Alternative Measures of Well-Being (SL IB Economics)

• Due to the limitations of using national income statistics to measure well-being and compare standards of living, alternative measures of well-being have been developed. These include:

1. The OECD Better Life Index
2. The Happiness Index
3. The Happy Planet Index

• While GDP focusses on production, happiness focuses on health, relationships, the environment, education, satisfaction at work and living conditions
• National incomes statistics tend to present more positive data while national happiness surveys yield more normative data
• There is a link between income and happiness and the Easterlin Paradox is often used to explain it. The paradox states that:
  • Happiness and increases in income have a direct relationship up to a point
  • Beyond that point, the relationship is less evident

• The Organisation for Economic and Cultural Development (OECD) has created an index which aims to measure the  well-being of citizens in its 38 member countries
• The Better Life Index has 11 variables which it considers essential to the well-being
  • Countries are rated on each variable and then comparisons can be made

 

The Eleven Variables of the OECD Better Life Index

Variable	Explanation
Housing	This considers living conditions and the proportion of household expenditure spent on housing
Income	This considers the net income and net wealth of households
Jobs	This considers job security, the average earnings of the country and the unemployment rate
Community	This considers the social support networks that exist in the economy
Education	This considers the quality of the education with a focus on educational attainment and skills
Environment	This considers the environmental health with a focus on air pollution and water quality
Civic Engagement	This considers voter turnout and community involvement in creating legislation (laws)
Health	This considers the quality of health with a focus on life expectancy and data from self reported health surveys
Life satisfaction	This considers the overall satisfaction that people have with their lives
Safety	This considers how safe people feel walking alone at night, together with the murder rate in the country
Work-life balance	This considers the percentage of employees who work long hours, together with the amount of time given to leisure and personal care

• The Happy Planet Index (HPI) attempts to measure sustainable wellbeing
• Countries are ranked by how efficiently they deliver long, happy lives using the earth's scarce resources in a sustainable way
• The HPI scores countries with a lower ecological footprint higher countries with more environmental degradation
• The HPI measures a country's progress using three variables
  • Wellbeing
  • Life expectancy
  • Ecological footprint
     
• 

 

The top 3 and bottom 3 countries on the HPI in December 2022 (Source: Happy Planet Index)

• The Happiness Index is a survey that measures happiness in 10 different areas of a persons life

1. Psychological Well-Being
   Optimism, sense of purpose/accomplishment
2. Health
   Energy levels and ability to perform everyday activities
3. Time Balance
   Enjoyment, sense of leisure, frequency of feeling rushed
4. Community
   Sense of belonging, volunteer levels, sense of safety in the community
5. Social Support
   Satisfaction with friends and family, feeling loved, and degree of loneliness
6. Education, Arts, and Culture
   Access to cultural and educational events and diversity
7. Environment
   Access to nature, pollution levels, and level of conservation
8. Governance
   Trust in government, sense of corruption, and competency of authorities
9. Material Well-Being
   Financial security and meeting basic needs
10. Work
    Compensation, autonomy, and productivity

(Source: The Happiness Index)