Issues in the Measurement of Well-being

1. Issues in the Measurement of Well-being Andrew E. Clark (Paris School of Economicsand IZA) http://www.parisschoolofeconomics.com/clark-andrew/ Economics and Psychology Masters Course

2. Three concepts of well-being Objective list – decided from “up above” Meet material, social and psychological needs Rights, economic resources, health, political freedom, freedom of thought, etc Preference satisfaction / desire fulfilment Individuals get what they want (role of resources) Mental state Hedonistic accounts; evaluative accounts ‘Subjective’ well-being Experienced utility

3. Objective lists haveoften appeared in Macro debates about performance – how well a country as a whole is doing GDP. The misery index AKA the Okun index (unemployment rate plus inflation) Widely used in policy debates unemployment rate; suicide rate; education level; access to green space; income inequality; etc Of the kind HDI/HDI+ Or Community Health Indicators

4. Which is not to say that there are no concerns about such nice “list” measures: What should be on the list? How can the items be compared? Are the weights the same for everyone? Paternalism: who decides? 4

5. Capabilities as a list Amartya Sen’s “capability approach” A challenge to consequentialist utilitarianism, and the Pareto criterion Start from a conception of what makes a good human life: people, not goods Capability Approach: what people are free to do as well as what they actually do. opportunities result from ‘capabilities’ – what you can do. these are distinct from ‘functionings’ – what you do.

6. Nussbaum’s list of capabilities 1. Life: not dying prematurely 2. Bodily health: good health; adequately nourished; shelter 3. Bodily integrity; mobility; free from violence; choice in sex and reproduction 4. Senses, imagination, and thought: education, religion, art 5. Emotions: attachments, love 6. Practical reason: form conception of the good, planning of life 7. Affiliation: social interaction; respect and dignity 8. Other species: concern and relation to animals, plants, nature 9. Play: laugh, play, enjoy recreational activities 10. Control over one’s environment: political participation; property, employment.

7. Human Development Index (HDI) Based on Sen’s idea of capabilities, added to Macro measures of performance Rationale: GDP per capita gives an incomplete picture of development and well-being can be supplemented by information on the opportunities people have UNDP has published the HDR every year since 1990; this includes the HDI by country.

8. United Nations Development Report 1990 “Human development is a process of enlarging peoples choices. The most critical of these wide ranging choices are to live a long and healthy life, to be educated and to have access to resources needed for a decent standard of living.” “No one can guarantee human happiness, and the choices people make are their own concern. But the process of development should at least create a conducive environment for people, individually and collectively, to develop their full potential and to have a reasonable chance of leading productive and creative lives in accordance with their needs and interests”

9. The Human Development Index

10. To calculate each dimension index …

11. Each indicator index …

12. HDI data from UNDR

13. The last column shows that the ranking of countries by GDP per capita is not the same as that by HDI Some countries do better than their GDP would imply (the Scandinavians, Madagascar) Others do worse The HDI adds new information to answer the question of how well a country is doing Despite their relatively high incomes, none of the oil-producing countries has a high HDI

15. Gender-related Development Index: HDR 1995 UNDP acknowledges key role for gender equality development per se may not contribute to gender equality HDI measures average achievement GDI adjusts to reflect male/female inequalities Calculate dimension indices by gender Use inequality-sensitive aggregation Then combine into GDI.

16. Contruction of the GDI

17. Gender specific values …

18. “Inequality-sensitive” aggregation average well-being of men and women: Dm, Df proportion of men and women : pm, pf aggregate population well-being: W equity-neutral aggregation: W1 = pmDm + pfDf equity-sensitive aggregation: W2 = [ pmDm-r + pfDf-r ] -1/r if r = -1, then W1 = W2, and thus equity neutral if r > -1, then inequality aversion; GDI uses r = 1.

19. GDI data from UNDR

20. GDI Map

21. Main findings of HDR 95 Benefits of development do not trickle down to everybody; it is not gender neutral Most of men’s work is paid; most of women’s work is unpaid: this impacts on social status (employment confers status) GDP per capita alone, or HDI, does not explain rank of country in GDI. In 2010, both the variables used to construct the HDI changed somewhat. And the GDI was replaced by the Gender Inequality Index. A new index was introduced that takes into account inequality in the dimensions of the HDI over the whole population (Inequality-adjusted HDI).

22. United Nations Millennium Development Goals 22 http://www.undp.org/

24. Preference satisfaction accounts Well-being the more you satisfy your preferences and fulfil your desires the higher your well-being is considered to be. In line with utility theory preferences inferred from the choices people make Concerns: Do people want/know what is good for them? What to do about “anti-social” preferences?

25. Mental state accounts Well-being how individuals feel / think Self-reported mood, emotions happy / sad / excited / bored Self-reported evaluation “how satisfied are you with your life?” Concerns: Adaptation and changing aspirations: : hedonic treadmill Personality traits These mean that objective and subjective may not “match”.

26. Adaptation is not universal We do not fully adapt to some circumstances and experiences Positive e.g. friendships Negative e.g. pain, noise, unemployment, poverty Important differences in degree and speed of adaptation and some evidence that baseline levels of SWB can change over time (for example, following unemployment)

27. BHPS Well-being questions The British Household Panel Survey (BHPS). See <http://www.iser.essex.ac.uk/ulsc/bhps/> Annual panel (longitudinal) survey since 1991. Wave 18 in September 2008 Wide range of variables from same individuals and households each year. E.g. in Wave 12 (2002): N = 17,339, aged 18-85

28. The General Health Questionnaire 12 (GHQ-12) Have you recently: 1. been able to concentrate 2. lost much sleep over worry 3. felt that you were playing a useful part in things 4. felt capable of making decisions 5. Felt constantly under strain 6. felt you could not overcome difficulties 7. been able to enjoy normal activities 8. been able to face up to problems 9. Been feeling unhappy and depressed 10. been Losing confidence 11. been thinking of yourself as worthless 12. been feeling reasonably happy

29. Satisfaction Questions Here are some questions about how you feel about your life. Please tick the number which you feel best describes how dissatisfied or satisfied you are with the following aspects of your current situation. Your life overall [ 1 ] [ 2 ] [ 3 ] [ 4 ] [ 5 ] [ 6 ] [ 7 ] not satisfied at all   completely satisfied This question is also asked about domains of life: e.g. health, income, house, partner ...

30. These “behave” the way we think that they should:

31. BBC News Website 24 Feb 2011www.bbc.co.uk/news/uk-12566965 • ONS Happiness Survey Questions Revealed • After becoming Conservative leader in 2005, David Cameron said gauging people's feelings was one of the "central political issues of our time". • "It's time we admitted that there's more to life than money and it's time we focused not just on GDP but on GWB - general well-being," he said. • The ONS will add the subjective questions to its next annual Integrated Household Survey • The questions will include: • Overall, how satisfied are you with your life nowadays? • Overall, how happy did you feel yesterday? • Overall, how anxious did you feel yesterday? • Overall, to what extent do you feel the things you do in your life are worthwhile? www.bbc.co.uk/news/uk-12566965

32. Does subjective well-being mean anything (1) Concern: Does it make sense to treat the happiness or life satisfaction scores as if they were cardinal and interpersonally comparable? Reality: Econometric models assuming cardinality and ordinality give roughly same results Meaning: people “split up” verbal labels into roughly equal blocks

33. Does subjective well-being mean anything (2) Concern: Are the life satisfaction or happiness questions reliable? Are they valid? Can people recall? Reality: Sensitive to wording, and question ordering. Can be experimentally manipulated (Schwarz’s dime on the photocopier) But correlate well with proxies of well-being. People are not good at recalling their own experiences.

34. Does subjective well-being mean anything (3) Concern: If happiness and life satisfaction became the policy maximand, one effective intervention might be to dampen peoples’ expectations; or give out happiness pills. Reality: People care about the causes and processes of higher/lower life satisfaction.

35. What is “experienced utility”? “Experienced utility”: an economists’ interpretation of life satisfaction and happiness a mental state account the level of utility that is actually felt cf. “decision utility” (preference satisfaction) the level of utility that people think they will feel utility inferred from observed choices People often mis-want, or get it wrong. So that satisfying preferences won’t bring well-being

36. Why people mis-want Impact bias: overestimate impact Focalism (too much attention to the central event) Immune neglect (rationalise bad events) Projection bias: different arousal states (don’t shop when hungry) Distinction bias: joint/single evaluations Memory bias: peak-end rule Duration neglect

37. Measuring experienced utility (1-1) Experience sampling method (ESM) Participants carry palm top instrument. Random selection of times of day as participant goes about daily life. Rating of various feelings such as “happy” or “frustrated/annoyed”. Record what they are doing. Aggregate each ‘moment’ to obtain time profile of affect.

38. Measuring experienced utility (1-2) Advantages of ESM Real, experienced utility, as life events are lived. No bias and distortion due to recall Disadvantages of ESM Costly Possibly disruptive (eg. while driving)

39. Measuring experienced utility (2-1) Day reconstruction method (DRM) Reconstruct previous day into a series of episodes Where, doing what, with whom Rating of various feelings such as “happy” or “frustrated/annoyed”. U-index: proportion of time in negative emotion.

40. Measuring Well-being: The Day Reconstruction Method Respondents reconstruct the previous day: like a retrospective TIME USE DIARY Day is split into a sequence of episodes. Respondents report the key features of each episode, including (1) When the episode began and ended (2) What they were doing (3) Where they were (4) Whom they were interacting with, and (5) how they felt on multiple affect dimensions

41. For each of the episodes that individuals identify during the day, they are asked the following questions:

44. Measuring experienced utility (2-2) Advantages of DRM Less costly than ESM Does not rely on participant self perception of life domain Disadvantages of DRM Element of recall: possible bias ie. it’s not how people felt then and there

45. Evidence from ESM/DRM

46. Measuring experienced utility (3) Life satisfaction questions Advantages Easy to administer Everyone understands them Disadvantages Neglect of duration More cognitive than affective

47. Issues with Measuring Satisfaction Social Desirability Possible bias if we ask individuals sensitive questions: they want to look good in front of the interviewer. “computer-assisted self-interviewing (CASI) and self-completion (SC) paper questionnaires are generally preferred to face-to-face interviewing as a way of assuring a greater degree of confidentiality and inducing more truthful responses” This is why the GHQ questions discussed above are a drop-off questionnaire. Self-reporting means that individuals are more likely to report their true response to questions like “have you recently been thinking of yourself as worthless” 47

48. Some BHPS results, from Conti, G., and Pudney, S. (2011). "Survey design and the analysis of satisfaction". Review of Economics and Statistics, 93, 1087-1093. Oral interviews conducted by an interviewer tend to produce more positive reports of satisfaction than private self-completion questionnaires – the “let’s put on a good show for the interviewer” effect. When children are present during the interview, adult interviewees tend to give still more positive responses – the “not in front of the children” effect. The presence of the interviewee’s partner during the interview tends to depress the level of reported satisfaction – the “don’t show your partner how satisfied you are” effect, which we speculate may have something to do with the desire to maintain a strong bargaining position within the relationship. 48

49. Issues with Measuring Satisfaction Which response scale? Even if the question is a good one, on what scale would we want them to respond? A satisfaction question can be answered on a three-point scale, a four-point scale, etc. May want an odd number of response categories in order for there to be a natural neutral 49

50. We would like a scale to be both reliable and valid Pretests for the European Social Survey suggested that reliability and validity were higher using an 11-point scale compared to a four-point scale. 50