If you asked us what we want to be when we grow up, many would answer “to be happy.” This is, undoubtedly, one of the greatest aspirations of human beings, and achieving happy societies should constitute the ultimate goal of nations. Happiness is subjective, but experts in the economics of well-being would tell us that it only goes so far: it is easier to feel satisfied with our life if we have a good job —today, also a home in which to start a family—, good health, and a support network that provides us with strong social relationships.
Money does not buy happiness, but it helps: the evidence shows that, in countries with relatively high income levels, the degree of life satisfaction among their citizens tends to be higher. Now, however, once an income threshold that guarantees basic needs is reached, a certain “satiation effect” is produced —every additional euro makes us less happy than the previous one— and it is then when the other determinants of well-being become relevant. This helps explain why, on many occasions, there is a disconnect between the improvement of aggregate indicators of economic growth and employment and the perception that the population—or at least a significant portion of it—has of their own situation.
“Once an income threshold is reached that guarantees the coverage of basic needs […] every additional euro makes us less happy than the previous one”
The debate about the advisability of going “beyond GDP” when it comes to measuring a country’s progress is old, but the accumulation of crises and the growing pessimism about the possibility that future generations will have a good life have led it to be revived in recent years. Simon Kuznets himself, one of the principal architects of modern national accounting, already warned in the 1930s that the welfare of a nation could hardly be inferred from a single metric of income. The limitations of classic growth indicators are well known: they capture the provision of goods and services we can put a price on, regardless of whether they have a positive impact —public education and health— or a negative one —more spending on fuels due to traffic, more spending on security due to crime— on people.
In fact, Nordhaus and Tobin’s seventies proposal to create a measure of economic well-being that complements GDP aimed precisely to “add” those things that can generate well-being but that GDP does not capture, such as the value of free time or unpaid work, and to “subtract” those that do involve expenditure but do not necessarily contribute to well-being, such as defense spending, mandatory commutes to work, or the costs from air pollution and congestion in cities. The other major critique of traditional income metrics is that they do not adequately or immediately capture issues essential for future prosperity such as the distribution of wealth generated, the nature of the jobs created, the value of the natural capital around us, or the quality of institutions and social relationships.
Indeed, the attempts to break with this logic and approach the measurement of well-being from a more holistic perspective aligned with people’s lives have been numerous. With their limitations, some prioritize the social dimension of inequality, poverty, or health; others seek to reflect the potential impact of environmental degradation, and the most comprehensive combine indicators representing the main dimensions of our quality of life (material conditions, inequality, health, leisure, social support networks, etc.) with subjective indicators of satisfaction with it. Among the most standardized and well-known are the United Nations’ classic Human Development Index, which was adjusted to incorporate planetary pressures and, in addition to income, life expectancy and educational levels, CO2 emissions and the use of natural resources as conditioning factors of well-being; and the Social Progress Index, which aggregates indicators of social and environmental progress, but deliberately isolates them from economic performance by not including income variables. Also notable are the recent works of Jones and Klenow, Heys and Taylor and Andrés et al., which seek to develop GDP adjusted for dimensions such as longevity, human capital, or the cost of carbon. But, undoubtedly, the broadest dashboards in terms of coverage and scope are those produced by the World Happiness Report and the OECD. The analytical framework offered by the latter is particularly interesting: it not only addresses the state of current well-being and its inequalities but also attempts to approximate what future well-being for each country could be, given the value of its economic, human, natural, and social capital.
At this point, the immediate question that arises is what we can do to advance toward a measurement of progress that better reflects people’s well-being. Here are some ideas.
“Emerging technologies will alter our relationship with work, improving working conditions and giving us more free time, or becoming an additional source of inequality”
The first: to understand well which dimensions of well-being may gain relevance in the future and to design the tools that allow us to anticipate these changes. We know that the degradation of natural ecosystems will have an increasing effect on health; that demographic aging and falling birth rates will alter social support networks — families will be increasingly smaller —, and that emerging technologies will modify our relationship with work, improving working conditions and giving us more free time, or becoming an additional source of inequality and precarity for some groups depending on how they are implemented. We need to know how the population is perceiving these transformations as they materialize.
The second, closely linked to the previous one: expand the scope and frequency of studies addressing key but less explored aspects of well-being, such as time use, essential for understanding mobility patterns, the distribution of caregiving, or eating and sleep habits, among other things. In Spain, the latest Time Use Survey published is that of 2009-2010.
The third: promote the development of longitudinal studies that allow assessing how the determinants of well-being change over the life cycle. A single decision may affect young people and adults in very different ways and be perceived differently by both groups. The recent launch of the Future Generations Study is a first step in this direction.
“The degradation of natural ecosystems will have an increasingly greater impact on health; aging populations and declining birth rates will alter social support networks”
And the fourth, but in my view, one of the most relevant: move toward “national accounts of well-being” that guide the design of public policies and — why not — also budget discussions and complement the information offered by traditional income and employment indicators. New Zealand’s Living Standards Framework Dashboard constitutes a superb reference to start working in this area.
We know where to aim. Now it is time to look at how we live, in addition to how much we grow, to make better decisions today and ensure better lives in the future.
