Measuring our quality of life — why is the world looking beyond GDP?

When the term Gross Domestic Product (GDP) was developed in the 1930s the market value of all goods and services produced within a country was considered to be the best indicator of a country’s standard of living. Now it’s widely recognised that other factors have to be taken into account when looking at a country’s success as a happy, safe place to live. Prof Stephen Bartos, advocates exploring how the ‘economics of happiness’ can be used to inform national policy.

Gross domestic product per capita is a useful, measure of national well-being from an economic perspective.

The severity of the 1930s Great Depression highlighted the need for a tool to assist policy makers to understand the state of their economies, and most importantly whether the policies they had in place were effective.

The gross domestic product measure was developed to serve this purpose. GDP per head of population has become well established as a measure of our standard of living that is comparable over time and across nations. However, as many nations have become wealthier and more knowledgeable about the impact our lifestyles are having on the natural environment and quality of life in other ways, we have developed a growing interest in measurement of other aspects of well-being in a more comprehensive way.

Well-being is a multi-dimensional concept that includes the aspects of life that we value, such as health, wealth, education, work, social relationships, and the environment. These different dimensions can generally be classified into the three streams or pillars – economy, society, and environment.

Subjective, or self-reported, measures of well-being are also important for understanding welfare. They can provide an indication of whether improvements have been made for the different domains of well-being – such as individuals, families, communities, workplaces or nations overall. They can also provide a reality check as to whether ‘expert’ views of well-being align with people’s own views.

There is debate about whether well-being is itself too vague a term to be useful. Some experts suggest that it is easier and more direct to measure happiness. Happines is not as subjective a concept as many would think: various studies have established reliable ways of measuring changes in happiness over time among groups of people.

There is, however, some reluctance among senior decision makers to refer to happiness as the goalof policy. Well-being is still the preferred term.

At this time, there is no single agreed measure of well-being, and there may never be. A single indicator would require us to agree on what should be included and how each factor should be weighted. It is more likely that a range of frameworks and indicators will emerge and compete for acknowledgement in a vigorous contest of ideas.

Well-being can operate on different domains

In the context of decision making, well-being can refer to an individual all the way through to a nation. Strong interest in the usefulness of taking a more structured approach to well-being has been shown by governments and community groups. In some ways, this is simply taking a more explicit approach to the complex trade-offs that humans have always made.

There are different approaches to structuring our thinking about well-being.

Developing new approaches could assist individuals, families, communities, businesses and governments make better informed decisions. The challenge is to find ways to make measures of well-being more applicable to policy. Australia is a leader in measurement (through projects such as the Australian Bureau of Statistics’ "Measures of Australia’s Progress"). Nevertheless, as yet these measures have not gained anything like the degree of currency in policy debate that is given to the more economically oriented measure of GDP.

Our selections will depend on personal preferences and values, and our reasons for wanting to conceptualise and measure well-being. If we are using a well-being prism to promote one option over another, it is useful to ensure the approach encapsulates the range of factors we want to consider. For example, a narrowly derived indicator may be of limited use in policy-making. An advantage of using a well-being approach to influence decision-making is that it can assist us to be explicit about the trade-offs we make and the values we bring.
 

Prof Stephen Bartos is a director with international consulting firm Sapere Research Group and Chair of the GAP Task Force on Progress in Society. He is author of two books Against the Grain – The AWB Scandal and Why it Happened (UNSW Press, 2006) and the reference manual Public Sector Governance – Australia (CCH, 2004). He has also written numerous refereed articles in scholarly journals, chapters in academic publications, and regular comment and opinion pieces on governance and fiscal policy, including a regular column in the Public Sector Informant magazine.

0 Comments

1. 

   foggy

   November 2, 2011 at 5:43 pm

   Informed decisions

   From your article I understand that "inform National policy" is to make "better informed decisions."But I feel that entity like "happiness" is far too personal to get each and every person’ s same on the national database.And happiness is subject to change."Well Being" needs certain materialistic provisions to be defined,but personal well being may make a person comfortable although he may not be floating in a state of happiness, due to any reason.

   So I think it is better to stick to keep it simple and and use the old tool of GDP per capita to guide governance.However specific areas regarding quality "effectives" maybe considered in shaping specific qualitative measures, tailor made to suit the national policy;the especially Sliver areas affecting international deals like commerce or human resources and more.