The art of measuring happiness

Wellbeing may sound like a nebulous concept that is difficult to quantify, but social scientists can now get a pretty good idea of how it matters, thanks to Professor Arthur Grimes.

man with grey hair and goatee in front of green letterboxes
As part of a series of Treasury seminars leading up to the release of its first Wellbeing Report later this year, Professor Arthur Grimes outlined how economists and others have managed to measure wellbeing over the years.

Professor Grimes, who is Professor of Wellbeing and Public Policy in Te Kura Kāwanatanga―School of Government, says that wellbeing is really just another word for ‘welfare’ or ‘utility’.

He says survey questions on subjective wellbeing have been around since the 1950s. They have been increasingly introduced in questionnaires in countries across the world.

In New Zealand they have most notably been included since 2008 in Statistics NZ’s General Social Survey and in local authorities’ quality of life surveys before then.

“Sociologists, psychologists, and economists have been using them more generally in their work since at least the 1970s. Measures of subjective wellbeing―such as ‘On a scale of 0 to 10 how do you feel about your life as a whole?’―might seem rough. However, when you look at where countries rank in different surveys based on such questions, they tend to give similar results.

“It’s the Scandinavians, the Netherlands, New Zealand, Canada, and Australia who do really well, while countries like Afghanistan and Togo and Chad are often placed at the low end. So, when we look at the answers we can see they are showing us something meaningful, even if the questions may sound a bit woolly.”

Economists can then quantify the impacts of policies on subjective wellbeing, though that is “the tricky bit”, Professor Grimes says.

“If we take the impact of the second (Auckland) Covid-19 lockdown, for instance, we have found that that lockdown reduced wellbeing, on average, by 0.2 of a point on an 11-point scale.

“We can compare that effect with effects of other events that affect wellbeing. For example, the negative effect of the lockdown is about two-thirds of the effect of becoming unemployed, which is one of the most serious negative influences on subjective wellbeing.

“There’s quite a few studies now that estimate the monetary equivalent for wellbeing of certain policies.  For example, we can estimate how much money someone would have to receive to be equally happy to stay in a private rental home rather than moving into public housing.

“This is useful since a government might be considering investing in another 10,000 public houses. It’s useful to estimate a ballpark figure for the benefits and say, ‘based on reasonable methodologies and assumptions, it looks like the benefits are way bigger than the cost, or the benefits look so trivial it’s not worth doing’.”

Subjective wellbeing analyses also help us to understand the importance of a welfare state, he says.

“In reflecting on his long research career, economist Richard Easterlin has concluded that a welfare state takes away a lot of worry for people if something goes wrong. The comparative lack of a welfare state is part of the reason why the United States might be one of the richest countries in material terms but normally only comes about 15th to 20th in national wellbeing comparisons.

“That’s about the same as Costa Rica, which is an interesting counter-example. It is the only middle-income country in the top 20. They make up for their relative lack of income with a strong emphasis on environment, societal trust, family and friends, and social connections, which are all hugely important for individuals’ wellbeing.”

How subjective wellbeing crosses cultural divides is also of interest to social scientists and policymakers, and more work needs to be done on this, Professor Grimes says.

“Rowan Thom and I looked at cultural wellbeing of iwi members related to their land loss and confiscations in the 19th century and found there are lingering effects 150 years later of what had happened, revealed in outcomes like te reo proficiency and smoking rates.”

The subjective wellbeing approach is valid across a wide variety of public policy domains, including how local authorities deal with their environmental, economic, social, and cultural wellbeing requirements, he says.

It also helps us to understand why people migrate.

“In New Zealand’s case, why are we so attractive to migrants? We’re not a particularly rich country―in some measures we’re only 30th or so in the world in terms of income. But it’s because our country is such a nice place to live. Other factors influencing wellbeing are at play here that make us attractive.

“The countries that are consistently the happiest over a long period have market economies supplemented by a welfare state, and they respect people’s freedoms.

“Given current world events, the criticality for wellbeing of respecting people’s freedoms is undeniable―there are no repressive regimes anywhere near the top of the wellbeing ranks.”