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Can Nations Measure Well-Being?

5 December 2011 at 11:43 am
Staff Reporter
Frustrated with the shortfalls of GDP as an indicator of wellbeing, how do we find alternative means to measure progress in the quality of people’s lives, asks Macquarie Group Foundation Professor at the Centre for Social Impact, Peter Shergold. This article is taken from the CSI Blog.

Staff Reporter | 5 December 2011 at 11:43 am


Can Nations Measure Well-Being?
5 December 2011 at 11:43 am

It was in May 1968 that Robert Kennedy, with characteristically brilliant oratory, identified the abject failure of governments to measure the quality of life afforded their people. The traditional statistic – per capita Gross Domestic Product (GDP) – “does not allow for the health of our children, the quality of their education, or the joy of their play; it does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials … It measures everything, in short, except that which makes life worthwhile.” Listen to the speech on YouTube: it will raise the hairs on the back of your neck.

Two generations on, governments are struggling to address Kennedy’s challenge. As not-for-profits increasingly seek to measure social returns on investment, and companies to give quantitative dimension to societal as well as financial value, give a thought to the world’s statisticians. Frustrated with the shortfalls of GDP as an indicator of wellbeing, they are struggling to find alternative means to measure progress in the quality of people’s lives.

It’s not a moment too soon. Democracy is under challenge. Levels of trust in politicians are worryingly low. Less remarked upon is the lack of public confidence in official statistics. In France and the UK, for instance, only one-third of citizens believe official figures.

Not surprisingly there is a renewed sense of urgency amongst government statisticians. In May this year the OECD, as part of its 50th anniversary celebrations, launched the Better Life Index. It builds on a French initiative, the Commission on the Measurement of Economic Performance and Social Progress, led by renowned American economist Joseph Stiglitz, which reported in 2010. The Commission concluded that for many purposes there were better economic statistics than a measure of production, GDP: levels of real household income, for example, or the extent of income inequality. It is not that GDP is a wrong measure but that it is often inappropriate as a measure what people care about. In many instances data on social or environmental wellbeing is more relevant.

The Better Life Index seeks to respond to the Commission’s challenge. It measures 11 dimensions, with 1-3 indicators in each: housing, income, jobs, education, the environment, governance, health, life satisfaction, safety and work-life balance. It’s proposed to add more criteria in the future.

The challenge, of course, is how to address the relative importance of such indices of well-being. The OECD deftly sidesteps the problem by making the index interactive. Each visitor can weight the variables on-line as they want and share their views with others via Twitter or Facebook. This is statistics in the age of social media.

It’s made difficult to work out which of the OECD’s 34 member states scores best. You have to measure the height of flowers and the size of their petals! I know you don’t believe me but take a look. Weighing all variables equally on the horticultural scale Australia, I think, is placed second, just behind Canada and just ahead of Sweden in the Better Life garden fertility stakes! Some 75% of Australians are satisfied with their lives compared to just 59% for the OECD as a whole.

As a nation we rate particularly well on the Community dimension. Around 95% of Australian respondents believe that they know someone they could rely on in a time of need. Interestingly 65% report that they have helped a stranger in the last month, compared to an OECD average of only 47%.

The United Nations is also actively seeking to move beyond traditional measures of national wealth. The UN Development Program argues that “an excessive obsession with the creation of material wealth can obscure the ultimate objective of enriching human lives”. Seeking to redress that defect it has recently issued its 2011 Human Development Report.

Frankly it doesn’t pack the enjoyment of the Better Life Index, requiring its users to possess some understanding of income logarithms and geometric means. The data, which graph trends back to 1980, is probably more compelling. It creates a composite index of human development by measuring 3 dimensions (health, education and living standards) against 4 indicators (life expectancy at birth, years of schooling, expected years of schooling and gross national income per capita).

Now I know that your ethical self will recognise the dangers of putting such data into league tables. But I also know that your inquisitive self wants to know how Australia performs. The answer is that of 269 countries (47 developed nations) we rank 2nd after Norway, performing slightly better than the Netherlands, the US, New Zealand and Canada. In short, the more comprehensive statistical metrics suggest that Australia provides a better quality of life than measures of GDP indicate.

The question is, how do we as a national judge ourselves? The answer is that the Australian Bureau of Statistics (ABS) has been on the job since 2002. The most recent Measures of Australia’s Progress (MAP), for 2010, has just been released.

MAP presents approximately 80 headline and supplementary indicators, in 17 dimensions, in a dashboard format. It’s a very powerful visual tool that lets us assess the extent to which life in Australia is getting better (and therefore ranks quite highly on my fun-o-meter).

MAP measures economic performance, social wellbeing and the environment. The indices are constantly being developed and improved – the 2010 version, for example, includes for the first time an indicator of low income rental affordability.

On most indicators – health, education, work, income, wealth and economic well-being – things are improving. On some – crime, housing or productivity – there’s been no significant movement over a decade. On others – biodiversity and atmospheric pollution – indicators suggest that things have become worse. On two indicators – family, community and social cohesion and democracy, governance and citizenship – there are at present no summary measures.

The truth is that the attempt to measure the quality of life over time and between nations is still in its infancy. Thorny problems bedevil the task. Is it appropriate for countries to envision that various indicators – such as economic and environmental – can be traded off? Should we balance statistics of current wellbeing (both economic and societal) with measures that might indicate future sustainability (such as levels of indebtedness or environmental degradation)? Can measures of democratic governance and freedom of speech, notably absent from the UN Millennium Development Goals, be incorporated?

One thing is clear. For nations, as for organisations, metrics is an increasingly important part of evaluation. Applied statistics, the driest of disciplines, is now placed firmly at the centre of debate on the quality of life enjoyed by citizens.

An edited version of this blog appeared as an opinion piece in the Sydney Morning Herald on 30th November 2011.

The Centre for Social Impact (CSI) at the University of New South Wales brings together the business, government, philanthropic and third (Not for Profit) sectors, in a collaborative effort to build community capacity and facilitate social innovation.

The CSI blog aims to provide a forum for discussion and debate on topics related to social impact. The blog features regular posts by CSI staff, as well as pieces by guest bloggers. Selected blog posts are re-published by Pro Bono Australia News – to visit the CSI blog visit

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