Measuring Social Well-Being

The BP oil spill was one of the most damaging man-made environmental disasters in recent history. Turns out it positively impacted the nation’s Gross Domestic Product (GDP) due to the Research & Development effort associated with the cleanup and re-engineering funding. 

Of course, the investments into R&D did produce real, lasting benefits for the economy. And the thousands of workers hired for the clean-up job did see a boost in their incomes. But disasters like the BP oil spill point to troubling limitations of GDP as a measure of societal success. 

In this case, GDP calculations didn’t explicitly consider the impact on health, morale, or the environmental ecosystems. In other words, GDP failed to capture the overall well-being of the local community. Over the past few decades, issues related to income disparity, climate change, and mental health have exacerbated, yet we continue to look to the same measure as a leading indicator for our nation’s progress. 

The simplicity of GDP in the face of a complex world has caused many people to begin asking fundamental questions. If the goal of society is to continuously enhance the overall well-being of its people, then shouldn’t we be focused on more holistic measurements of societal success?

In 1994 Clifford Cobb, Ted Halsted, and Jonahtan Rowe created the Genuine Progress Indicator (GPI). Like GDP, GPI measures the economic growth of a country. However, GPI takes a different approach at measuring economic impact - it quantifies the social, environmental, and economic costs associated with a certain area. GPI takes 26 indicators such as ozone depletion, air pollution, higher education cost, consumer durables cost, and quantifies the economic costs associated with each of them, culminating in a final numerical score. 

These indicators are lumped into 3 different categories: social, economic, and environmental. The final GPI number is taken as a net sum of all the costs calculated within each category. Since its inception, GPI has been adopted by state governments such as Vermont and Maryland and applied for policy making. Various other regions such as San Francisco Bay Area, Minnesota, Hawaii, and Utah are performing studies to assess its feasibility within each state.

Bhutan’s Gross National Happiness (GNH) index tracks its national well-being in 7 dimensions: mental, physical, workplace, social, economic, environmental, and political. Over the years Bhutan’s policymakers have developed a systematic approach to use GNH to drive policymaking. This includes creating the National Environmental Protection Act, micro-environmental action plans to address biodiversity issues in 950 villages, promoting sustainable industrial development, and the enactment of water policies and food legislation.

Canada’s CIW - Canadian Index of Well Being - tracks community vitality, democratic engagement, education, environment, healthy populations, leisure & culture, living standards, and time use. Institutions such as the Organization for Economic Cooperation and Development (OECD) have developed a “Better Life Index.”

However, while the intentions may be noble, it turns out that measuring societal well-being requires more than throwing a bunch of ostensibly reasonable variables together; well-being is inherently subjective, which makes it difficult to measure its progress. 

For example, poor mental health can be attributed to many reasons that may have nothing to do with the socio-economic condition of a country. Genetic predispositions may cause certain individuals to have worse physical health than others. 

Because of the inherent subjectivity, these kinds of holistic well-being measures are prone to constant readjustments of methodology as their designers keep chasing an ever-elusive accuracy. After realizing the shortcomings of GPI, researchers began to formulate GPI 2.0 as a more accurate version for the index. 

The updated methodology includes the cost of severe weather events when accounting for climate change, service value of public infrastructure (specifically parks, schools, performance spaces), and utilizes more sophisticated formulae to correct household spending among other changes. 

What’s more, well-being indicators are considered “composite indicators”. Which means the indicator aggregates different elements that roll up to its overall value. The greater the complexity, the more assumptions in the calculations. 

GPI criteria such as the cost of climate change, the cost of inequality, average wages, and the cost of motor vehicle crashes all have some underlying assumptions which are necessary to arrive at a quantitative value. The more the assumptions, the higher the chance the indicator is divorced from reality.

In the face of these measurement challenges,  the ongoing use of well-being indices depends on access to the proper resources and political buy-in. Significant funding is needed just to process the large quantities of data associated with the task. Vermont’s plans to implement GPI 2.0 have been stuck since 2018, in part due to funding concerns. 

The repercussions for cutting corners could be significant. A lack of high-quality data, or too many faulty assumptions, can skew decisions regarding policy. Some countries simply exclude indicators that are too hard to measure, even if they may be crucially important to actual well-being. For example, Italy uses well-being indicators during the economic and budget planning process. However, the country excludes the “subjective” measures within well-being during the process due to concerns about poor data quality. 

There are so many national well-being indices developed by different organizations that use different approaches, have their own subtle nuances, and are implemented at various scales. On the one hand, the explosion of activity around these measurements can make it seem like an idea whose time has come. On the other hand,  the variance in approaches can make the quest for a perfect methodology seem like a fool’s errand. 

Perhaps there is some truth in both of those viewpoints. Governments investing time and money into developing well-being indices demonstrates a wise focus on improving people’s overall quality of life, which is probably what the people ultimately care about. 

The Latin phrase Salus populi suprema lex esto captures the idea well - “the welfare of the people is the supreme law.”  Complexities are inevitable, but that’s no excuse for sticking to simplistic measures to make sense of social realities. The proliferation of experiments seeking a more perfect method for calculating social well-being, while deeply flawed in many cases, are catalyzing thoughts that are aiming in a good direction. 

Not everything that matters can be measured, but also, what doesn’t get measured, rarely gets managed. At the end of the day, the task of upholding the “supreme law” requires continuous improvement and innovation from the government, ideally with some help, or at least patience, from the governed.

Opinions expressed are solely the author’s own and do not reflect the views of their employer.