Rethinking Well-being: Beyond GDP for a Happier Society

1. Why Measure Subjective Well-being? Andrew Oswald University of Warwick I would like to acknowledge that much of this work is joint with coauthors Andrew Clark, Nick Powdthavee, David G. Blanchflower, Eugenio Proto, Alex Weiss, Rainer Winkelmann, and Steve Wu. I thank the ESRC for support.

2. Reason 1

3. Reason 1 We need to know if society is going in a sensible direction.

5. Yet in 1934

6. Yet in 1934 • “...the welfare of a nation [can] scarcely be inferred from a measure of national income...”

7. Hug a tree today

9. Prof. Simon Kuznets • The originator of the concept of GDP

10. “...the welfare of a nation [can] scarcely be inferred from a measure of national income...” S Kuznets

11. So even Simon Kuznets knew that we require a different yardstick.

12. Reason 2

13. Reason 2 Human beings have feelings.

14. Reason 2 Human beings have feelings.

19. Humans have feelings, and feelings matter.

20. How do I know researchers care about feelings of well-being?

21. Say we do an electronic search.

22. Since 2008, approximately 110,000 articles have been published in economics journals.

23. The most-cited major article in modern economics:

24. The most-cited major article in modern economics: Relative income, happiness, and utility: An explanation for the Easterlin paradox and other puzzles Clark, Andrew E.; Frijters, Paul; Shields, Michael A. JOURNAL OF ECONOMIC LITERATURE MAR 2008

25. Reason 3

26. Reason 3 People’s ‘utility’ depends on income relative to comparison income. Veblen, Scitovsky, Hirsch, Frank...

27. Much econometric evidence

28. Much econometric evidence • Clark and Oswald “Satisfaction and Comparison Income”. Journal of Public Economics 1996 • Luttmer “Neighbors as Negatives”. Quarterly Journal of Economics 2005

29. There is other evidence that human beings care about their relative position.

30. We are now able to see that inside the brain.

32. Title: Social comparison affects reward-related brain activity in the human ventral striatumAuthor(s): Fliessbach K, Weber B, Trautner P, et al.Source: SCIENCE Volume: 318 Issue: 5854 Pages: 1305-1308 Published: NOV 23 2007

33. Armin Falk et al

34. Armin Falk et al While being scanned in adjacent MRI scanners, pairs of subjects had to perform a task with monetary rewards for correct answers.

35. Variation in the comparison subject's payment affected blood oxygenation level-dependent (BOLD) responses in the ventral striatum.

36. Variation in the comparison subject's payment affected blood oxygenation level-dependent (BOLD) responses in the ventral striatum. This brain region is engaged in the registration of primary rewards.

37. Falk et al in Science

38. Falk et al in Science • “The mere fact of outperforming the other subject positively affected reward-related brain areas.”

39. Blood-oxygenation equations • (similar with fixed effects, main variation across Ss)

40. So, inside your brain

41. So, inside your brain You simply want to be high up the monkey pack

42. But then a focus on total national income (GDP) misses the point.

43. But then a focus on total national income (GDP) misses the point. The total amount of relative status is fixed.

44. Say you don’t believe in statistical evidence.

45. 5 euros

46. 500,000 euros

47. 5 euros

48. 500,000 euros

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