Professor Liam Delaney, University of Stirling, UK presented this seminar "The usefulness of a national wellbeing index for Public Policy" as part of the Visiting Fellows Seminar Series at the Whitaker Institute on 17th April 2013.

1. National Well- Being Indices Professor Liam Delaney

2. “Not fluffy”

3. Overview
Well-Being and Economics
Concepts of Well-Being
20th Century Ireland
National Well-Being Indices
Considerations and Limitations

4. 2 - Historical Background (1)
Schumpeter (1953) traces utility theory from Aristotle through the medieval scholastics through to Smith, Bernoulli, Walras (rarete), Jennings and Lyod.
Jevons: “Economics as a calculus of pleasure and pain”. Marshall: “Hedonics”.
Generally assumed that utility was linear but this was not always the case and began to be relaxed.
Very strong European interest at the turn of the 20th century in integrating newly emerging psychological theories in to economics particularly psychophysics (e.g. Fechner).

5. Historical Background (2)
Strong interest in issues such as the interpersonal comparison of utility particularly with regard to progressive taxation.
However, became gradually apparent that what was taking place was a logic of utility rather than a psychology of utility.
Friedman (1952) and other work e.g. Samuelson put a number of nails in the coffin of directly analysing utility.
Many of the issues did survive as critiques of welfare economics. Ng (2003), Harsanyi (1997)

6. Modern Hedonic Economics
The quantitative analysis of measured hedonic experience has a long past.
Has recently been “discovered” by economics.
Strongly associated with the work of Kahneman, Frey, VanPraag, Clark, Blanchflower, Oswald and others.
Review by Layard (2005).
See Van-Praag and Ferrer-I-Carbonell (2004) for a more Euro-centric perspective.
Strong links with Psychology and Neuroscience. (Glimshcer and Rustichini 2004).

7. Well-being and Economics
Historical concern with utility
Modern debate
Easterlin Paradox
Well-Being functions
Loss Aversion

8. Benefits of GDP/GNP
Comparable
Linked to core economic parameters
Okun's law
Debt Dynamics

9. Limitations of GDP/GNP
Household Production
Inequality
Public Goods/Externalities
Non-Market Goods
Environmental sustainability
Consumption and PPP

10. Concepts of Well-being
Consumption and Income
Happiness
Life Satisfaction
Flow measures of Utility
Functioning
Eudemonia
Capabilities

11. Flow Measures of Well-Being

12. Stress:-Public Transport V Driving
http://www.stressmapping.com/
Liam Delaney, Michael Daly, Gerard O Neill
Red= driving
Green= Public Transport

13. Fogel on Development of Societies
Stage 1: Death is linked to an endemic shortage and uncertainty of food
Stage 2: Prevention of death from infectious illness becomes key
Stage 3: Increasing control over acute causes of death and increasing life expectancies and medical advancements
Transitions between stages

14. 20th-Century Ireland
5 major collapses
Declines in infant mortality in 40s
Increases in Life Expectancy
High out-migration
High variances in childhood conditions
Current trough following boom

15. Source O’Grada 2010

16. Irish Infant Mortality
0
10
20
30
40
50
60
70
80
90
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
Rate per 1000

17. Life Expectancy in Ireland

18. Mean scores on psychological distress index (1994-2001)

19. Suicide rates per 100,000 by gender

20. Male suicide rates by age group

21. Determinants of Well-being
Unemployment
Childhood mistreatment
Social isolation
Chronic Pain
Relationship
Fixed effects
Income

22. Income
Huge historical debate
Easterlin Paradox
Wolfers and Stevenson
Easterlin and Angelescu
Diminishing Returns?

23. Intertemporal Factors
Intergenerational Welfare
Childhood determinants of well-being
Scarring effects
Disruptive life events
Chain effects

24. Evaluable or Inherently Inevaluable
Hsee (2008)
One solution to Easterin Paradox
Inherently Evaluable Goods relate to core well-being
Consistent with increased happiness between rich and poor and why rich do not get happier over time
Not just limited to poor countries

25. Inherently Evaluable Goods
“Inherently evaluable attributes are those for which we have an innate, typically visceral and biological scales to judge desirability. Examples include the amount of sleep, severity of pain or allergies, stress from work, ambient temperature, degree of social isolation (loneliness), etc., In contrast, inherently inevaluable attributes are those for which we do not have an innate evaluation scale to assess desirability – to evaluate these attributes, we must instead rely on external reference information or socially learned norms. Examples include the size of a diamond, the amount of income…”
(Hsee et al 2008, p 228).

26. Macro-Considerations
Inflation less aversive than unemployment
Inequality
Financial Crises
Less known about balance sheets

27. Irish Literature
Newman, Delaney, Nolan (2008): increases in financial satisfaction through Celtic Tiger
Delaney et al (2008): determinants of WHO-5
ESRI - The Best of Times
Delaney (2009): well-being through late 20th century Ireland
Walsh (2012): well-being after the fall

28. National Well-being indices
GDP/GNP
Stiglitz-Sen Commission
Life Satisfaction Rankings
Happiness Rankings
OECD Better Life
Human Development Index
Gallup
ONS

29. Stiglitz-Sen Recommendations
Income/Consumption rather than production
Households
Wealth and distribution
Subjective dimensions
Inequalities
Surveys to assess linkages
Role of statistical offices

30. Ireland in Well-Being Indices
Highly ranked on GDP/GNP
Life expectancy convergence though with long lags
Consistently among highest in well- being and life satisfaction
7th in Human Development Index

31. 5.325.486.016.036.096.266.416.466.486.496.556.656.756.816.897.157.157.177.427.447.507.537.577.737.737.797.837.877.948.028.028.328.470.511.522.533.544.555.566.577.588.59mean of happinessBulgariaUkraineTurkeyRussian FederationRomaniaHungaryLatviaItalySlovakiaGreecePortugalEstoniaCzech RepublicCroatiaPolandFranceGermanySloveniaIsraelUnited KingdomAustriaSpainCyprusNetherlandsBelgiumIrelandLuxembourgSwedenNorwaySwitzerlandFinlandDenmarkIcelandOverall Mean Happiness for the Year 2002 - 2010

32. 4.244.585.405.555.675.885.896.046.066.106.246.306.406.456.506.846.866.877.067.087.197.247.427.467.507.587.807.817.857.968.018.458.460.511.522.533.544.555.566.577.588.59mean of lifesatisfactionUkraineBulgariaRussian FederationHungaryPortugalLatviaTurkeySlovakiaRomaniaGreeceEstoniaFranceCzech RepublicCroatiaPolandGermanyItalySloveniaUnited KingdomIsraelCyprusSpainBelgiumIrelandAustriaNetherlandsNorwayLuxembourgSwedenFinlandSwitzerlandDenmarkIcelandOverall Mean Life Satisfaction for the Year 2002 - 2010

33. Mean-levels of well-being across countries
UA
EE
HU
PT
GB
GR
SK
CZ
SI
FI
PL
DE
AT
FR
NL
ES
BE
SE
IS
LU
NO
CH
IE
DK
0 5 10 15 20
mean of who5
UA
EE
HU
PT
GB
GR
SK
CZ
SI
FI
PL
DE
AT
FR
NL
ES
BE
SE
IS
LU
NO
CH
IE
DK
Subjective Well-Being By Country
Source: Delaney et al 2009

34. Gallup Index
When sorted according to the percentage of inhabitants who are 'thriving', Ireland comes 10th out of 40,
Behind Denmark, Finland, Norway, Sweden, Netherlands, Switzerland, Austria, Belgium and the United Kingdom.
In Ireland, 49% are thriving, 49% are struggling, 2% are suffering, and the score for daily experience is 7.5

35. UN Happiness Report

36. Annual samples of 1,000 respondents in more than 150 countries. Respondents evaluate their quality life on an 11-point ladder scale (Cantril ladder).
The report gathers the responses from Gallup World Polls, from 2005 to 2011, and weights them by each country’s population. Ireland comes 10th in the world based on this measure.
Using the Gallup World Poll (Cantril ladder)

40. Happy Index
Country rankings based on the 4-point evaluative happiness answers in the combined World Values Survey/European Values Survey
Ireland comes sixth on this combined measure.

42. Average happiness yesterday
Average Gallup World Poll answers to a question asking about the respondent’s happiness yesterday (using a yes/no 2-point response scale).
Ireland comes first on this measure.

44. Positive affect
Gallup World Poll country rankings for positive affect (the average of yes/no answers on the frequency yesterday of enjoyment, happiness and laughter).
Ireland comes second on this measure.

46. Negative affect
Gallup World Poll country rankings for negative affect (the average of yes/no answers on the frequency of worry, sadness, anger and depression).
Ireland is ranked number 27 on this.

48. Average net affect
positive affect minus negative affect
Ireland is ranked 3rd on this.

50. OECD Better Life Index: Ireland (indicators)
Housing expenditure: 4/36
Dwelling with basic facilities: 99.80% = 10/36
Rooms per person: 2.1 = 5/36
Household financial wealth: 21485 USD = 22/36
Household net adjusted disposable income: 24156 USD = 16/36
Job security: 10/36
Long-term unemployment rate: 6.69% = 33/36
Employment rate: 60% = 26/36
Quality of support network: 98% = 2/36
Years in education: 17.6 = 17/36

51. OECD Better Life Index: Ireland (indicators)
Student skills: 18/36
Educational attainment (% aged 25 to 64 having completed secondary school): 72% = 24/36
Water quality: 89% satisfied = 14/36
Air pollution: 13 micrograms = 3/36
Consultation on rule-making: 9/36
Voter turnout: 67% = 22/36
Self-reported health: 83% good or v.good = 6/36
Life expectancy: 81 years = 11/36
Life satisfaction: 17/36

52. OECD Better Life Index: Ireland (indicators)
Homicide rate: 1.2 homicides per 100,000 people = 15/36
Assault rate: 2.63% = 10/36
Time devoted to leisure and personal care: 14.56 hours = 24/36
Employees working very long hours: 3.72% = 10/36

53. After the Fall
Set of papers by Brendan Walsh
Evidence for increase in suicide rates
Small change in life satisfaction
Increase in births
Decrease in mortality
Increase in migration

54. Source Walsh 2011

55. Source Walsh 2011

56. Considerations 1
Multi-dimensionality
Differential item functioning
Migration and Well-Being
Means and Variances
Rawlsian Well-Being functions
Quantile Regressions

57. Migration
Source: Delaney et al 2013 in press

58. Heterogeneous reporting
Analyses of socioeconomic inequities in adult health often rely on self-reported indicators, usually some variant of:
Subjective scales involve evaluation of your own true health compared with your own subjective view of what it means to be above or below a given threshold (such as very good and good)
Response categories may be interpreted in systematically different ways
If there are systematic differences in how different groups of people interpret responses categories then results using these responses may be biased
In general, would you say that your health is: Very good, Good, Fair, Poor, Very poor
58

59. Response Category Cut-point Shift
Very good
Very bad
Good
Bad
Moderate
True Health
Response Scale
A B C
59

60. Heterogeneous health reporting
5-category SAH instrument
“True” health status for each individual, which is unobserved, represented on a vertical axis with higher points, represented by the red lines, indicating better health
The ranges of true health within which different responses are given to the SAH question vary across individuals (A, B & C)
Relative to A, B is more positive and C more negative regarding their health
At the top level of “true” health (top red line) A reports good health, B very good and C moderate
At the middle level of true health, A reports moderate health, B good and C bad
At the lowest level of true health, A reports bad health, B moderate and C very bad
B is much more optimistic than A or C
60

61. Incomparable Responses Problem
Individuals may report health differently depending their upon
Different understandings or conceptions of health
Expectations for own health
Their health relative to their peers
Different norms or standards as to what the responses categories mean
Financial incentives to report ill health
This is referred to as differential item functioning or DIF
61

62. Consequences of DIF for equity analyses and indices
If the variation is random, it will not bias the measurement of socioeconomic-related health inequality
Differential reporting of health by socioeconomic status (SES) would bias estimation of the gradient
E.g. if the poor systematically understate their true health status, then self-reported measures of health will not reflect the full extent of health inequalities
For the same ‘true’ (but unobserved) health status, poor may report better health
Differences in health disparities from self-reported and objective health measures suggest systematic variation in reporting
62

63. Evidence of heterogeneous reporting
Income-related inequalities in objective health indicators (malnutrition, mortality), tend to be higher than those in subjective health
Discrepancy in health gradients measured by objective and subjective indicators is even more common in developing world
For example, in developing countries, gradient in reported health often much smaller than gradient in mortality/anthropometrics
Aboriginals self-report better health despite being seriously disadvantaged on objective measures such as mortality
63

64. Examples
India:
Amartya Sen (2002): “the state of Kerala has the highest levels of literacy... and longevity... in India. But it also has, by a very wide margin, the highest rate of reported morbidity among all Indian states...
At the other extreme, states with low longevity, with woeful medical and educational facilities, such as Bihar, have the lowest rates of reported morbidity in India.”
64

65. Methodology: Anchoring Vignettes
King et al. (2004) proposed anchoring vignettes as a method overcoming the problem of incomparable responses
How - uses respondent’s evaluations of the health states of hypothetical people described in a short vignettes as an anchor for their self-assessed responses (King et al. 2006, Kapteyn et al 2007, van Soest 2007)
Purges these reporting differences from individuals’ evaluations of their own health
65

66. Methodology: Anchoring Vignettes
1. Respondents are first asked to evaluate their health in a given domain on a subjective scale. For example:
In the last 30 days, how much of a problem did you have because of shortness of breath?
None, Mild, Moderate, Severe, Extreme
2. Respondents are then asked to rate the health of one or more hypothetical person described in the vignette on the same scale that they used to rate their own position. For example:
Vignette A: Marie has no problems with walking slowly. She gets out of breath easily when climbing uphill for 20 meters or a flight of stairs. In the last 30 days, how much of a problem did Marie have because of shortness of breath?
Vignette B: Sean has asthma. He enjoys playing football twice or three times per week. He has attacks of wheezing once a month that go away half an hour after taking his medication. In the last 30 days, how much of a problem does Sean have breathing?
None, Mild, Moderate, Severe, Extreme
66

67. Vignette Assumptions
As the objective health situation of the person described in the vignette(s) is the same for all respondents, anchoring vignettes can identify individual variation in subjective thresholds
Vignette equivalence: Assume all respondents recognise the vignette as representing the same dimension of health, thus variation in its evaluation derives only from reporting differences
Response consistency: Assume respondents rate their own health in the same way as the vignette, the common cut-points estimated from the vignette responses can be imposed on the evaluation of own health
67

68. Anchoring Vignettes (King et al. 2004)
68

69. Anchoring Vignettes (King et al. 2004)
69

70. Anchoring Vignettes (King et al. 2004)
70

71. Vignettes and Life Satisfaction
Source Kapteyn et al 2011

72. Considerations II
Frequency of Collection
MOT versus Speedometer
Language for use in policy
Well-Being and Mental Health
Well-Being and Behaviour
Paternalism and neo-paternalism

73. Considerations III
Ethical basis of consumption
Political economy of measurement
Is well-being a distraction?
Well-Being and productivity
Bank bailouts

74. Options for Ireland
Index constructed from ESS
Aging studies - TILDA/SHARE
Regular tracking from CSO through QNHS
Welfare of targeted groups
Migrants into Ireland
Irish abroad
NI Measures

75. Extra Slides on Influence on Measures

76. US National Well-Being Index
The Gallup-Healthways Well-Being Index
Daily measure of health and well-being in the U.S.
Over 500 adults interviewed every day
Total nterviews: 2012 n = 353,564 and 2011 n = 353,492
Real-time measurement of life-evaluation, emotional health, physical health and health behaviours, work environment

77. Daily data
Source: http://www.well-beingindex.com/

78. Well being questions: Emotional health
Now, please think about yesterday, from the morning until the end of the day. Think about where you were, what you were doing, who you were with and how you felt. Were you treated with respect all day yesterday? Did you smile or laugh a lot yesterday? Did you learn or do something interesting yesterday? Did you have enough energy to get things done yesterday?
Did you experience the following feelings during A LOT OF THE DAY yesterday? How about enjoyment, physical pain, worry, sadness, stress, anger, happiness? (asked individually)

79. Emotional health: 1% drop in recession
Source: http://www.well-beingindex.com/

80. Well being questions: Evaluation Index
Please imagine a ladder with steps numbered from 0 at the bottom to 10 at the top. The top of the ladder represents the best possible life for you and the bottom of the ladder represents the worst possible life for you. On which step of the ladder would you say you personally feel you stand at this time?

81. Life-evaluation: Substantial drop (approx. 10%)
Source: http://www.well-beingindex.com/