Man is far too clever to be able to survive without wisdom
E. F. Schumacher
Abstract
Claims abound that GDP accounting ignores social and ecological problems and misrepresents social well-being. While GDP growth continues to be a policy priority in most countries, it is at best one objective among many in achieving humanity’s “ultimate purpose.” Yet revisions to the income accounts and alternative well-being indicators are also problematic, since they reinforce the illusion that social and ecological impacts on well-being are objectively measurable. Future policy must not only be informed to a greater extent by qualitative and multi-dimensional assessments, but must recognize that any rank-ordering of society’s ultimate ends cannot but be subjective.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
By social well-being I refer specifically to the welfare of society as a whole, the measurement or estimation of which is often classified as “objective” (e.g., Paim 1995). I do not by this term mean an aggregation of the component individual subjective “well-beings”. I will have more to say later about this distinction.
It is beyond my present cope to discuss plausible arguments for why growth may be negative-sum under such a criterion, but the point is amply addressed in the literature. See especially Scitovsky (1977) on this point.
Kuznets (1955) was among the first to note this, presenting evidence that the income distribution in a country becomes more unequal as it begins along its development trajectory, only later to change course toward greater equality.
The HDI differs in that consumption (income) counts as but one of three dimensions. Nevertheless, as I will discuss, the UNDP’s approach is also exceedingly narrow since well-being has many more dimensions, many of which defy quantitative measure.
The diagram is as in Daly (1991, p. 19) save for two minor modifications. I use the label “philosophy and values” instead of ethics because the latter may be interpreted as relating more to narrow questions of individual morality. Also, I label the area of inquiry concerned with the ultimate end “spirituality” instead of religion in order to eliminate any suggestion of institutional influences and to more accurately convey a non-material (or post-material) ultimate purpose.
To De Gregori (1986), ultimate means are those that only become resources once developed by the human hand and human ingenuity. Along similar lines, to Daly (1995) they are the “stuff to which value is added.” Ultimate means are also often classified as “low-entropy” matter-energy, the foundation for (and constraint on) all human activity. See also, e.g., Corning (2002), Ferrari et al. (2001), and Georgescu-Roegen (1971).
Note the hierarchy among different areas of inquiry. Choices made regarding both the path of technological change and the extent of human impact on the environment are a product of the “economics” (i.e. intermediate means-intermediate ends) sphere. We can therefore say that nature and technology are subordinate to economics. The latter is in turn subordinate to “philosophy and values” since it is humanity’s pursuit of the “ultimate end” that directly, if unconsciously, determines our rank-ordering of competing intermediate ends.
In all that follows I will take progress, development, or well-being improvement to refer to success in achieving the ultimate human purpose.
I should be clear that by “subjective” I mean biased or partial and not individual or personal as the word is often used in the literature.
The “positive” assumptions relate to different scenarios for allocation of the resource depletion externalities in the absence of reliable data. The competing scenarios regarding the weight or importance given to the performance of individual subgroups is a “normative” exercise, as discussed earlier. Finally, we might say that the different discount rate assumptions have a positive and a normative aspect—positive in the sense that they may correspond to available estimates of time value preference or capital opportunity cost, normative in that they imply some relative intergenerational preference.
References
Ackerman, F. (1997). Consumed in theory: Alternative perspectives on the economics of consumption. Journal of Economic Issues, 31(3), 651–664.
Ahluwalia, M., & Chenery, H. (1974). The economic framework. In H. Chenery, M. Ahluwalia, C. L. G. Bell, J. H. Dully, & R. Jolly (Eds.), Redistribution with growth (pp. 35–57). London: Oxford University Press.
Barrera, A. (1999). Economic life, rights, and obligations: Perspective from theological teleology. Forum for Social Economics, 29(1), 63–74.
Brekke, K., & Howarth, R. (2000). The social contingency of wants. Land Economics 76(4), 493–503.
Brekke, K., Luras, H., & Nyborg, K. (1996). Allowing disagreement in evaluations of social welfare. Journal of Economics, 63(3), 303–324.
Corning, P. (2002). Thermodynamics: Beyond the second law. Journal of Bioeconomics, 4(1), 57–88.
Costanza R., & Cornwell, L. (1992). The 4P approach to dealing with scientific uncertainty. Environment, 34, 12–20, 42.
Csikszentmihalyi, M. (2000). The costs and benefits of consuming. Journal of Consumer Research, 27, 267–272.
Daly, H. (1991). Steady-state economics (2nd ed). Washington & Covelo: Island Press.
Daly, H. (1995). Consumption and welfare: two views of value added. Review of Social Economy, 53(4), 451–473.
Daly, H., & Cobb, J. (1989). For the common good: Redirecting the economy towards community, the environment, and a sustainable future. Boston: Beacon Press.
De Gregori, T. (1986). Technology and negative entropy: Continuity or catastrophe? Journal of Economic Issues, 20(2), 463–469.
Dupor, B., & Liu, W. (2003). Jealousy and equilibrium overconsumption. American Economic Review, 93(1), 423–428.
Eckersley, R. (2000). The mixed blessings of material progress: Diminishing returns in the pursuit of happiness. Journal of Happiness Studies, 1, 267–292.
Faucheux, S., Muir, E., & O’Connor, M. (1997). Neoclassical natural capital theory and “weak” indicators for sustainability. Land Economics, 73(4), 528–552.
Ferrari, S., Genoud, S., & Lesourd, J. (2001). Thermodynamics and economics: Towards exergy-based indicators of sustainable development. Swiss Journal of Economics and Statistics, 137(3), 319–336.
Frey, B., & Stutzer, A. (2004). Economic consequences of mispredicting utility. Institute for Empirical Research in Economics, University of Zurich. Working paper no. 218.
Georgescu-Roegen, N. (1971). The entropy law and the economic process. Cambridge: Harvard University Press.
Hirsch, F., (1977). Social limits to growth. London: Routledge.
Howarth, R., (1996). Status effects and environmental externalities. Ecological Economics, 16, 25–34.
Klasen, S., (1994). Growth and well-being: Introducing distribution-weighted growth rates to reevaluate U.S. Post-War Economic Performance. Review of Income and Wealth, 40(3), 251–272.
Kuznets, S. (1955). Economic growth and income inequality. American Economic Review, 45(1), 1–28.
Lane, R. (2000). Diminishing returns to income, companionship—and happiness. Journal of Happiness Studies, 1, 103–119.
Leibenstein, H. (1950). Bandwagon, snob, and veblen effects in the theory of consumers’ demand. Quarterly Journal of Economics, 64, 183–207.
Martinez-Alier, J. (1995). Distributional issues in ecological economics. Review of Social Economy, 53(4), 511–528.
Martinez-Alier, J., Munda, G., & O’Neill, J. (2001). Theories and methods in ecological economics: A tentative classification. In C. Cleveland, D. Stern, R. Costanza (Eds.), The economics of nature and the nature of economics (pp. 34–56). Edward Elgar: Cheltenham and Northampton.
Maslow, A., (1968). Toward a psychology of being (3rd Ed.). John Wiley.
Max-Neef, M. (1992). Development and human needs. In P. Ekins, M. Max-Neef (Eds.), Real-life economics: Understanding wealth creation (pp. 197–214). London and New York: Routledge.
Mill, J. (1848). Principles of political economy. London: Longmans, Green, and Co.
Munda, G. (1997). Multi-criteria evaluation as a multidimensional approach to welfare measurement. In J. van den Bergh & J. van der Straaten (Eds.), Economy and ecosystems in change: Analytical and historical approaches (pp. 96–115). Cheltenham: Edward Elgar.
Ng, Y. (2002). The East-Asian happiness gap: Speculating on causes and implications. Pacific Economic Review, 7(1), 51–63.
Norgaard, R. (1994). Development betrayed: The end of progress and a coevolutionary revisioning of the future. London and New York: Routledge.
Paim, L. (1995). Definitions and measurements of well-being: A review of the literature. Journal of Economic and Social Measurement, 21, 297–309.
Pearce, D. W., & Barbier, E. (1990). Sustainable development: Economics and environment in the third world. Brookfield: Gower Pub. Co.
Repetto, R., Magrath, W., Wells, M., Beer, C., & Rossini, F. (1989). Wasting assets: Natural resources in the national income accounts. Washington: World Resources Institute.
Rogerson, R., Findlay, A., Morris, A., & Coombes, M. (1989). Indicators of quality of life: Some methodological issues. Environment and Planning A, 21, 1655–1666.
Sachs, W. (1992). Bygone splendour. In P. Ekins & M. Max-Neef (Eds.), Real-life economics: Understanding wealth creation (pp. 156–161). London and New York: Routledge.
Schor, J. (1991). Global equity and environmental crisis: An argument for reducing working hours in the north. World Development, 19(1), 73–84.
Schumacher, E.H. (1999). Small is beautiful: economics as if people mattered (2nd Ed.). Hartley &Marks.
Scitovsky, T., (1977). The joyless economy: An inquiry into human satisfaction and consumer dissatisfaction. New York: Oxford University Press.
Sen, A (1997). Editorial: Human capital and human capability. World Development, 25(12), 1959–1961.
Sen, A. (2001). Economic development and capability expansion in historical perspective. Pacific Economic Review, 6(2), 179–191.
Stockhammer, E., Hochreiter, H., Obermayr, B., & Steiner, K. (1998). The index of sustainable economic welfare (isew) as an alternative to GDP in measuring economic welfare. The results of the Austrian (revised) ISEW calculation 1955–92. Ecological Economics, 21, 19–34.
Torras, M. (2003). Welfare, inequality, and resource depletion: A reassessment of Brazilian economic growth, 1965–1998. Aldershot: Ashgate Press.
Veblen, T. B. (1912). The theory of the leisure class. London, MacMillan.
Worster, D. (1995). The shaky ground of sustainability. In W. Sachs (Ed.), Global ecology: A new arena of political conflict (pp. 132–145). London & New Jersey: Zed Books.
Acknowledgments
I wish to thank Kazuya Ishii and Dean Jolliffe for comments on earlier versions of this work. All errors remain mine.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Torras, M. The Subjectivity Inherent in Objective Measures of Well-Being. J Happiness Stud 9, 475–487 (2008). https://doi.org/10.1007/s10902-007-9084-z
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10902-007-9084-z