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Happy Talk

ACCA India , 17 December 2013  

In an effort to replace GDP as a measure of progress, statisticians are trying to gauge happiness through tangible life-quality elements. But will these be lost in translation?

When the authors of the US declaration of independence said that ‘life, liberty and the pursuit of happiness’ were goals of their nascent state, they knew what they were talking about. For what is the point of life, and the freedom to direct it, if it does not generate happiness?

Probably all political and religious creeds agree that happiness is a good idea, but there is far less agreement over what it actually entails. And there is even less consensus over how to achieve happiness, especially via government policy. But today, statisticians are trying to help square that circle by measuring happiness and linking it to tangible life-quality elements that governments can change.

The goal is to improve on using gross domestic product (GDP) as the key benchmark signifying progress. It has long been agreed that this is not effective. For instance, in the 1990s, academics at the Massachusetts Institute of Technology showed that once people had access to purchasing power parity of around US$10,000-a-year, their happiness did not deepen significantly as they grew richer. Additional happiness was henceforth boosted through non-economic emotional, spiritual and other agencies.

This realisation has helped fuel an already existing movement – promoted especially by the Himalayan kingdom of Bhutan – towards producing policy indicators that assess a society’s collective happiness or wellbeing, trying to orientate government actions towards that end.

The UN General Assembly in August 2011 passed a resolution that not only recognised ‘happiness as a universal goal and aspiration’, but that ‘the gross domestic product indicator by nature was not designed to and does not adequately reflect the happiness and wellbeing of people in a country…’ It asked member states ‘to pursue…measures that better capture the importance of the pursuit of happiness…’ And it asked those governments who had been developing statistical indicators measuring happiness to share them.

The challenge has been accepted and national statistical offices have started collecting this data in earnest. In March this year, the world’s largest think-tank, the Paris-based Organisation for Economic Cooperation and Development (OECD), released its Guidelines on Measuring Subjective Well-being. It claimed that this was ‘the first comprehensive framework for internationally comparable and intellectually robust data on this topic’, allowing ‘statisticians and researchers to better measure how individuals evaluate and experience their lives’.

Comparable indicators

Of course, a major problem with measuring something as subjective as happiness is making sure that indicators are comparable and psychologically reliable, so the OECD has taken a sophisticated approach.

The OECD guidelines’ definition of subjective wellbeing cover the following principles:

Life evaluation: Subjects are typically asked how satisfactory their life feels on a scale of one to 10. This, the OECD has found, usually involves a mindful cognitive assessment by subjects of their lives.

Affect: A person’s feelings or emotional states, typically measured with reference to shorter time periods – say, how they were feeling at various points over the past two days and what they were doing at the time. The aim here is to get a true emotional gut-reaction feeling.

Eudemonia:  A sense of meaning and purpose in life, or good psychological functioning. Here, for instance, the OECD is measuring how good people feel about the way their life is going and what contributes to that. Satisfying employment and parenting are often cited as strong positive elements.

These principles are, according to an OECD note, ‘intended to be used as a resource for data producers developing their own surveys, but also include sections that will be more relevant to potential users of subjective wellbeing data such as policy analysts and economists.’ That, essentially, is measuring changes in psychological wellbeing against variables that governments can do something about, such as unemployment, health, education, income, housing or maybe something as soft as social contact.

The OECD wants governments to link wellbeing measurements to policy delivery, so that they not only know how to make people happier, they know how much it might cost. Research undertaken thus far, for instance, has shown that anywhere in the world, unemployment significantly reduces people’s happiness (they need four times as much money in benefit to be as happy being idle); and also that people particularly dislike commuting, regarding it as dead time. So, wellbeing statistics not only show how much happiness can be generated by creating jobs and reducing work journey times; by combining them with government employment or transport budgets, they offer analysis on what policy choices will boost wellbeing and their cost.

‘We can say how much life satisfaction you can buy for a dollar,’ says Conal Smith, the OECD’s leader on the development of international guidelines on the measurement of subjective wellbeing. ‘It gives some empirical evidence and that’s a large chunk of what policy is involved with.’

Rich-world governments are starting to take this on board. The UK government, for example, has introduced subjective wellbeing matrices into its policy assessment guidance for state agencies.

Smith provides an example from a regional police force in the UK, which conducted a subjective wellbeing assessment of citizens, asking them what police services and service delivery made them happy. It had been assumed that response time to crime calls was critical; the sooner the police arrived, the better. Not so. The research showed that this was only the case for violent crime. When property crime, such as burglary, happened, what was more important was that the police turned up when they said they would, even in two hours’ time. Armed with that knowledge, police managers were able to devote more resources to responding swiftly to violent crimes while scheduling officers to meet less urgent jobs.

Better Life Index

A ‘Better Life Index’ created by the OECD, suggests that governments deepen this psychological data by linking it to measurements of how societies fare in jobs, health, housing and civic engagement. The OECD adds advice on reporting and analysing the data collected, as well as ‘ways of mitigating the effect of various sources of bias’, giving examples of surveys and prototype questions.

‘Subjective wellbeing data can provide an important complement to other indicators already used for monitoring and benchmarking countries’ performance, for guiding people’s choices, and for designing and delivering policies,’ says Martine Durand, the OECD’s chief statistician. ‘[But] to provide a fuller picture, subjective wellbeing data must be examined alongside information on more objective aspects of life.’

Common standards essential

It is important, says Smith, that there are common data collection standards and methodology. Because the OECD wants national statistical offices involved – and indeed many already are – there is a real risk that if governments develop their own metrics, these will not be internationally comparable – and that reduces their value to governments wanting to learn from other countries’ experience. Imagine how much less value GDP measurements would have if governments counted this key economic data differently.

There are inevitably some issues of cultural bias in happiness metrics; some countries’ cultures are more prone to declarations of pessimism – for instance, France – compared with some Anglo-Saxon cultures, such as the UK and US). Indeed, some research has shown that in wellbeing polls French natives tend to depress reports of their happiness by between one-eighth and one-quarter of a scale point, on a 0-10 scale, compared with immigrants to France from a wide range of countries. However, some clear messages are already emerging from wellbeing data.

One is that being poor is no fun. Smith notes that less developed countries such as Togo tend to have life evaluation assessments of between 3.5 and 4, while richer countries such as Norway and Denmark tend to be in the 7 to 8 range. But the more detailed metrics are yielding important (and more surprising) data, too. The US and Colombia have similar life evaluation assessments, for instance. This has surprised Americans and prompted questioning of how Colombians can be happy in a drug-exporting country with a terrible crime problem and a decades-long civil war. Yet data showed high Colombian scores on family support and social life, which outweighed the security difficulties.

To really underscore the potential importance of this information, wellbeing assessments undertaken in Tunisia, Algeria and Egypt showed a steep fall in happiness from 2008-9, even though for the previous decade regular improvements in GDP, life expectancy and education were logged. The wellbeing assessments were insufficiently detailed to pinpoint what the problem was, but ‘the data predicts the Arab spring’, says Smith. What might a sensible government in the region have done if it had been more aware of this data? Could revolutions, that took many by surprise, have been headed off?

Which brings us back to Bhutan. It has developed its own precise metrics for a Gross National Happiness index since fully democratic government was achieved in 2008 and it is now applied to a wide range of government policies. As with the OECD, assessments include psychological wellbeing; health; time use; education; cultural diversity and resilience; good governance; community vitality; ecological diversity and resilience; and living standards.

However, Bhutan – which had a per capita GDP of just US$2,284 in 2012 – has yet to dovetail its systems with the OECD, which will make it hard for the time being to check whether the home of gross national happiness is up there with Scandinavians (Sweden has a per capita GDP of US$57,948) in terms of national cheeriness. If it is, we might all learn something.

Keith Nuthall, journalist.


‘In pursuit of happiness’, Accountancy Futures, Edition 06

OECD Guidelines on Measuring Subjective Well-being

This article first appeared in Accounting and Business, the monthly magazine for ACCA members.

By: Tina Narsian


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ACCA India
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