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Measuring Well-Being and Progress

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Abstract

Well-being is becoming a concept which is more and more involved in any world development consideration. A large amount of work is being carried out to study measurements of well-being, including a more holistic vision on the development and welfare of a country. This paper proposes an idea of well-being and progress being in equilibrium with each other. This is distant from the two extreme positions: poor but happy, and rich then happy; too romantic the first, and reductive the second. After a short explanation on the meaning of Objective and Subjective well-being, we show some interesting relations between economic and social variables, and we propose a new index to measure the well-being and progress of the countries: the Well-being & Progress Index (WIP). It includes several aspects of well-being and progress, like human rights, economic well-being, equality, education, research, quality of urban environment, ecological behaviours, subjective well-being, longevity, and violent crime. The most frequently used indexes usually only focus on some aspects, like ecology, or economy, or policy, or education, or happiness, and so forth. On the contrary, this new WIP index allows a global and well-balanced vision, thanks to the large range of indicators used, and how representative they are.

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Notes

  1. Some economists had a more ethical orientation, such as Adam Smith, John Stuart Mill, Karl Marx, Francis Edgeworth; some others a more technical one, like William Petty, François Quesnay, David Ricardo, Augustin Cournot or Léon Walras.

  2. Like the World Development Indicators and the World Development Report.

  3. Joaquín Almunia, “Measuring progress, true wealth and well being”, Conference “beyond GDP”, Brussels, 19 November 2007.

  4. José Manuel Durão Barroso, "Beyond GDP—Opening speech", Conference “beyond GDP”, Brussels, 19 November 2007.

  5. In his first report to the US Congress in 1934: Simon Kuznets (1934), "National Income, 1929–1932". 73rd US Congress, 2d session, Senate document no. 124, p. 7.

  6. Simon Kuznets (1962), "How To Judge Quality", The New Republic, October 20, 1962.

  7. Kahneman (1994), Easterlin (2001) p. 465, Frey and Stutzer (2002), [it. tr. (2006), pp. 25–40].

  8. Arrigo and Sordelli (2004). This separation is also close, although does not coincide, to the distinction between stimulation and comfort of Scitovsky in his well known The Joyless Economy (1976).

  9. There is a vast quantity of literature and an important historic debate covering this subject, which is also very topical and relative to different concepts and evaluations of utility and well-being. We refer for example to Sen (1987) for a discussion about rationality, utility and well-being; Kahneman (1994, 2003) about the connections among utility, rationality and the surrounding situation; the research gathered in Frey and Stutzer (2002) show how happiness is dependent on the surrounding situation.

  10. Independence from the reference (for example, how rich I am at this moment) is the base of the Theory of expected utility of Bernoulli, where the (rational) decider makes choices for the expected utility of future situations. However, in the model, the preferences of the decider remain identical, because the utility does not depend on the present situation. From this originated Bernoulli's model, the modern Theory of Decisions, that conserved the assumption of independence from the reference (so called by Tversky and Kahneman 1991) in all its future versions.

  11. Kahneman (2006), Easterlin (2001), Easterling (1974), Frey and Stutzer (2002), Brickman (1978), Frank (1999). For further information about this idea read the first part of paragraph 4.

  12. For the USA during the years 1946–1990 refer to Blanchflower and Oswald (2000), Lane (1998) p. 462; Myers (2000), p. 61; for Japan during the years 1958–1991 refer to Frey and Stutzer (2002) Fig. 1.3; for China during 1994–2005 refer to Kahneman (2006) Fig. 4.

  13. Diener et al. (1995) shows a strong relation between richness and expressed happiness when comparing 55 countries; the same strong relation is showed by the research of Veenhoven (1991), of Inglearth (1990) and of Inkeles and Diamond (1986), comparing several countries. Many comparisons among different levels of people’s richness in the same country show an equally strong relation between richness and expressed happiness: Easterlin (2000) for the USA 1994; Diener et al. (1993) for USA 1981–84; data-base of Euro-Barometer Survey Series (1975–1991) for Europe (look at Di Tella et al. 1999.

  14. http://worlddatabaseofhappiness.eur.nl/.

  15. Helson (1964), Brickman and Campbell (1971), Parducci (1995), Frederick and Loewenstein (1999). A different version of the adaptation theory is the idea of the “homeostatic process”: even after several modifications in our life condition, our happiness tends to go back to our original level of happiness. It is like our happiness derives more from our genetic predisposition than from events changing our life (Headey and Wearing 1992).

  16. Irwin (1944), Michalos (1991), Inglearth (1990).

  17. In Economy we can also find this theory, considering the changement of the preferences in the forming of habit (Marshall 1890; Duesenberry 1949; Modigliani 1949; Pollak 1970; Carroll and Weil 1994).

  18. Diener et al. (1993), Fig. 2 for a comparison between income improvement and expressed happiness in the USA 1981–84; Frey and Stutzer (2002), Fig. 1.4, for a similar comparison in the USA 1995; and also Smith (1776) evidence showing how, beyond a certain level, an increase of income is not so useful.

  19. Look also at the research carried out by the research group which has grown up by Bernard van Praag and Arie Kapteyn (1973): Kapteyn and Wansbeek (1982, 1985), van Praag and Frijters (1999). They show that the shift of preference toward the high (the more I have got the more I want), “deletes” around 60–80% of the real well-being coming from increased richness.

  20. Frey and Stutzer (2002), Frey et al. (2002), Hanh (1984). The literature suggests calling procedural utility the well-being given by the process of reaching the goal (what I should do to achieve my goal of buying a bike), and calling the instrumental utility that one received when we reach the intended goal (buying a new bike). Then the psychological well-being concerns both the final state (how happy it makes me feel to own my new bike) and the procedure; the material well-being concerns only the final state.

  21. Easterling (1974), Easterlin (1995), Veblen (1899), Becker (1974), Frank (1985), Pollak (1976), Duesenberry (1949), Russel (1930) p. 68–69, Kosicki (1987), Hirsch (1976).

  22. We introduce this “or” just to remind the reader that money does not always mean happiness, even if we also show how strong their connection normally is. As we will illustrate later, the position of this paper does not want to be extreme, thus, we are distant from both the romantic idea of “poor but happy” and from the limited idea of “rich then happy”.

  23. Even though the literature often uses the terms “happiness”, “well-being”, “life satisfaction” interchangeably, in this paper we prefer to use the term “well-being” in the context of global welfare (both objective and subjective well-being), reserving the use of the word “happiness” to emphasize only the psychological contribution in our well-being.

  24. Especially the economists who followed the authority of Robbins (1932).

  25. Allen and Hicks (1934) showed how the demand theory works, just using an ordinal scale; a few years later, Samuelson (1938) wrote the general behavioural base for the standard theory, in which is valid the axiom: utility means preference; while Houthakker (1950) and Uzawa (1960) provided the actual shape of the expressed preference theory.

  26. The economic analysis is more connected to the preferences and wishes than to the hedonic experience.

  27. We remind the reader (with Sen 1987 too), that sometimes people can have a goal that does not involve directly a traditional well-being (like more money or more material goods or more power), but that makes them feel happier.

  28. Just as an example we remind the reader the success of the column “Anomalies”, present from 1987 in the prestigious Journal of Economic Perspectives, where are showed punctual examples of falsification of the consumer theory.

  29. Look at for example Sen (1987), Kahneman (1994), Simon (1982).

  30. But remember that this does not mean necessarily that it is possible to capture subjective wellbeing through a survey. In practice it is rather difficult for several reasons, such us difficulties of recollection by respondents on how happy they were at a certain time in the past, difficulties of comparing people, cultures etc.

  31. “…direct subjective consequences from engaging in some activities to the exclusion of others… For instance, how much an individual likes or dislikes the activity ‘panting one’s house’, in conjunction with the amount of time one spends in painting the house, is as important a determinant of well-being independent of how satisfied one feels about having a freshly painted house” (Juster et al. 1985).

  32. The respondents rate each episode of the previous day by replying to the question “how did you feel during this episode?”. In replying to this question he gives a score from 0 to 6 on some possible feelings (happy, frustrated/bored, depressed/sad, annoyed/frightened, tender/cordial, irritated/vexed, worried/anxious, amused, tired), where 0 indicates that the relative feeling was not felt at all, and 6 indicates that the respondents experienced that feeling very much. The Net Affect is the mean of the scores of the positive feelings minus the mean of the scores of the negative feelings.

  33. Except the case of China, (for China during the period 1994–2005 look at Kahneman 2006, Fig. 4) and of others countries (Internet appendix to Inglehart, Foa and Welzel, “Social Change, Freedom and Rising Happiness,” Journal of Personality and Social Psychology), that show a little decrease of expressed happiness.

  34. It would be interesting to study these relations by means of multiple regression (or similar), to quantify the effect of each of these variables previously measured by a comparative scale, for example.

  35. For instance in the USA, compared with others countries, the average longevity is not as high as the average richness, maybe also because of its not so healthy alimentary habit, or because of any other reasons too. However, its longevity is much higher than other poorer countries (even if in these countries the other variables, like climate, pollution, etc., are better).

  36. Methodology proposed in D’Acci (2009a, b, 2008, 2007).

  37. For a deep contribution to the Ethic and Economy debate look at Sen (1987).

  38. Refer to Frey and Stutzer (2002), Paragraph 4, p. 108.

  39. The HDI combines normalized measures of life expectancy, literacy, educational attainment, and GDP per capita. Life expectancy at birth, as an index of population health and longevity; knowledge and education, as measured by the adult literacy rate (with two-thirds weighting) and the combined primary, secondary, and tertiary gross enrollment ratio (with one-third weighting). Standard of living, as measured by the natural logarithm (to reduce the impact beyond a certain level) of gross domestic product per capita at purchasing power parity (GDPppp). Each of these 3 factors has the same weight.

  40. The GPI indicator takes into account everything the GDP uses, but adding the cost of the negative effects related to economic activity (such as the cost of crime, cost of ozone depletion and cost of resource depletion, among others). Proposed in 1994 by Cliff Cobb.

  41. ISEW = personal consumption + public non-defensive expenditures + capital formation + services from domestic labour–costs of environmental degradation–depreciation of natural capital–private defensive expenditures. The index is based on the ideas presented by William Nordhaus and James Tobin in their Measure of Economic Welfare (1972). It was first coined in 1989 by Herman Daly and John B. Cobb. They later went on to add several other "costs" to the definition of ISEW. In this later work they built the Genuine Progress Indicator.

  42. It includes Psychological wellbeing indicators, Ecology indicators, Health indicators, Education indicators, Culture indicators, Living Standards indicators, Time Use indicators, Community Vitality indicators and Good Governance indicators. It was coined in 1972 by Bhutan's former King Jigme Singye Wangchuck.

  43. The nine quality-of-life factors utilized and the indicators used to represent these factors are: Material wellbeing (GDP per person, at PPP in $), Health (Life expectancy at birth (in years), Political stability and security, Family life (Divorce rate per 1,000 of population), converted into an index with a value of 1 (for the lowest divorce rates) to 5 (the highest), Community life (a dummy variable taking value 1, if the country has either a high rate of church attendance or of trade-union membership, zero otherwise), Climate and geography (Latitude), Job security (Unemployment rate), Political freedom (The average indices of political and civil liberties. On a scale of 1 (completely free) to 7 (not free at all), Gender equality (Ratio of average male and female earnings). Developed by The Economist Intelligence Unit (http://www.eiu.com) in 2005.

  44. The mathematical expression for the Life-Quality Index, L, is: L = E K G where E is the expectancy of healthy life at birth, G is the Gross Domestic Product (GDP) per person, and the parameter K is a constant based on time budget studies which are available for many countries (K is approximately equal to 5.0 for developed nations). Defined by Nathwani in 1997.

  45. It is a coefficient which measures the equality of income distribution, where value 0 represents absolute equality, and value 100 indicates absolute inequality.

  46. “The rating process is based on a checklist of 10 politically correct questions and 15 civil liberty questions. The politically correct questions are grouped into three subcategories: Electoral Process (3 questions), Political Pluralism and Participation (4), and the Functioning of Government (3). The civil liberty questions are grouped into four subcategories: Freedom of Expression and Belief (4 questions), Associational and Organizational Rights (3), Rule of Law (4), and Personal Autonomy and Individual Rights (4)”. (from www.freedomhouse.org).

  47. Life expectancy at birth, GDP per capita, Gini index, Unemploymenttotal, Education Index, Researchers in research and development, Women’s equality and Intentional homicides are calculated on the data set of the Human Development Report 2007/2008 and of the UNESCO Institute for Statistics 2007; Freedom is calculated on a data set and survey of Freedomhouse; Subjective Well-being comes from Marks, N., Abdallah, S., Simms, A, Thompson, S. (2006)Marks et al. 2006, The Happy Planet Index, New Economics Foundation, London.

  48. In this figure Luxembourg does not appear.

  49. This is a good question, but we like to point out that both, GDP and WIP*, may also improve independently or because they are driven by some other unobserved factor.

  50. Although various aspects of people's lives have improved over history, they do not seem to have improved overall. It depends on the point of view, for example if we consider the risks to us and future generations from factors such as climate change and environmental degradation which may be irreversible. From an optimistic viewpoint we could think of these factors as part of the Negative Transitory Cycles, unless they become irreversible damages.

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    Luca D’Acci

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D’Acci, L. Measuring Well-Being and Progress. Soc Indic Res 104, 47–65 (2011). https://doi.org/10.1007/s11205-010-9717-1

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