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Open Access 2024 | Open Access | Buch

Evaluating Economic Success

Happiness, Health, and Basic Human Needs

verfasst von: Michael Joffe

Verlag: Springer Nature Switzerland

Buchreihe : Wellbeing in Politics and Policy

Enthalten in: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

Inhaltsverzeichnis

Über dieses Buch

This open access book argues that a new policy approach is required in order to tackle the numerous problems the world is currently facing. The priority should be on achieving better outcomes for people, especially those facing deprivation or precariousness, by meeting their basic needs. In order to achieve this, the book develops a monitoring system that can act as an objective, an incentive, and a criterion of success for policy makers at all levels of government and in civil society, as well as providing information to guide specific actions. In doing so, the book aims to promote good health and positive social functioning by providing a new approach to help assess how well basic human needs are being met. This involves monitoring the outcomes of the economy that ought to satisfy these needs. It will appeal to all those interested in public policy, official statistics and monitoring, public health and wellbeing, as well as practitioners.

Inhaltsverzeichnis

Frontmatter

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Chapter 1. A Successful Economy is One that Meets Basic Human Needs

Abstract

The multiple problems the world now faces require a new policy approach. The priorities are to achieve better environmental outcomes, and better outcomes for people—especially those facing deprivation and/or precariousness. This book focuses on the human component, and specifically on the contribution that the economy can make. It proposes a criterion of success for the economy, and a monitoring system that corresponds to it. This would act as an objective, an incentive and a criterion of success for policymakers in government at all levels and in wider society. It would also provide specific information to inform public debate and to guide policy decisions.

The proposed criterion of success is that the economy should, as far as possible, meet the basic needs of all residents. There is wide agreement on what items qualify as basic needs. Meeting them would minimise distress and promote aspiration and social participation. This aim is widely supported across the political spectrum. It underlies the UN Sustainable Development Goals and other international agreements, and its wide support is backed by survey evidence. This value system is grounded in respect for the dignity of all, which in turn promotes inclusion and social justice, and facilitates agency and aspiration.

The monitoring system would comprise the outcomes of the economy that are relevant to people’s basic needs. It would aim to steer the economy towards satisfying them, thereby promoting good health and positive psychological/social functioning. This would represent a shift to pursuing ends, the meeting of human needs, rather than means, the quantity of economic output (GDP). Monitoring these economic outcomes is straightforward, most measures are already available in some form, and they are acceptable and affordable.

This book proposes that a list should be agreed of the most important economic outcomes that meet people’s basic needs, and a corresponding monitoring system should be introduced. This would be presented as a dashboard in a standardised format, providing informative material for public debate and a practical agenda for remedial action. In addition, the items would be aggregated to create an Index of Economic Outcomes (the IEO), as an overall score. This would replace GDP as a measure of economic success; GDP would be retained for the purpose of informing economic policy, for which it is well suited. The aggregation principle would be based on the quantitative contribution of each item to health and subjective wellbeing.

The overall monitoring system would promote environmental as well as human wellbeing. It would enable the environmental cost of meeting human needs to be calculated—the sustainability ratio, a measure of sustainable development. More generally, I propose a clear structure for monitoring the economic system as a whole, comprising assets of various kinds, output (GDP), outcomes, and impact (health and subjective wellbeing).

Michael Joffe

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Chapter 2. How to Monitor an Economy’s Contribution to Meeting Basic Needs

Abstract

Economic outcomes are intermediate between economic outputs and their impact on people’s lives. They represent the major way in which economic activity positively impacts health and wellbeing. The monitoring of such intermediate outcomes has useful measurement properties, because they apply to the whole population, they are present early and allow preventive measures to be undertaken, and they directly indicate where intervention is necessary thereby helping to set the policy agenda.

A provisional list of possible indicators for high-income countries is presented. The choice of items is based on the literature on human needs, and on the literatures on impact—the social determinants of health, and the emerging evidence on the economic determinants of subjective wellbeing. Data on these items are already collected, although some development work is needed to put them in the required format for the proposed monitoring system. It is desirable that the list of economic outcome measures should be standardised internationally, albeit with separate lists for different levels of economic prosperity.

Many items are expressed in terms of “access”, which combines availability and affordability; the criterion is whether or not the need is met, irrespective of how this is achieved. Insecurity is another pervasive issue, because of its impact on people’s quality of life.

Each item would be presented as the proportion unfulfilled, the proportion of the population who lack a particular amenity. This metric corresponds to the commitment to leave no one behind, i.e. the value system that everyone’s basic needs should be met, and is readily understood by most people. This implies that an agreed threshold is required for each item. Economic outcomes would be presented as a dashboard for public discussion and policy development, and as the aggregate measure, the Index of Economic Outcomes (IEO), for the overall evaluation of economic success.

The use of the proportion unfulfilled highlights inequalities, at least at the lower end of the income scale, implying that there is no need for a separate measure of inequalities as there is with per capita GDP (and with most other measures). It is compatible with different degrees of inequality higher up the scale, and therefore with a range of political views, implying that it can command wide popular support. An important implication of the proportion unfulfilled metric is that it requires representation of the whole population, including “hard-to-reach” groups.

The focus on economic outcomes that meet basic needs while minimising environmental damage corresponds to the perspective of the UN Sustainable Development Goals. The development work involved in establishing the IEO and its component items in the rich world could contribute to future work on the monitoring system for the Goals.

Michael Joffe

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Chapter 3. An Outline of Existing Monitoring Systems

Abstract

Economic performance has long been routinely measured by GDP. Although it is a good measure of activity, it is generally agreed to be a poor measure of economic success. The reasons are that it omits domestic labour and other unpaid work, it includes a great deal of economic activity that does not contribute directly to economic welfare (“defensive expenditures”) and may be harmful to individuals, society or the environment, and it is insensitive to inequality. There are also several other, more technical, problems. More fundamentally, purchases that merely improve one person’s economic standing compared to others make no contribution to aggregate wellbeing yet are counted in GDP. And macro-evidence shows that in rich societies, increasing prosperity is subject to diminishing returns—as GDP per person rises ever higher, the amount of additional benefit greatly decreases, possibly even to zero.

There have been various responses to this situation. One is to start from GDP, and attempt to remedy its defects by adding some items (e.g. domestic labour) and subtracting others (e.g. the cost of deterioration of nature). Various methods have been devised to adjust for inequality. And there have been many attempts to broaden the range of included items to form composite indices—the basic motivation being that economic success is only one criterion of societal benefit (this is not the same thing as providing a measure of economic success). Some useful ideas have emerged from this work, but there are no clear criteria for deciding which items should be included. Furthermore, the underlying notion is that monitoring something desirable will in itself lead to improvement—whereas in reality, effective policy needs to be based on the determinants of desirable outcomes that can be altered. And it is difficult to envisage such composite indices displacing GDP in the development of major policies. However, a different approach to “beyond GDP”, the OECD/EU initiative for an “economy of wellbeing”, has much in common with the emphasis on basic needs proposed in this book.

A great deal of progress has been made in assessing household disposable income, in valuing public services that are free at the point of delivery and in evaluating “free” goods and new products. The valuation of the various types of assets has also advanced considerably, including the UN System of Environmental Economic Accounting and the Inclusive Wealth Index. Particular attention is needed in relation to critical resources that are non-substitutable, including drinkable water, fertile soil, and pollinators including bees.

Subjective wellbeing has been the focus of much development activity. It is now widely monitored, and substantial research is being undertaken on its determinants. However, many methodological and conceptual problems remain, and its causal dependence on economic factors may be too weak to justify its sole use in evaluating the success of an economy. Health status needs to be considered alongside happiness as a primary criterion. Its social determinants are extremely well established, and account for a greater proportion of health outcomes than either healthcare or lifestyle choices. To a large extent, these determinants correspond to the satisfaction of basic needs as emphasised in this book, and health is responsive to interventions across the corresponding range of policy areas. The success of an economy in promoting a good quality of life for everyone can therefore be evaluated by monitoring of the satisfaction of basic needs, as determinants of health and happiness.

Michael Joffe

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Chapter 4. Advantages of the Proposed New Monitoring System

Abstract

The IEO perspective based on economic outcomes and the universal meeting of basic needs has a clear purpose, and a concept that corresponds to it, a formulation appropriate to fulfilling this purpose, a well-specified domain of application and a clear relationship with other related items that are being monitored. It is responsive to relevant societal heterogeneity and to changes over time, and is practically useful in relation to possible interventions. Its metric is clearly related to its purpose, and based on an explicit value system. It combines the advantages of specific individual indicators and an aggregate index, with weighting based on a clear criterion. The real-life significance of its components is intuitively meaningful. In addition, most of the required measures are already available (although needing some development work), they are acceptable, and they could be produced at relatively low cost in timely fashion.

The language of basic needs departs from traditional welfare economics, but some economists now argue that a rethink is needed, in view of the accumulating evidence on subjective wellbeing together with threats such as climate change, and pose the question, what exactly does “better” mean? The language of basic needs is also distinct from that of rights; it has the advantage of being more specific and arguably has a firmer conceptual justification. Compared with GDP, the IEO focus is superior in relation to harmful goods and activities, and more generally in emphasising the importance of the economy in enabling people to live long and fulfilling lives.

Combining the IEO with other measures would provide valuable information. Dividing the IEO by real per capita GDP would generate an efficiency ratio, where high efficiency implies that people’s lives are more fulfilled at lower cost. Similarly, dividing the IEO by the ecological footprint and/or specifically by the carbon footprint would generate a sustainability ratio, which could be regarded as a measure of sustainable development. The IEO could also be used to monitor the effects of policies, and in policy development. For each of the objectives embodied in the constituent items of the IEO, many different policy options would generally exist. The choice of policies would depend on a combination of values-based debate and the evidence on effectiveness and cost-effectiveness.

The IEO is intentionally based on a minimal value system that can command the support of all people of goodwill, whatever their particular political persuasion. It would play a major role in agenda setting, in planning for economic security at the national level and in fostering joined-up government. Action to improve the level of satisfaction of basic needs could involve governments (including regional and local) by means of direct provision, transfer payments, investments, fiscal policy and regulation; the private sector by reducing prices and introducing new products, and possibly by a more “stakeholder” orientation; and cultural change. A major contribution of a focus on the IEO could be to improve the tenor of public debate.

Michael Joffe

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Chapter 5. Technical Appendix: Quantifying the Impact of Economic Outcomes

Abstract

Construction of the IEO will involve some methodological and practical challenges, but this has been true also with GDP, and statistical agencies have routinely solved the issues that have arisen in that context.

The inclusion criteria and weights for the IEO are based on estimates of the magnitude of the causal contribution of each candidate item to health and/or subjective wellbeing. Ideally, these would be derived from a comprehensive evidence base, but this will require development work. Initially, reliance will need to be placed on expert opinion where the evidence base is inadequate for this purpose.

Calculation of the magnitude of the causal effect is based on the population attributable fraction, a standard epidemiological measure. This requires a value for the causal relative risk of each variable, adjusted for the effects of the others. The formula for this calculation is given, and explained, for a single exposure and for multiple exposures, for new cases (counts) or alternatively for the timing of deaths—the interval by which a death is brought forward, using survival analysis.

The latter formula for years of life lost (YLL) can readily be extended to cover a reduction in the health-related quality, rather than the length, of life. This draws on the well-established literature on Disability-Adjusted Life Years (DALYs), which contains values for the severity of the loss of functional health due to disability or disease in terms equivalent to loss of life duration—e.g. diabetic foot is counted as 0.20, meaning that the value of five years living with that condition is considered equivalent to four years without it. The same calculation can be performed for subjective wellbeing using Wellbeing-Adjusted Life Years, and in principle these can be combined with health loss (DALYs) resulting in what I call D/WALYs.

Each IEO component, such as illiteracy or insecure livelihood, is likely to play a causal role in various different types of impairments of health and/or subjective wellbeing. These would be combined as the sum of the D/WALYs lost that are attributable to that IEO component. Aggregation of the different IEO components to produce the overall index would start with the calculation of the complements of the scores of each item—for example, if the value is 0.05, its complement is 0.95. The IEO would then be calculated as their geometric mean (as has been used in the Human Development Index). The consequence is that the ideal IEO is 1 (probably best expressed as 100%), with real-life values being less than 1, and with the largest values indicating the most successful economies.

Michael Joffe

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Backmatter

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Titel: Evaluating Economic Success
verfasst von: Michael Joffe
Verlag: Springer Nature Switzerland
Electronic ISBN: 978-3-031-57671-3
Print ISBN: 978-3-031-57670-6
DOI: https://doi.org/10.1007/978-3-031-57671-3

Springer Professional

Über dieses Buch

Inhaltsverzeichnis

Frontmatter

Chapter 1. A Successful Economy is One that Meets Basic Human Needs

Chapter 2. How to Monitor an Economy’s Contribution to Meeting Basic Needs

Chapter 3. An Outline of Existing Monitoring Systems

Chapter 4. Advantages of the Proposed New Monitoring System

Chapter 5. Technical Appendix: Quantifying the Impact of Economic Outcomes

Backmatter

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