Alternative Measures of Well-Being (DP IB Economics)
Revision Note
Alternative Measures of Well-being
Due to the limitations of using national income statistics to measure well-being and compare standards of living, alternative measures of well-being have been developed. These include:
The OECD Better Life Index
The Happiness Index
The Happy Planet Index
While GDP focusses on production, happiness focuses on health, relationships, the environment, education, satisfaction at work and living conditions
National incomes statistics tend to present more positive data while national happiness surveys yield more normative data
There is a link between income and happiness and the Easterlin Paradox is often used to explain it. The paradox states that:
Happiness and increases in income have a direct relationship up to a point
Beyond that point, the relationship is less evident
OECD Better Life Index
The Organisation for Economic and Cultural Development (OECD) has created an index which aims to measure the well-being of citizens in its 38 member countries
The Better Life Index has 11 variables which it considers essential to the well-being
Countries are rated on each variable and then comparisons can be made
The Eleven Variables of the OECD Better Life Index
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Housing |
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Income |
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Jobs |
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Community |
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Education |
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Environment |
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Civic Engagement |
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Health |
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Life satisfaction |
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Safety |
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Work-life balance |
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Happy Planet Index
The Happy Planet Index (HPI) attempts to measure sustainable wellbeing
Countries are ranked by how efficiently they deliver long, happy lives using the earth's scarce resources in a sustainable way
The HPI scores countries with a lower ecological footprint higher countries with more environmental degradation
The HPI measures a country's progress using three variables
Wellbeing
Life expectancy
Ecological footprint
The top 3 and bottom 3 countries on the HPI in December 2022 (Source: Happy Planet Index)
The Happiness Index
The Happiness Index is a survey that measures happiness in 10 different areas of a persons life
Psychological Well-Being
Optimism, sense of purpose/accomplishmentHealth
Energy levels and ability to perform everyday activitiesTime Balance
Enjoyment, sense of leisure, frequency of feeling rushedCommunity
Sense of belonging, volunteer levels, sense of safety in the communitySocial Support
Satisfaction with friends and family, feeling loved, and degree of lonelinessEducation, Arts, and Culture
Access to cultural and educational events and diversityEnvironment
Access to nature, pollution levels, and level of conservationGovernance
Trust in government, sense of corruption, and competency of authoritiesMaterial Well-Being
Financial security and meeting basic needsWork
Compensation, autonomy, and productivity
(Source: The Happiness Index)
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