from the Wellbeing policy tools course held by the What Works Centre for Wellbeing and the Centre for Economic Performance on 4 Oct 2017

1. Wellbeing:
Key Issues
Richard Layard
4 October 2017

2. THE GOAL
C18 Enlightenment idea:
Judge a society by the
happiness of the people.
→ Judge a policy by
ΔHappiness/ΔNet cost
2

3. 3
“The care of human life and
happiness… is the only legitimate
object of good government”.
Thomas Jefferson
NOT NEW
GDP was never meant to be a
measure of welfare.

4. 4
IN MANY COUNTRIES HAPPINESS HAS
NOT RISEN, DESPITE ECONOMIC GROWTH

5. 5

6. 6

7. POLITICIANS ARE
INTERESTEDWhat matters to people must be the
guideline for our policies.
Chancellor Merkel (2015)
- OECD now recommends member
governments to make wellbeing the
goal of government.
- UN and World Happiness Report.
- Global Happiness Policy Report. 7

8. UK’S RECORD
1st country to measure it
Behavioural Insights Team
Mental health reforms
What Works Centre for
Wellbeing
8

9. 9
Chair: Gus O’Donnell
Download Report from
Legatum Institute
(Commission on
Wellbeing and Policy)
www.li.com

10. 10
•How to measure it?
•What evidence is needed?
•Using the evidence (CEA)?
ISSUES

11. CRITERIA FOR A MEASURE
1. A simple question (not an
index).
2. As comprehensive as
possible.
3. Acceptable to policy-
makers.
→ Life-satisfaction (0-10) 11

12. Where only other
measures exist, use
conversion factors
See Layard, R. (2016), "Measuring wellbeing and
cost-effectiveness analysis using subjective
wellbeing”, Discussion Paper 1. What Works
Centre for Wellbeing.
https://www.whatworkswellbeing.org/product/
measuring-wellbeing-and-cost-effectiveness-
analysis-using-subjective-wellbeing/
12

13. SUBJECTIVE EXPERIENCE IS AN
OBJECTIVE PHENOMENON
Self-reports correlate with
electrical activity in the
relevant areas in the brain.
They predict longevity, job
quitting, marital break-up,
childbearing, productivity,
voting. 13

14. 14
HAPPINESS AFFECTS
LONGEVITY
Unhappy people are more likely to die
People originally aged 50 and over
0
10
20
30
Happiest third Middle third Least happy third
Percentage
dying over
the next nine
years

15. LIFE-SATISFACTION (LS)
AFFECTS VOTING
Incumbent vote share
= 0.64 LS
+ 0.36 Economic Growth
- 0.06 Unemployment
+ 0.15 Inflation
(Partial correlation coefficients)
15

16. 16
“John Stuart Mill taught that the happiness of the individual
is paramount. He didn’t name names, but I suspect that you
and I are the sort of individual he had in mind.”

17. EVIDENCE NEEDED
1. Which aspects of life matter most
for LS (explained variance)
→ Areas for policy development.
2. How policy-changes in those areas
affect LS.
→ Experiment (often embodied in
models) showing effect on life-
satisfaction and net cost. 17

18. 18
DISTRIBUTION OF LIFE-
SATISFACTION (%) UK

19. 0 0.05 0.1 0.15 0.2
Mental health (diagnosed dep/anx)
Physical health (no. of conditions)
Partnered
Non criminality
Not unemployed
Education (years)
Income
19
WHAT EXPLAINS THE VARIATION
IN LIFE-SATISFACTION?
β
0.09
0.02
0.06
0.06
0.11
0.10
0.19
(Partial correlation coefficients)

20. 20
0.07
0.03
0.09
0 0.02 0.04 0.06 0.08 0.1
Emotional health at 16
Behaviour at 16
Qualifications
HOW ADULT LIFE-SATISFACTION IS
AFFECTED BY CHILD OUTCOMES
β
(Partial correlation coefficients)

21. COST-EFFECTIVENESS
ANALYSIS
Traditional cost-effectiveness analysis
measures benefits by how much people
would be willing to pay for them.
Not feasible for most government
expenditures. (see over)
→ Measure benefits in units of life-
satisfaction.
21

22. %
Education 11
Transport 3
Health 18
Law and order 4
Defence 6
Welfare 15
Pensions 20
Interest 6
Other (e.g. environment, housing,
social services, industry)
16
100
PUBLIC EXPENDITURE
22

23. Overall objective: Maximise ΣLS
Assume total expenditure fixed.
So in total we want to maximise
∆𝑳𝑺
𝑪𝒐𝒔𝒕 𝒂𝒗𝒂𝒊𝒍𝒂𝒃𝒍𝒆
23
COST-EFFECTIVENESS ANALYSIS

24. We require
∆𝑳𝑺
𝑵𝒆𝒕 𝒄𝒐𝒔𝒕 𝒐𝒇 𝒑𝒐𝒍𝒊𝒄𝒚
> Cut-off.
Outcomes are over time, so ΔLS
is measured in point-years
(similar to Quality-Adjusted
Life Years).
24
FOR A POLICY INITIATIVE

25. WHAT CUT OFF?
Trial and error. Where to start?
NHS has required
∆ 𝑸𝑨𝑳𝒀𝒔
∆ 𝑪𝒐𝒔𝒕
>
𝟏
£𝟐𝟓,𝟎𝟎𝟎
We could require
∆ 𝑳𝑺 𝒑𝒐𝒊𝒏𝒕−𝒚𝒆𝒂𝒓𝒔
∆ 𝑪𝒐𝒔𝒕
>
𝟏
£𝟐,𝟓𝟎𝟎
25

26. Life-satisfaction
β
Misery
β
Income 0.09 -0.07
Education (years) 0.02 -0.01
Not unemployed 0.06 -0.07
Non criminality 0.06 -0.04
Partnered 0.11 -0.08
Physical health (no. of
conditions)
0.10 -0.09
Mental health (diagnosed
depression/anxiety)
0.19 -0.16
R2 0.19 0.14
WHAT EXPLAINS WHO IS IN
MISERY (LOWEST 10%)?
26

27. 27
£k p.a
Poverty. Raising more people above the
poverty line
160
Unemployment. Reducing unemployment by
active labour market policy
30
Physical health. Raising more people from the
worst 20% of present-day illness
100
Mental health. Treating more people for
depression and anxiety
5
AVERAGE COST OF REDUCING THE
NUMBERS IN MISERY, BY ONE PERSON

28. 1. Use life-satisfaction to measure
benefit, and include it in every
survey/trial.
2. We can explain it.
3. Do policies where
ΔLS/ΔNet cost > 1/2,500
or give extra weight to misery.
28
CONCLUSIONS

29. 29
SOURCESSlides 4-6: Clark, A.E., Flèche, S., Layard, R., Powdthavee, N. and Ward, G. (2018). The Origins of
Happiness: The Science of Wellbeing over the Life Course: Princeton University Press.
Slide 9: O'Donnell, G., Deaton, A., Durand, M., Halpern, D. and Layard, R. (2014). Wellbeing
and policy. London: Legatum Institute.
Slide 12: See Layard, R. (2016), "Measuring wellbeing and cost-effectiveness analysis using
subjective wellbeing”, Discussion Paper 1. What Works Centre for Wellbeing.
https://www.whatworkswellbeing.org/product/measuring-wellbeing-and-cost-
effectiveness-analysis-using-subjective-wellbeing/
Slide 14: Layard, R. and Clark, D.M. (2014). Thrive: The power of evidence-based psychological
therapies, London: Penguin.
Slide 15: Ward, G. (2015). 'Is Happiness a Predictor of Election Results?', CEP Discussion Paper
No. 1343, LSE Centre for Economic Performance.
Slides 18-20: Clark, A.E., Flèche, S., Layard, R., Powdthavee, N. and Ward, G. (2018). The Origins of
Happiness: The Science of Wellbeing over the Life Course: Princeton University Press.
Slide 22: ONS
Slide 26: Clark, A.E., Flèche, S., Layard, R., Powdthavee, N. and Ward, G. (2016) “Origins of
happiness: Evidence and policy implications”, VOX, http://voxeu.org/article/origins-
happiness
Slide 27: Available on request.