Happiness index must be quantitative and broad

By Guest Contributor
November 26, 2010

By Robert Cole

David Cameron wants to know how best to measure the well-being of British citizens. The prime minister is right to say that economic development cannot just be measured in money. But to succeed where others have failed, the indicator should be quantitative and broad. The UK’s retail prices index is a good model.

To be useful, the Happy Index must be simple. As the UK’s Office for National Statistics acknowledges, success will only come if it is widely accepted and understood. To be worthwhile, it must also measure unhappiness as well as happiness. If it turns out to be a flimsy public relations exercise designed to make people believe they are better off than they feel, it will be waste of time.

In any event, the index will be easy to ridicule. But dismissive skepticism ignores the basic truth that economic activity exists to improve standards of living which are not captured by conventional GDP measures. It also ignores the opinions of big thinkers such as Nobel economics prize winners Amartya Sen and Joseph Stiglitz, authors of a recent report commissioned by French President Nicolas Sarkozy.

To be credible, however, the Happy Index must be compiled in accordance with the kind of hard-nosed standards that financial markets will accept. Rather than attempting to identify a single or small number of measures that seem to encapsulate well-being now, the index should mimic the RPI by looking at a broad range of factors. It may not need to measure a basket of 600 goods, as the RPI currently does. But the measure should be diverse, mixing life expectancy and income with less conventional measures such as obesity and prescriptions for anti-depressants.

Each element should also be clearly quantifiable. Asking people how happy they are is likely to be a non-starter. Measuring changes in the opinions of a group would be more appropriate. If constructed like the RPI, the various elements can be replaced, or given different weights, over time. That way, the aggregate can still be a single, simple number that is easy to grasp. Therein is a standard worth setting.

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