The Main Approaches to Measuring Progress and Measuring Well-being Barbara Iasiello& Jon Hall Global Project, OECD

How to Measure Progress?

How to Measure Progress Three Approaches 1. The Accounting Framework Approach Extension of traditional economic accounts based on GDP, to capture the environment or social concerns

SESAME Approach The SESAME can be defined as a detailed and integrated statistical information system in matrix format, from which a set of core (macro-)indicators for different aspects of well-being can be derived (Keuning, 1997) Usually it includes many indicators as: GDP, population size, (un)employment, inequality, education, environmental indicators, etc.

Agriculture, forestry and fishing Mining and manufacturing Electricity, gas and water supply Care and other service activities Construction Trade, hotels, restaurants and repair Transport, storage and communication Finance and business services Other commercial services General government Total GDP Paid employment and self employed persons Low educatio n Total employm. High educatio n Low educatio n High educatio n Female Total Male … … … … … … … … … … … … … … … … …… …… …… …… …… ……… ……… ……… …… …… …… … … … … … … … … … … … … … … … … … … … … … … … … … Source: Keuning, S., Verbruggen, M., European Structural Indicators – a Way Forward. June 2003.

Strengths & Weaknesses Very powerful tool for analysis  Investment in terms of the amount of data to be collected and the resources needed

How to Measure Progress Three Approaches 2.The One-Number Approach Development of composite indicators of progress that combine detailed information into a single measure

The GPI GDP Add uncounted benefits (eg unpaid work, parenting) Genuine Progress Indicator Subtract “real” costs (eg defensive expenditure like prisons)

Strengths & Weaknesses Powerful tool for advocacy  Difficulty in aggregating units measured in different ways – adding apples and oranges, or valuing things like “parenting” in $s  Difficult to interpret the results without stepping back to investigate the components

How to Measure Well-being Three Approaches 3. The Suite of Indicator Approach Identification of a set of key indicators covering economic, social and environmental domains

Strengths & Weaknesses It has the advantage of covering a wide range of topics, without the need of estimating individual weights.  Can be difficult to interpret  Can include too much information

Indicators Measures should be “unambiguous" that is have a clear good/bad direction of movement Important to focus on the big picture Important to discuss the links between indicators ….. trade-offs and reinforcements

Progress: Objective and Subjective Components Objective components – longevity, income, air quality The stuff we can measure exactly

Progress: Objective and Subjective Components Subjective components – fear, trust, happiness, life satisfaction Must ask people how they feel Business Confidence Self assessed health

Objective and Subjective Assessments Are Important Level of Subjective well-being highlow Objective living conditions highwell-beingdissonance lowadaptationdeprivation

Measuring Subjective Well-being Arguments For Nice organising principle Public are interested – and a growing demand Solid evidence that high subjective wellbeing correlates with other “hard” aspects of wellbeing e.g. health

Happiness and Health The Nuns 17

Measuring Subjective Well-being Arguments Against Difficult to measure Difficult to find policy relevance for measures (at least for generalised measures of life satisfaction) Doesn’t appear to change a great deal over time (though there is a life course effect) Not “appropriate” ground for a statistical office 18

A Happy Planet Index Launched by nef in July 2006 HDI style rank order of nations Measure of the “Ecological efficiency with which human well-being is delivered” Over 1,000,000 downloads to date

What HPI measures Human system Ecosystem Resource demand Ecosystem well-being Human well-being Culture Social Capital Governance Economy Education Healthcare Natural Capital Biodiversity CO 2 emissions Soil erosion Water quality Air quality

What HPI measures Human system Resource demand Happy and Long Lives Resource Use (divided by) Human well-being

What HPI measures Human system Resource demand (Life Sat) * (Life Exp) Eco Footprint (divided by) Human well-being

Measuring Progress to Foster Progress 24

The benefits for citizens for citizens for policy makers for countries 25

The benefits – for citizens Promote accountability and enhance citizen engagement… ….improve citizens knowledge giving them the opportunity to improve their decision making processes and to become more aware of the risks and challenges of today’s world 26

The benefits – for policy makers Policy makers can better assess the current situation, make more informed decisions, and measure progress over time and relative to other nations Better coordination in government Data to advocate necessary reforms and evaluate their impact on societal welfare 27

The benefits – for countries By highlighting the issues that genuinely matter to a society, a set of progress measures can help a country best meet the needs of its citizens by focussing attention on the key outcomes ‘Sunshine is the best disinfectant’… ….transparency has the ability to reduce waste, prevent corruption, and shift resources where they’re truly needed 28

Progress Measures Can Help… Promote greater accountability Enhance the quality of public debate Help countries prioritize resource allocation 29

Progress Measures Can Help… Enhance democracy … … enhance decision making … … and so generate progress 30

“Measuring the Progress of Societies is one of the most important roles the OECD can take on” –Angel Gurria, OECD Secretary General "World GDP growth has been faster than it has been for a very long time. But people are not particularly happy" –Kemal Dervis, Head of UNDP " Progress indicators are a way for people to hold their government’s accountable " –Francois Bourguignon, Chief Economist of the World Bank 31

Group Exercise The Secretary General of the League of Arab States has asked your group to develop a set of indicators of progress.

Your Job is to  Choose a concept related to progress that covers different dimensions – eg poverty, social cohesion, etc. –and explain why it is important for progress.  Discuss what specific aspects of Arabian life need to be included in this concept.  Develop the specific indicators that need to be included in the set of indicators.

Your Job is to  For example… develop indicators of “Safety”. Safety must be defined….  Safety … might be made up of dimensions like crime, defense, road accidents … each dimensions must be measured using an indicator…  Crime … could be the homicide rate, the mugging rate, people in prison.  List the specific indicators you want to include for measuring Safety

You have to Prepare a five minutes presentation describing your set of indicators and why it is important for Progress.