Business ethics 88.
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A regular focus of this column is innovative approaches to measuring human welfare. The business section of the Post, like those of other papers around the world, are filled with regular reports of "economic growth," almost invariably measured in terms of Gross Domestic Product. But GDP measures only a fraction of the human activities that make people better off - namely, the market value of goods bought and sold.
Some measures, such as the "New Economic Welfare" measure pioneered in the 1970s by eminent economists William Nordhaus and James Tobin, try to broaden this concept by including other kinds of economic production - for example, home production (housework, childcare etc.) and free time, which is universally acknowledged as an input into "economic" utility.
A bolder innovation is the concept of "gross national happiness," pioneered by King Wangchuck of Bhutan. This concept explicitly tries to incorporate non-economic sources of welfare, including spiritual development. An obvious obstacle to this goal is deciding how to measure more amorphous sources of well-being.
In a recent column, I discussed an obvious possibility: just ask people how happy they are. Nobel laureate Amartya Sen, another leading pioneer in alternative welfare measures, expressed doubt at the usefulness of this approach. Sen is worried that people living in misery will express happiness because they have become forcibly accustomed to lowering their standards. In response, I presented some of my research results based on the Israeli Social Survey suggesting that this is not a problem. For better or worse, Israelis living in miserable conditions tend to describe themselves as, well, miserable - at least compared to those with more money, better health, more intact families and so on.
But my column raised another concern - that survey responses to purely subjective questions like "How happy are you?" may cease to be reliable as soon as they are used as the basis for policy decisions.
A UK group called the New Economics Foundation has suggested a measure they call the "Happy Planet Index" (HPI). While this measure is based on reported, subjective life satisfaction scores, it also provides an innovative way of sidestepping my reservation. For some countries they were unable to obtain survey data, so they basically use regularities and correlations to give a "life satisfaction score" to more objectively measurable factors. This leads to an "estimated life satisfaction." The NEF has actually been criticized for departing from their regular methodology and synthesizing such an "estimated" satisfaction score, but in fact this "departure" may actually be their most important contribution and provide a way to create a more accountable "happiness index" that is based on subjective self-reporting but not so sensitive to local nuances - such as cranky countries where people routinely report low satisfaction, perhaps to ward off the "evil eye." (As we know, the traditional Jewish response to the question "How are you?" is an evasive "Thank God" or an even more evasive "Could be worse.")
Another wrinkle introduced by the HPI is that it doesn't actually measure happiness but rather "happiness efficiency" - it divides the happiness score by the country's so-called "ecological footprint," which is a somewhat controversial method of measuring a country's burden on global sustainability. The goal is to somehow measure how effective countries are at turning resources into well-being - their "bliss for the buck."
Israel, for example, has a very respectable happiness score, but our definitely first-world ecological footprint gives us a mediocre HPI.
Necessity is the mother of invention, and I think that the constraints that compelled the NEF to estimate life satisfaction scores based on international averages actually embodies the most promising strategy I have seen to exploit subjective survey data to create a more objective well-being measure, by using broad and reliable correlations with more objective measures. Maybe we are happily on the way to attaining an acceptable international happiness index.
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.