Can ‘happiness economics’ provide a new framework for development?

Measuring wellbeing shows quality of life and helps explain its determinants. But can it be useful in post-MDGs policy?

In September this year, world leaders will gather in New York to take stock of the efforts made towards achieving the millennium development goals. They will be reviewing the findings of worldwide consultations and a high-level panel report in order to formulate what comes after the MDGs expire.

The world has changed a lot since 2000. Thus, what is crucial in the search for a post-2015 development framework is to take into account innovative approaches that have emerged in the past 15 years. Perhaps the most interesting and potentially revolutionary approach of the past decade when it comes to policymaking is rooted in the new science of happiness. Happiness economics is a new field that strives to find out what really makes people happy based on surveys asking citizens: “How satisfied are you with your life as a whole these days?” or “How happy are you?”. Rather than letting experts define what makes for the good life from an armchair perspective, happiness economics allows us to identify the factors that matter for people’s wellbeing as they themselves experience it.

When the original MDGs were formulated, happiness economics barely existed. Before 2000, less than five scientific articles a year dealt with “subjective wellbeing”, academic speak for happiness and life satisfaction. Over the course of the past decade, though, their number has risen enormously. A World Happiness Report launched last year at the United Nations summarises the evidence to date.

The influential Stiglitz-Sen-Fitoussi commission (pdf), which inspired a number of national initiatives around the globe to redefine our understanding of progress (pdf) concluded in 2009 that indicators of subjective wellbeing hold the promise of delivering not just a good measure of quality of life per se, but also a better understanding of its determinants. Sadly, the debate on happiness has focused almost exclusively on the rich nations, where vast economic growth since the second world war has effectively failed to make people any happier – a fact known as the Easterlin paradox (pdf). Here, decision-makers are realising that ever more consumption and GDP growth are not the key to happiness, and a promising search has been triggered for what really makes life worthwhile. In a number of countries, governments have therefore started to draw lessons from happiness research. In the UK, for instance, the Office for National Statistics has recently started collecting data on happiness from 200,000 Britons every year.

The role of wellbeing in development remains more puzzling. Isn’t development all about getting a roof over your head and food in your belly? What use is cloudy talk about happiness in this context?

But it is time we explored how data on people’s happiness can be used in development policy and our search for a post-2015 development framework. Taking it into account during the process of development can be a crucial source of knowledge for policymakers. Being aware of what factors really matter for their citizens is an advantage that policymakers in today’s rich nations did not have at comparable stages of development.

In this context, I carried out a research project that examined data on life satisfaction for 100,000 people from 70 nations. The study, which is published by the Institute of Development Studies, reveals considerable heterogeneity in the factors that make people happy across countries . With regard to the search for a post-2015 framework, this finding implies a need for greater flexibility in the choice of development targets given a large degree of variation in people’s preferences. Consequently, customised development goals should take into account what makes people in each country happy rather than strive for a one-size-fits-all model such as the MDGs.

The new study reveals that the role of three very important development goals, namely income, health and education, for people’s life satisfaction varies significantly across nations. Previously, it was widely believed that these factors were universal prerequisites of happiness that mattered to more or less the same extent everywhere. But combining information about people’s subjective preferences with objective data on their living conditions allows us to examine which countries manage to generate the goods that truly make a difference for people’s wellbeing.

So why customised development goals? The process of customisation basically means a high involvement of the end user in the production of a goal. Hardly could a better and more urgent reason be found to involve this group than in development policy. Its end-users are people in need, sometimes desperate need. Therefore it seems imperative to take their perspective into account by allowing a greater flexibility in the choice and the weighing of development targets. CDGs could achieve that.

Christian Kroll is a research fellow at Jacobs University in Germany and works as a project manager at the Bertelsmann Foundation. Christian writes here in his own capacity

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