How do we measure national well-being? In what sense can we say that Israelis are better off than they were a decade ago, or better off than members of some other nation? At some level, these judgments must be subjective but all nations also develop statistical measures of national performance. What should these measures include?
By far, the most common measure of well-being is economic income. When we compare countries, we measure "gross domestic product" (the money value of economic production) per person. When we compare individuals, we generally compare income. When we evaluate poverty, this, too, is based on family income.
Lately, scholars are increasingly inclined to expand this approach to economic welfare to include other variables that economists are comfortable with. For example, even in introductory economics courses we learn that people value their free time even though it has no official market value. Therefore, measures such as Nordhaus and Tobin's "MEW" (Measure of Economic Welfare) from the 1970s included an estimate of the value of leisure time.
An additional example: it is an axiom of economics that income is ultimately valued only for the goods and services it can obtain. Thus, the best way of measuring economic welfare is to look at consumption expenditures rather than income. This approach has been forcefully advocated by US economist Daniel Slesnick.
Social welfare is generally assumed to be influenced not only by the amount of income, but also by its distribution. Thus, measures have been developed that weight output by a measure of equality. Regular readers know that in this column I have applied all of these insights to studying economic well-being in Israel.
The "last frontier," and the most controversial, is the use of subjective measures of well-being. After all, if income is only a means towards obtaining consumption, consumption itself is only a means to obtaining happiness. Why then don't we try to measure this elusive quantity directly?
One well-known move in this direction was the bold initiative of King Jigme Singye Wangchuck of Bhutan in 1972. King Wangchuck decided that the development goal of Bhutan would not be "gross national product" but rather "gross national happiness." Economic well-being would be only one factor; spiritual well-being and other "intangibles" would also figure prominently.
Such subjective measurements are finding more use lately. In a recent column, I quoted leading Israeli welfare expert Momi Dahan who mentioned key evidence that poverty in the Israeli ultra-orthodox population was not as serious a problem as income statistics showed - when ultra-orthodox Jews were asked if they considered themselves poor, they turned out to have the lowest level of poverty of any group!
One practical objection to use of subjective measures is that they are meaningless, that answers to subjective questions like "How is your life satisfaction?" are not well-defined and that answers are not thought out. However, there is a lot of evidence that answers to subjective questions can carry a lot of information. For example, people's self-evaluation of their health has been shown in a number of studies to be highly correlated with health outcomes, even when objective measures of health are included along with it.
I want, here, to relate to a powerful ideological objection to subjective measures voiced by Nobel laureate Amartya Sen in his book Development as Freedom.
Our desires and pleasure-taking abilities adjust to circumstances, especially to make life bearable in adverse situations. The utility calculus can be deeply unfair to those who are persistently deprived - for example, the usual underdogs in stratified societies, perennially oppressed minorities in intolerant communities, traditionally precarious sharecroppers living in a world of uncertainty routinely overworked sweatshop employees in exploitative economic arrangements, hopelessly subdued housewives in severely sexist cultures. The deprived people tend to come to terms with their deprivation because of the sheer necessity of survival and they may, as a result, lack the courage to demand any radical change and may even adjust their desires and expectations to what they unambitiously see as feasible.
In other words, "gross national happiness" can be improved by bettering people's lot, or by convincing them to make the best of what they have.
I think that Sen's words bear an important warning to avoid excessive reliance on subjective measures but should not deter us from using them as one element in a comprehensive scheme. For one thing, I would like to see evidence that within democratic societies the underclasses do indeed develop an "adaptive" attitude of satisfaction, as Sen implies. (I plan to discuss this further in an upcoming column.) Additionally, perhaps there really is some wisdom or lifestyle attributes in these downcast groups that contribute to their happiness and that others could learn from. Finally, the fact that a measure is imperfect is not a reason to ignore it altogether. Rather, like the Bhutanese measure, it can be used as one component in a broader measure of well-being.
I believe that subjective measures of individual well-being can make an important contribution to the overall assessment of national welfare.
The writer is research director at the Business Ethics Center of Jerusalem (www.besr.org), an independent institute in The Jerusalem College of Technology. He also is a rabbi.
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