Alternative Measures of Well-being (DP IB Economics)

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:

1. The OECD Better Life Index

2. The Happiness Index

3. 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

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

1. Psychological Well-Being
   Optimism, sense of purpose/accomplishment

2. Health
   Energy levels and ability to perform everyday activities

3. Time Balance
   Enjoyment, sense of leisure, frequency of feeling rushed

4. Community
   Sense of belonging, volunteer levels, sense of safety in the community

5. Social Support
   Satisfaction with friends and family, feeling loved, and degree of loneliness

6. Education, Arts, and Culture
   Access to cultural and educational events and diversity

7. Environment
   Access to nature, pollution levels, and level of conservation

8. Governance
   Trust in government, sense of corruption, and competency of authorities

9. Material Well-Being
   Financial security and meeting basic needs

10. Work
    Compensation, autonomy, and productivity

(Source: The Happiness Index)