A look on the bright side of life

Inclusive Economy04 Jul 2013Evert-jan Quak

Happiness versus wellbeing, are we talking about the same thing? How can and should policy be made on efforts to measure happiness or wellbeing? This is the first blog post in a series from the OECD conference Economics for a Better World.

The Broker is attending the three-day OECD-Universities Research conference Economics for a Better World. As economists love to measure everything, the opening of the conference focused on the issue of measuring wellbeing versus happiness. What do economists measure if they talk about wellbeing and happiness? But more importantly, how useful is it for policy-makers? This last question in particular relates to our debate Spurring economic transition that looks at how an inclusive economy can be achieved. Wellbeing and/or happiness have to be taken into account during such a transition.

But what are we talking about? The different approaches to this subject became visible directly during the opening of the conference. Keynote speaker Bruno Frey of the University of Warwick and the University of Zurich talked about achievements in measuring happiness. The Swiss economist sees major improvements in happiness measurement in recent years. To understand economics better we have to understand the determinants of happiness and how they interact.

Allister McGregor (IDS Sussex University), who opened the conference with a welcome speech, prefers the concept of wellbeing. While happiness focuses mainly on the individual, wellbeing is based on us living well together. McGregor wants to move from how to live well individually (happiness) to how we can live well collectively (wellbeing).

However, the opening words were on happiness. The objective in measuring happiness is to show how satisfied an individual is with his or her life. An index based on happiness indicators gives policy-makers information on how to change policy to better satisfy their publics. Frey emphasizes that the causality of different indicators is especially important: income level, full employment, participation level, and social contacts are all important for happiness.

Although it is difficult for economists to work on topics that are subjective and relative, it is crucial that they measure and understand happiness. For example, why do people compare themselves automatically with those who are richer than they are? We don’t compare ourselves with the poor. Comparisons on employment work in a similar way. Frey says that the strongest impact on happiness is when someone becomes unemployed. The happiness level of the unemployed increases slightly only if the general level of unemployment in society rises.

So now that we can measure happiness better than before, what is in it for policy-makers? Not much, according to Frey. He is opposed to the idea of using these measurements for a policy to maximize happiness. When this becomes an official goal of government data will be manipulated. In his view, it is more important to look at different indicators that make people happy. This means focusing, at constitutional level, on democracy, decentralization and human rights. And, at policy level, on full employment, education and consumers.

The question remains, however: how will these policies relate to collective wellbeing?