen what the Stiglitz-Sen commission will conclude when it reports in April. But crucially, to enable policy-makers to truly understand the impact of their actions on the reality of people’s lives, societies must start paying attention to the ways in which subjective well-being can be carefully and seriously measured. We think that our National Accounts of Well-being represent a substantial step forward along this path and our growing band of expert supporters suggests that many others are beginning to think so too.
Juliet Michaelson is a researcher at nef’s centre for well-being.
What is the best way to measure whether a country is successful? For most of the last 100 years, we have tended to assume that the answer lies in observing the growth of headline economic indicators, such as GDP. Plenty of criticisms have been levelled at GDP – it is far too narrow a measure, takes no account of the distribution of resources or environmental costs, and so on. And recent events hammer home the point that chasing ever-increasing economic growth is a fool’s errand. Even Gordon Brown, since 1997 the de-facto Chief Financial Officer of UK PLC, has had to admit that there’s no such thing as boom without the bust.
Our new report, National Accounts of Well-being: bringing real wealth onto the balance sheet, published on Saturday, provides a different response to the question. It argues that the success of nations is best measured in terms of the things that really matter to the people who live in them: their experiences, feelings and perceptions of how their lives are going. In other words, their subjective well-being. After all, as British economist Andrew Oswald noted almost 30 years ago:
“Economic performance is not intrinsically interesting…People have no innate interest in the money supply, inflation, growth, inequality, unemployment…Economic things matter only in so far as they make people happier.”
What does matter to us, and is arguably the ultimate goal of all human endeavour, is that we feel good about ourselves and the people around us, and do things in our lives which give us a sense of meaning and value.
Of course, the current economic situation is going to seriously hurt a lot of people. But in the post-crash world, we need to ask ourselves whether we want to rebuild the system according to the same flawed blueprint, or find a better compass to guide us.
The first set of National Accounts of Well-being, which nef has produced for 22 countries across Europe, are a tangible means by which governments can monitor their progress in promoting the well-being of their citizens. Using the most comprehensive international survey data on subjective well-being ever collected, we have designed a framework of measures which describe a nuanced picture of people’s experiences. For example, as well as measuring whether people have good feelings, we also look at whether they undertake activities which are meaningful, engaging and which make them feel competent and autonomous. And alongside our first headline measure of personal well-being we also measure people’s social well-being – whether they have supportive relationships and a sense of connection with others.
The results – which can be explored interactively on the website accompanying the report – show how far we still have to go when measuring success in these terms. While Denmark retains its oft-cited position with the highest well-being levels in Europe, Sweden, so often singled out to be praised for its policy success, does not feature among the top five countries on personal well-being. The UK’s performance according to the headline indicators is distinctly middling, and on the trust and belonging component of social well-being it comes a very poor 20th out of the 22 countries.
By redefining success in terms of how people actually experience their lives, National Accounts of Well-being set out a challenge for anyone interested in shaping the future of their society. But they also provide a crucial tool in efforts towards creating brighter tomorrows, in a classic illustration of one of nef’s key principles: that measuring the things which matter is a crucial step in getting them to change.
So how quick will governments be to adopt these new measures of success? Given the growing political interest in well-being we’re optimistic that it won’t take too long. In the meantime, we’ll be keeping a close eye on the reaction to our proposal, and carrying on making the case that we should be measuring what matters most…
Andy Wimbush is nef’s Communications Assistant and blogmaster.
If you hoped that the recession might buy us some time to combat climate change, you’re likely to be disappointed. That’s according to figures from the UK’s Committee for Climate Change which predict that even a serious fall in GDP would only deliver a fraction of emissions reductions. The Guardian has the full story here, including some perspectives from nef’s Policy Director Andrew Simms. Andrew explains:
There’s a strong lockstep between GDP and emissions. You wouldn’t get more than a 1% change in emissions unless you had something really dramatic happening, like closing a whole industry down… Because of the recession, perversely, fuel prices have gone down a lot and that might cancel out some of the savings expected in that sector.
Of course, nef doesn’t expect back-to-business-as-usual to solve the climate crisis either. Take a look at some our most recent publications on the way out of recession and ecological mayhem:
- From the Ashes of the Crash: 20 first steps from new economics to rebuild a better economy
- A Green New Deal: Joined-up policies to solve the triple crunch of the credit crisis, climate change and high oil prices
- Triple Crunch: Joined-up solutions to financial chaos, oil decline and climate change to transform the economy
And if you haven’t already, be sure to read ‘Paradigm reclaimed‘, Stephen Spratt’s blog post about how to build a better banking system.
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