National Well-Being Indices Professor Liam Delaney

“Not fluffy”

Overview

Well-Being and Economics

Concepts of Well-Being

20th Century Ireland

National Well-Being Indices

Considerations and Limitations

2 - Historical Background (1)

Schumpeter (1953) traces utility theory from Aristotle through the medieval scholastics through to Smith, Bernoulli, Walras (rarete), Jennings and Lyod.

Jevons: “Economics as a calculus of pleasure and pain”. Marshall: “Hedonics”.

Generally assumed that utility was linear but this was not always the case and began to be relaxed.

Very strong European interest at the turn of the 20th century in integrating newly emerging psychological theories in to economics particularly psychophysics (e.g. Fechner).

Historical Background (2)

Strong interest in issues such as the interpersonal comparison of utility particularly with regard to progressive taxation.

However, became gradually apparent that what was taking place was a logic of utility rather than a psychology of utility.

Friedman (1952) and other work e.g. Samuelson put a number of nails in the coffin of directly analysing utility.

Many of the issues did survive as critiques of welfare economics. Ng (2003), Harsanyi (1997)

Modern Hedonic Economics

The quantitative analysis of measured hedonic experience has a long past.

Has recently been “discovered” by economics. Strongly associated with the work of Kahneman,

Frey, VanPraag, Clark, Blanchflower, Oswald and others.

Review by Layard (2005). See Van-Praag and Ferrer-I-Carbonell (2004) for a

more Euro-centric perspective. Strong links with Psychology and Neuroscience.

(Glimshcer and Rustichini 2004).

Well-being and Economics

Historical concern with utility

Modern debate

Easterlin Paradox

Well-Being functions

Loss Aversion

Benefits of GDP/GNP

Comparable

Linked to core economic parameters

Okun's law

Debt Dynamics

Limitations of GDP/GNP

Household Production

Inequality

Public Goods/Externalities

Non-Market Goods

Environmental sustainability

Consumption and PPP

Concepts of Well-being

Consumption and Income

Happiness

Life Satisfaction

Flow measures of Utility

Functioning

Eudemonia

Capabilities

Flow Measures of Well-Being

Stress:-Public Transport V Driving http://www.stressmapping.com/

Liam Delaney, Michael Daly, Gerard O Neill

Red= driving

Green= Public

Transport

Fogel on Development of Societies

Stage 1: Death is linked to an endemic shortage and uncertainty of food

Stage 2: Prevention of death from infectious illness becomes key

Stage 3: Increasing control over acute causes of death and increasing life expectancies and medical advancements

Transitions between stages

20th-Century Ireland

5 major collapses

Declines in infant mortality in 40s

Increases in Life Expectancy

High out-migration

High variances in childhood conditions

Current trough following boom

Source O’Grada 2010

Irish Infant Mortality

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Rate per 1000

Life Expectancy in Ireland

Mean scores on psychological distress index (1994-2001)

Suicide rates per 100,000 by gender

Male suicide rates by age group

Determinants of Well-being

Unemployment

Childhood mistreatment

Social isolation

Chronic Pain

Relationship

Fixed effects

Income

Income

Huge historical debate

Easterlin Paradox

Wolfers and Stevenson

Easterlin and Angelescu

Diminishing Returns?

Intertemporal Factors

Intergenerational Welfare

Childhood determinants of well-being

Scarring effects

Disruptive life events

Chain effects

Evaluable or Inherently Inevaluable

Hsee (2008)

One solution to Easterin Paradox

Inherently Evaluable Goods relate to core well-being

Consistent with increased happiness between rich and poor and why rich do not get happier over time

Not just limited to poor countries

Inherently Evaluable Goods

“Inherently evaluable attributes are those for which we have an innate, typically visceral and biological scales to judge desirability. Examples include the amount of sleep, severity of pain or allergies, stress from work, ambient temperature, degree of social isolation (loneliness), etc., In contrast, inherently inevaluable attributes are those for which we do not have an innate evaluation scale to assess desirability – to evaluate these attributes, we must instead rely on external reference information or socially learned norms. Examples include the size of a diamond, the amount of income…”

(Hsee et al 2008, p 228).

Macro-Considerations

Inflation less aversive than unemployment

Inequality

Financial Crises

Less known about balance sheets

Irish Literature

Newman, Delaney, Nolan (2008): increases in financial satisfaction through Celtic Tiger

Delaney et al (2008): determinants of WHO-5

ESRI - The Best of Times

Delaney (2009): well-being through late 20th century Ireland

Walsh (2012): well-being after the fall

National Well-being indices

GDP/GNP

Stiglitz-Sen Commission

Life Satisfaction Rankings

Happiness Rankings

OECD Better Life

Human Development Index

Gallup

ONS

Stiglitz-Sen Recommendations

Income/Consumption rather than production

Households

Wealth and distribution

Subjective dimensions

Inequalities

Surveys to assess linkages

Role of statistical offices

Ireland in Well-Being Indices

Highly ranked on GDP/GNP

Life expectancy convergence though with long lags

Consistently among highest in well-being and life satisfaction

7th in Human Development Index

5.325.48

6.016.036.09

6.266.416.466.486.496.556.65

6.756.816.89

7.157.157.17

7.427.447.507.537.57

7.737.737.797.837.877.948.028.02

8.328.47

0 .5 1 1.5 2 2.5 3 3.5 4 4.5 5 5.5 6 6.5 7 7.5 8 8.5 9

mean of happiness

BulgariaUkraineTurkey

Russian FederationRomaniaHungary

LatviaItaly

SlovakiaGreece

PortugalEstonia

Czech RepublicCroatiaPolandFrance

GermanySlovenia

IsraelUnited Kingdom

AustriaSpain

CyprusNetherlands

BelgiumIreland

LuxembourgSwedenNorway

SwitzerlandFinland

DenmarkIceland

Overall Mean Happiness for the Year 2002 - 2010

4.244.58

5.405.55

5.675.885.89

6.046.066.10

6.246.30

6.406.456.50

6.846.866.87

7.067.08

7.197.24

7.427.467.507.58

7.807.817.85

7.968.01

8.458.46

0 .5 1 1.5 2 2.5 3 3.5 4 4.5 5 5.5 6 6.5 7 7.5 8 8.5 9

mean of lifesatisfaction

UkraineBulgaria

Russian FederationHungaryPortugal

LatviaTurkey

SlovakiaRomania

GreeceEstoniaFrance

Czech RepublicCroatiaPoland

GermanyItaly

SloveniaUnited Kingdom

IsraelCyprus

SpainBelgium

IrelandAustria

NetherlandsNorway

LuxembourgSwedenFinland

SwitzerlandDenmark

Iceland

Overall Mean Life Satisfaction for the Year 2002 - 2010

Mean-levels of well-being across countries

UAEEHUPTGBGRSKCZSIFIPLDEATFRNLESBESEISLUNOCHIEDK

0 5 10 15 20mean of who5

UAEEHUPTGBGRSKCZSIFI

PLDEATFRNLESBESEIS

LUNOCHIE

DK

Subjective Well-Being By Country

Source: Delaney et al 2009

Gallup Index

When sorted according to the percentage of inhabitants who are 'thriving', Ireland comes 10th out of 40,

Behind Denmark, Finland, Norway, Sweden, Netherlands, Switzerland, Austria, Belgium and the United Kingdom.

In Ireland, 49% are thriving, 49% are struggling, 2% are suffering, and the score for daily experience is 7.5

UN Happiness Report

Annual samples of 1,000 respondents in more than 150 countries. Respondents evaluate their quality life on an 11-point ladder scale (Cantril ladder).

The report gathers the responses from Gallup World Polls, from 2005 to 2011, and weights them by each country’s population. Ireland comes 10th in the world based on this measure.

Using the Gallup World Poll (Cantril ladder)

Happy Index

Country rankings based on the 4-point evaluative happiness answers in the combined World Values Survey/European Values Survey

Ireland comes sixth on this combined measure.

Average happiness yesterday

Average Gallup World Poll answers to a question asking about the respondent’s happiness yesterday (using a yes/no 2-point response scale).

Ireland comes first on this measure.

Positive affect

Gallup World Poll country rankings for positive affect (the average of yes/no answers on the frequency yesterday of enjoyment, happiness and laughter).

Ireland comes second on this measure.

Negative affect

Gallup World Poll country rankings for negative affect (the average of yes/no answers on the frequency of worry, sadness, anger and depression).

Ireland is ranked number 27 on this.

Average net affect

positive affect minus negative affect

Ireland is ranked 3rd on this.

OECD Better Life Index: Ireland (indicators)

Housing expenditure: 4/36

Dwelling with basic facilities: 99.80% = 10/36

Rooms per person: 2.1 = 5/36

Household financial wealth: 21485 USD = 22/36

Household net adjusted disposable income: 24156 USD = 16/36

Job security: 10/36

Long-term unemployment rate: 6.69% = 33/36

Employment rate: 60% = 26/36

Quality of support network: 98% = 2/36

Years in education: 17.6 = 17/36

OECD Better Life Index: Ireland (indicators)

Student skills: 18/36

Educational attainment (% aged 25 to 64 having completed secondary school): 72% = 24/36

Water quality: 89% satisfied = 14/36

Air pollution: 13 micrograms = 3/36

Consultation on rule-making: 9/36

Voter turnout: 67% = 22/36

Self-reported health: 83% good or v.good = 6/36

Life expectancy: 81 years = 11/36

Life satisfaction: 17/36

OECD Better Life Index: Ireland (indicators)

Homicide rate: 1.2 homicides per 100,000 people = 15/36

Assault rate: 2.63% = 10/36

Time devoted to leisure and personal care: 14.56 hours = 24/36

Employees working very long hours: 3.72% = 10/36

After the Fall

Set of papers by Brendan Walsh

Evidence for increase in suicide rates

Small change in life satisfaction

Increase in births

Decrease in mortality

Increase in migration

Source Walsh 2011

Source Walsh 2011

Considerations 1

Multi-dimensionality

Differential item functioning

Migration and Well-Being

Means and Variances

Rawlsian Well-Being functions

Quantile Regressions

Migration

Source: Delaney et al 2013 in press

Heterogeneous reporting

Analyses of socioeconomic inequities in adult health often rely on self-reported indicators, usually some variant of:

Subjective scales involve evaluation of your own true health compared with your own subjective view of what it means to be above or below a given threshold (such as very good and good)

Response categories may be interpreted in systematically different ways

If there are systematic differences in how different groups of

people interpret responses categories then results using these

responses may be biased

In general, would you say that your health is:

Very good, Good, Fair, Poor, Very poor

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Response Category Cut-point Shift

Very good

Very bad

Good

Bad

Moderate

True Health Response Scale A B C

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Heterogeneous health reporting

5-category SAH instrument “True” health status for each individual, which is unobserved,

represented on a vertical axis with higher points, represented by the red lines, indicating better health

The ranges of true health within which different responses are given to the SAH question vary across individuals (A, B & C) Relative to A, B is more positive and C more negative regarding

their health At the top level of “true” health (top red line) A reports good health,

B very good and C moderate At the middle level of true health, A reports moderate health, B

good and C bad At the lowest level of true health, A reports bad health, B moderate

and C very bad

B is much more optimistic than A or C

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Incomparable Responses Problem

Individuals may report health differently depending their upon

Different understandings or conceptions of health

Expectations for own health

Their health relative to their peers

Different norms or standards as to what the responses

categories mean

Financial incentives to report ill health

This is referred to as differential item functioning or DIF

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Consequences of DIF for equity analyses and indices

If the variation is random, it will not bias the measurement of socioeconomic-related health inequality

Differential reporting of health by socioeconomic status (SES) would bias estimation of the gradient E.g. if the poor systematically understate their true health status,

then self-reported measures of health will not reflect the full extent of health inequalities

For the same ‘true’ (but unobserved) health status, poor may report better health

Differences in health disparities from self-reported and objective health measures suggest systematic variation in reporting

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Evidence of heterogeneous reporting

Income-related inequalities in objective health indicators (malnutrition, mortality), tend to be higher than those in subjective health

Discrepancy in health gradients measured by objective and subjective indicators is even more common in developing world

For example, in developing countries, gradient in reported health often much smaller than gradient in mortality/anthropometrics

Aboriginals self-report better health despite being seriously disadvantaged on objective measures such as mortality

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Examples

India: Amartya Sen (2002): “the state of Kerala has the highest

levels of literacy... and longevity... in India. But it also has,

by a very wide margin, the highest rate of reported

morbidity among all Indian states...

At the other extreme, states with low longevity, with woeful

medical and educational facilities, such as Bihar, have the

lowest rates of reported morbidity in India.”

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Methodology: Anchoring Vignettes

King et al. (2004) proposed anchoring vignettes as a method overcoming the problem of

incomparable responses

How - uses respondent’s evaluations of the health states

of hypothetical people described in a short vignettes as

an anchor for their self-assessed responses (King et al.

2006, Kapteyn et al 2007, van Soest 2007)

Purges these reporting differences from individuals’ evaluations of their own health

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Methodology: Anchoring Vignettes

1. Respondents are first asked to evaluate their health in a given domain on a subjective scale. For example:

In the last 30 days, how much of a problem did you have because of shortness of breath?

None, Mild, Moderate, Severe, Extreme

2. Respondents are then asked to rate the health of one or more hypothetical person described in the vignette on the same scale that they used to rate their own position. For example:

Vignette A: Marie has no problems with walking slowly. She gets out of breath easily when climbing uphill for 20 meters or a flight of stairs. In the last 30 days, how much of a problem did Marie have because of shortness of breath?

Vignette B: Sean has asthma. He enjoys playing football twice or three times per week. He has attacks of wheezing once a month that go away half an hour after taking his medication. In the last 30 days, how much of a problem does Sean have breathing?

None, Mild, Moderate, Severe, Extreme

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Vignette Assumptions

As the objective health situation of the person described in the vignette(s) is the same for all respondents, anchoring vignettes can identify individual variation in subjective thresholds

Vignette equivalence: Assume all respondents recognise the vignette as representing the same dimension of health, thus variation in its evaluation derives only from reporting differences

Response consistency: Assume respondents rate their own health in the same way as the vignette, the common cut-points estimated from the vignette responses can be imposed on the evaluation of own health

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Anchoring Vignettes (King et al. 2004)

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Anchoring Vignettes (King et al. 2004)

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Anchoring Vignettes (King et al. 2004)

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Vignettes and Life Satisfaction

Source Kapteyn et al 2011

Considerations II

Frequency of Collection

MOT versus Speedometer

Language for use in policy

Well-Being and Mental Health

Well-Being and Behaviour

Paternalism and neo-paternalism

Considerations III

Ethical basis of consumption

Political economy of measurement

Is well-being a distraction?

Well-Being and productivity

Bank bailouts

Options for Ireland

Index constructed from ESS

Aging studies - TILDA/SHARE

Regular tracking from CSO through QNHS

Welfare of targeted groups

Migrants into Ireland

Irish abroad

NI Measures

Extra Slides on Influence on Measures

US National Well-Being Index

The Gallup-Healthways Well-Being Index

Daily measure of health and well-being in the U.S.

Over 500 adults interviewed every day

Total nterviews: 2012 n = 353,564 and 2011 n = 353,492

Real-time measurement of life-evaluation, emotional health, physical health and health behaviours, work environment

Daily data

Source: http://www.well-beingindex.com/

Well being questions: Emotional health

Now, please think about yesterday, from the morning until the end of the day. Think about where you were, what you were doing, who you were with and how you felt. Were you treated with respect all day yesterday? Did you smile or laugh a lot yesterday? Did you learn or do something interesting yesterday? Did you have enough energy to get things done yesterday?

Did you experience the following feelings during A LOT OF THE DAY yesterday? How about enjoyment, physical pain, worry, sadness, stress, anger, happiness? (asked individually)

Emotional health: 1% drop in recession

Source: http://www.well-beingindex.com/

Well being questions: Evaluation Index

Please imagine a ladder with steps numbered from 0 at the bottom to 10 at the top. The top of the ladder represents the best possible life for you and the bottom of the ladder represents the worst possible life for you. On which step of the ladder would you say you personally feel you stand at this time?

Life-evaluation: Substantial drop (approx. 10%)

Source: http://www.well-beingindex.com/