wellbeing and policy

96 Pages·2014·2.27 MB·English

| REPORT | 2014
WELLBEING
AND POLICY
By Gus O’Donnell (Chair) and
Angus Deaton
Martine Durand
David Halpern
Richard Layard
Commissioned by
the Legatum Institute
www.li.com
www.prosperity.com
The Legatum Institute is an independent non-partisan public policy organisation whose
research, publications, and programmes advance ideas and policies in support of free and
prosperous societies around the world.
The views expressed in this paper are those of the author(s) and not necessarily those of the
Legatum Institute.
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preparation of this report, no responsibility can be taken for any error or omission contained herein.
COMMISSIONERS’ BIOGRAPHIES
COMMISSIONERS’
BIOGRAPHIES
LORD GUS O’DONNELL
Lord O’Donnell, currently Chair of Frontier Economics, was the
Head of the Civil Service and Cabinet Secretary between 2005 and
2011. Prior to that he served as Permanent Secretary to the Treasury
between 2002 and 2005. Additionally he undertook the position as the
United Kingdom’s Executive Director at the International Monetary
Fund and the World Bank, and has served as Managing Director of
Macroeconomic Policy and International Finance at HM Treasury.
In January of 2012 he received a peerage and took his seat in the
House of Lords. Lord O’Donnell was a Lecturer at the University of
Glasgow before joining the civil service and received his M.Phil from 
Nuffield College, Oxford and his Bachelor’s degree from the University
of Warwick.
PROF. ANGUS DEATON
Angus Deaton is the Dwight D. Eisenhower Professor of Economics
and International Affairs at the Woodrow Wilson School of Public
and International Affairs and the Economics Department at Princeton
University. He has published numerous papers which examine the
relationship between income and wellbeing and how best to measure
wellbeing. Most recently, he is the author of The Great Escape: health,
wealth and the origins of inequality. He is a fellow of the Econometric
Society, the British Academy, the Royal Society of Edinburgh and the
American Academy of Arts and Sciences. He holds honorary degrees
from the Universities of Rome, London, Edinburgh, and St. Andrews.
Prior to Princeton he was Professor of Econometrics at the University
of Bristol.
MS. MARTINE DURAND
Ms. Durand is the Chief Statistician and Director of the OECD
Statistics Directorate. She oversees the Organisation’s statistical activities
and is responsible for the work on the measurement of well-being and
societal progress and the biennial flagship report How’s Life? Measuring
Well-Being, as part of the OECD Better Life Initiative. Prior to this
position she was Deputy-Director of Employment, Labour, and Social
Affairs at the OECD. She has authored numerous papers on well-being,
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COMMISSIONERS’ BIOGRAPHIES
labour markets, social policies, and international migration. She studied
mathematics, statistics, and economics from Paris VI University, École
Nationale de la Statistique et de l’Administration Économique and the
University of Wisconsin-Madison.
DR DAVID HALPERN
David Halpern is the Chief Executive of Behavioural Insights and Board
Director. He has led the team since its inception in 2010. Prior to that,
David was the founding Director of the Institute for Government and
between 2001 and 2007 was the Chief Analyst at the Prime Minister’s
Strategy Unit. Before entering government, David held tenure at
Cambridge, Oxford and Harvard and has written several books and
papers on areas relating to behavioural insights and wellbeing, including
as a co-author of the MINDSPACE report and the Hidden Wealth
of Nations.
PROF. LORD RICHARD LAYARD
Lord Layard is the Director of the Wellbeing Programme in the Centre
for Economic Performance at the London School of Economics. He is
the author of the influential book titled Happiness, which argued that
social progress should be judged by the extent of happiness and misery.
He is a leading authority in the growing debate on happiness and
economics. He is also well known for his earlier work on unemployment
and inequality. He was educated at King’s College, Cambridge, and the
London School of Economics and Political Science.
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ACKNOWLEDGEMENTS
ACKNOWLEDGEMENTS
The Commissioners acknowledge research support and advice from
Giulia Greco, Lisa Ollerhead, Ewen McKinnon, Conal Smith, Marty
Seligman and Dudley Knowles.
Gus O’Donnell and Richard Layard acknowledge support from the
US National Institute of Aging (Grant R01AG040640) for work
on wellbeing.
Angus Deaton acknowledges support from National Institute on
Aging through the National Bureau of Economic Research, Grants
5R01AG040629–02 and P01 AG05842–14, and through Princeton’s
Roybal Center, Grant P30 AG024928.
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CONTENTS
CONTENTS
Prologue 7
Introduction 8
Chapter 1: Economic analysis, policy
evaluation, and the role of happiness 17
1. The standard model 18
2. Long-standing, familiar problems 18
3. More recent difficulties 20
4. How can happiness measures help? 21
5. Conclusions 25
Chapter 2: Measuring subjective wellbeing 26
1. Introduction 27
2. Defining subjective wellbeing 28
3. A modular approach to measuring subjective wellbeing 30
4. National initiatives to measure subjective wellbeing 36
5. Policy uses of subjective wellbeing data 38
6. Conclusions 41
Chapter 3: The drivers of
subjective wellbeing 42
1. Introduction 43
2. The drivers of wellbeing 44
3. The role of childhood 47
4. Conclusion 48
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CONTENTS
Chapter 4: Better policy making 49
1. Why a different approach is needed 50
2. A new form of cost-benefit analysis 51
3. QALYs 51
4. The interpersonal distribution of wellbeing 52
5. Discount rates 53
6. The length of life and number of births 53
7. Relation to traditional cost-benefit analysis 54
8. Conclusion 54
Chapter 5: Some implications for policy 56
1. Mental health and character building 58
2. Community 61
3. Income and work 66
4. Governance 69
5. Conclusion 73
Technical annex: Cost-benefit
analysis in terms of wellbeing 74
Bibliography 80
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PROLOGUE
PROLOGUE
The Legatum Institute established the Commission on Wellbeing and
Policy to advance the policy debate on social wellbeing. This report aims
to give policy makers a greater understanding of how wellbeing data can
be used to improve public policy and advance prosperity.
The Legatum Institute is founded upon the principle that prosperity is a
more capacious idea than can be expressed by a purely material measure
such as Gross Domestic Product (GDP). Consequently the Institute’s
own Prosperity Index is based on both wealth and wellbeing. 
The Legatum Institute has sponsored the Commission on Wellbeing
and Policy in order to help stimulate a debate as to if and how wellbeing
analysis should influence government policy.
The Commission operated independently of the Legatum Institute and
its views do not necessarily reflect those of the Institute.
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INTRODUCTION
INTRODUCTION
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