Developing the Well-being Economy: The Current State of Play

A well-being economy is orientated around promoting human well-being and ecological balance rather than focusing on ever increasing economic growth. Encouragingly, the idea of the well-being economy has transitioned from academic and community discussion to something that is being operationalized by governments. The concept of the well-being economy is being translated into practice in various ways, and some general lessons have already emerged.

The problem with conventional economic measures

It is increasingly recognized that economic growth, measured by gross domestic product (GDP) is a very limited metric of economic progress. It is entirely mute regarding several matters of importance such as distribution of wealth and income, unpaid work and environmental health. While GDP will likely remain a relevant economic metric of market activities, there is little justification to consider it as the key marker of economic and social progress.

Similarly, traditional economics flounders with its limited concept of cost-benefit analysis, which is organized around estimating the strengths and weaknesses of various economic decisions or projects based on people’s willingness to pay. For several reasons, this is an inadequate tool of analysis. For example, we live in an unequal world where people’s willingness to pay can be very different from their capacity to pay. Small wonder that a range of alternative measures of progress have been developed.

Putting the well-being economy into practice

In 2019, New Zealand developed its first Well-being Budget, which officially prioritized well-being over limited economic metrics such as GDP. The budget was based on the Living Standards Framework, which provides a set of metrics across four key dimensions: economic, social, human and natural capital. This framework included indicators for health, education, community engagement, environmental amenity and social cohesion to measure the extent to which well-being is being advanced.

In July 2023, the Australian government released a national well-being framework which utilizes 50 economic, social and environmental indicators with the goal of promoting a more healthy, secure, sustainable and prosperous economy. The framework provides a meaningful basis for the government’s recent move toward establishing well-being budgets.

Another example comes from Wales, where the 2015 Well-being of Future Generations Act placed a legal duty on public entities to consider the long-term impact of their decisions on the economic, social, environmental and cultural well-being of Wales. Seven well-being goals were put forward and public bodies are now required to show how their activities advance these goals.

Scotland has also been moving in the direction of a well-being economy since 2019. The National Performance Framework (NPF) provides the central means to do this by focusing on a range of economic, health, education, social justice and environmental indicators to review well-being outcomes. Various governmental and non-governmental organizations have been aligning their work priorities to support this framework.

The Wellbeing Economy Governments initiative provides further case studies from countries such as Finland, Iceland and Canada.

General lessons in developing the well-being economy

It is difficult to draw general lessons from diverse case studies, as the specific contexts related to each country’s history, institutions, social and political structures matter. That said, research has managed to tease out several general lessons and principles.

Measure the right variables

A central aspect of any well-being economy initiative is the development of a range of measures that can meaningfully capture the government’s chosen conception of well-being. This might involve creation of new indicators, but it can often utilize many existing social, economic, health or environmental indicators. The chosen indicators must be reasonably up to date and able to be disaggregated by categories such as gender, age and geographical location.

Gaps in data availability, or difficulties in reducing a particular dimension of well-being into quantitative measure can create challenges. For example, it is often hard to accurately measure the value of clean air or water, or of unpaid work and social cohesion in quantitative terms. In such instances, it is usually better to measure such things as best as possible using existing tools, while being transparent about the methodology used and the possible limitations of the measurement. Such an approach might render the measurement somewhat imperfect, but it is nonetheless superior to excluding important indicators simply because they are difficult to measure.

Thus far, most countries have decided against combining various indicators of well-being into a single measure via the construction of a weighted index. This is primarily because of the difficulties of weighting each measure within an index in a way that is not open to charges of subjectivity. Instead, the standard approach is to use a ‘dashboard approach,’ where multiple measures are considered much in the manner that dials and gauges on a car dashboard are considered. Of course, many variables need to be considered both separately and in relation to other variables.

Note that adopting a dashboard approach does not rule out the use of indexes combining several economic and social indicators, such as the Genuine Progress Indicator, the Better Life Index or the Human Development Index as one of the indicators on a dashboard.

Decision-making that takes well-being into account

It can be easy for governments to focus more on measuring well-being, than on integrating well-being measures into decision-making. Indeed, this is the classic stumbling block in advancing a well-being economy. However, some countries, such as Wales, have through a process of trial and error, developed explicit practical guidelines for decision-making by public servants and policymakers to advance well-being into real-world operational decision- making, implementation and administration. For example, in Wales their transport policy has specifically focused on reducing investment in new motorways and supporting active transport such as walking and cycling.

Focusing on well-being also runs the risk of being a source of irritation to those operating under time and resource constraints or those habituated to established processes and objectives. Well-being can also be cynically gamed, with superficial change masking what amounts to little more than a continuation of the status quo. Solutions to this challenge include driving cultural change, not just within government but within communities, so that stakeholders expect and demand substantial rather than tokenistic change.

Scheduled reporting, external oversight and strong accountability and transparency are also important. This may in turn require structural change in how departments within the government work both internally and in relation to each other. Traditional notions of frank and fearless advice from public servants are also something that needs to be promoted and protected.

This is a but a brief survey of a large issue. For the interested reader, there are more detailed reports, and also textbooks and open access teaching modules organized around the issue of well-being.

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