Michael Birkjær, Alexander Gamerdinger

The Happiness Research Institute

“All constitutions of government are valued only in proportion as they tend to promote the happiness of those who live under them. This is their sole use and end.” – These were Adam Smith’s words in 1790, but it appears that same view is still widely held today. According to a new cross-national survey conducted by the Nordic Council of Ministers, 70% of people in the Nordic nations agree that the promotion of human wellbeing is a better measure for a successful government than economic growth. But, perhaps more importantly, scientific evidence reveals that increased wellbeing is a better predictor of government re-election than economic growth.

As a result, governments appear to have every reason to place more emphasis on improving people’s well-being. And so they do.

Today, governments around the globe, from New Zealand to Finland, are progressively adopting the notion of the Wellbeing Economy to solve some of society’s most looming issues. In essence, a Wellbeing Economy is about using wellbeing data to inform both national strategies and greater social impact of public policies. Yet, looking across the various initiatives governments have undertaken, it can prove very difficult to detect clear similarities on goals and methodologies. 

By disentangling the various practical shapes a Wellbeing Economy might take, and the many theoretical foundations it can rely on, we propose a ‘common language’ for the Wellbeing Economy with our new report, ‘Towards a Nordic Wellbeing Economy.’ In addition, this report also initiates a discussion on how the Nordic countries might accept and use the concept of the Wellbeing Economy to help achieve their ‘Vision 2030′.

The report was commissioned by the Nordic Council of Ministers and written by the Happiness Research Institute, a Danish think tank whose mission is to inform decision makers of causes and effects of human wellbeing and make subjective wellbeing part of the public policy debate.

What is certain about the Wellbeing Economy?

The wide consensus on increasing the gross domestic product (GDP) is what currently guides policymaking and business decisions in almost all countries on the globe. A Wellbeing Economy is certain about going ‘beyond GDP’, and to complement – or even replace – the metric with a broader set of social and environmental indicators fed by the ever-growing amount of publicly available data on wellbeing. This is what enables the Wellbeing Economy to tackle some of society’s most looming issues such as loneliness and mental health problems, as well as complex climate and environmental challenges.

The current economy relies on the ‘utility approach’ to wellbeing and uses data on consumer behaviour and preferences to predict and assess the value of public policies. One intrinsic weakness of such methods is to assign a value to any kind of phenomenon that is placed outside of the market. In that way, the accurate valuation of social connections, love or biodiversity loss – all of which are crucial for the wellbeing of humans and the planet – proves very difficult. A Wellbeing Economy on the other hand is capable of addressing and valuing these non-market challenges through empirical insights based on human experiences or objective measurements of social and environmental realities. In that, the Wellbeing Economy has a better chance to solve complex global challenges than conventional economic approaches. 

What is uncertain about the Wellbeing Economy?

While it is clear that the concept of Wellbeing Economy is a beyond-GDP-approach with an untapped potential to address looming social and environmental issues, the concept also suffers from one overarching issue: it proves hard to compare and benchmark Wellbeing Economy programmes and performances across countries. 

Although two Wellbeing Economies will never be identical, it is crucial that goals, performances and experiences can be compared, benchmarked and shared. What we need is to establish a ‘common language’ for the Wellbeing Economy. In the report, we argue that this necessitates shared knowledge of the many theoretical and methodological stances that a Wellbeing Economy can take, as well as a roadmap outlining what it means to transition from a conventional economy to a Wellbeing Economy. 

What kind of wellbeing? Utility vs objective wellbeing vs. subjective wellbeing?

One important point of the report relates to the goals a Wellbeing Economy should prioritize. If not GDP, what then should be the goal of policy-making? Promoting mental health and happiness, decreasing multidimensional inequalities or tackling environmental degradation and climate change? While all of these issues are important, they each demand a diverse set of – possibly conflicting – policies to address them. 

The reason why these different policy priorities (and strategies to get there) exist, can be traced back to a theoretical discussion on how wellbeing is best defined. Broadly, the report informs us about three approaches, each rooted in different understandings of wellbeing: Utility, objective wellbeing and subjective wellbeing. 

In a conventional economy, wellbeing is defined as ‘utility’ and is often expressed in terms of consumer preferences. The general idea is that economic growth, by providing people with a greater variety of choice, enables the general population to fulfil its desires, and thereby enhances wellbeing. This view has generated wide consensus among policymakers, scientists and industry.

Contrarily, a Wellbeing Economy draws on two different approaches to wellbeing: subjective or objective wellbeing. While objective wellbeing can be defined by the ‘hard facts’ of wellbeing circumstances, such as longevity, education and the absence of air pollution, subjective wellbeing is rooted in first-person subjective experience, which can be addressed by measures of life satisfaction, mental health or loneliness.

In practice, we find that governments tend to monitor and utilize utility measures, objective wellbeing measures and subjective wellbeing measures – and often at the same time. But while mixing methods may have practical benefits or even prove necessary (in the case of lacking data), it also comes with a great potential risk. 

For some welfare domains such as healthcare, wellbeing metrics based on the utility method will frequently place a larger value on certains domains of impact than those based on the subjective wellbeing approach. In practice, this means that the choice of method for eliciting wellbeing values indirectly influences the policy output through cost-benefit analyses. Or put differently: it does not only matter whether we value wellbeing or not, but also which definition of wellbeing we rely on.

When is a country a Wellbeing Economy?

Broadly, countries have engaged in three wellbeing initiatives. Some countries such as Scotland, the Netherlands and Germany have started to monitor wellbeing through national indicator sets. This development was especially driven by the 2009 Stiglitz-Sen-Fitoussi Commission, which advocated for the measurement of ‘beyond GDP’ indicators. However, as pure monitoring of wellbeing indicators suggests a rather ‘passive’ use, we cannot consider these countries as Wellbeing Economies. 

Instead, the report makes the case that a country is only classified as a Wellbeing Economy if it uses wellbeing measures to actively inform governments’ wellbeing priorities, or to actively guide policy-making towards most wellbeing impact.

Actively informing wellbeing priorities can be done through wellbeing budgets or fiscal strategies that allocate money for areas of wellbeing such as climate protection or mental health policies. 

On a ‘micro level’ wellbeing indicators can be used in cost-benefit analyses to help policymakers decide for the policies with the highest wellbeing impact. Great examples of such is the work of the treasuries in both New Zealand and the United Kingdom, where subjective wellbeing metrics have been embraced as “social values” to quantify the impact of public policy.

Finding role models in odd places

Making sense of the different theoretical and practical forms of a Wellbeing Economy might be challenging for starters. However, we argue that this is a necessary first step to get familiarized with the concept and accept its diversity. The intention of this report is also not to dictate our concepts onto the global community working with the Wellbeing Economy. It is merely to ‘get started’ with a strongly needed systematic categorization of the different shapes a Wellbeing Economy can take. 

One of the reasons why conventional economic methodologies enjoy widespread acceptance around the world is because its applied measures – such as GDP – are easy to understand and can be applied to benchmark and compare performances across countries. The System of National Accounts (SNA) has globally diffused the way GDP is calculated and thereby provided policymakers and economists with the ‘grammar’ of the current economic language. 

The Wellbeing Economy needs a similar system that provides structure, transparency and comparability. However, this structure should not only exist for the indicators used, but also for wellbeing policies and new narratives that can be applied to transition into a Wellbeing Economy. In sum, what we need is a ‘common language’ and a catalogue  that enables governments to learn- and to be inspired by each other.

By: Jussi Ahokas

Finland joins the leading group of Wellbeing Economy Governments

This week we received great news when the Finnish Ministry of Social Affairs and Health announced that Finland had joined the international Wellbeing Economy Governments (WEGo) network. The news is particularly good for SOSTE Finnish Federation for Social Affairs and Health (an umbrella organization of Finnish NGOs from the social and health sector) which has been promoting the wellbeing economy approach for several years.

By joining the WEGo partnership, Finland will be increasingly involved in discussions with New Zealand, Scotland, Iceland, and Wales around how societies can be built to ensure wellbeing for all people, despite the great challenges of our time. 

Civil society as a catalyst of cooperation

The news of Finland joining WEGo is also exciting for the Wellbeing Economy Alliance, a civil society network of which SOSTE has been a member since Spring 2019, as the Alliance has been instrumental in the creation of the Wellbeing Economy Governments partnership. Apart from countries being able to engage in wellbeing economy initiatives, the network has offered to its member organizations, foundations, and individuals an arena to reflect together on the need for actions orientated towards wellbeing. 

Due to this cooperation SOSTE, for example, has reinforced the idea that without securing ecological sustainability future wellbeing cannot be ensured. In many respects, the change we need is greater than what could be achieved solely by SOSTE’s work on wellbeing economy, which has mostly concentrated on health policy and social policy issues. A sectoral perspective, or even a national perspective, is not sufficient – a wellbeing economy must be built globally and with all people and the whole planet in mind. 

Together we can build a wellbeing economy  

Given the extent of the required actions, no actor can succeed in building a wellbeing economy alone. It is, therefore, important to involve also governments and civil servants around the world in this joint effort. 

In the case of Finland, the wellbeing economy was one of the main themes during the country’s EU Presidency, and in recent months the wellbeing economy approach has really found its place in the central government’s agenda. A Wellbeing Economy group has just been established in the Public Health Advisory Board, and ministries and other state institutions have also been engaged around the issue of wellbeing economy. It is excellent that this work can now be shared and benchmarked with the other WEGo governments. 

Wellbeing economy for a better future 

When the acute coronavirus crisis is over, we will have again the opportunity to consider the next steps that should be taken to build up wellbeing economies and support people’s wellbeing around the world. 

SOSTE, social and health sector NGOs and global civil society are ready to continue to provide solutions that strengthen and expand the wellbeing economy. It is possible that in following years this effort will be embraced by other countries as well, as the global dialogue around the wellbeing policy and wellbeing economy evolves. This gives hope for a better tomorrow. 

By Jussi Ahokas

Finland took over the Presidency of the Council of the European Union this autumn (from 1 July to 31 December). The timing of Finland’s third EU Presidency has been very interesting. The European Parliament election took place in May and during the autumn the construction of the new European Commission has been under way. The future choices of Europe and the next steps for policies of the European Union have been widely discussed. Hence, more room than usual has been opened for envisioning and reflection – what should be the desirable future path for the whole continent and the union of European nation states?

As the chair of the Council Finland has tried to seize the opportunity by bringing new initiatives to the European policy discussions. Most importantly, Finnish Ministry of Social affairs and Health introduced the Economy of Wellbeing policy approach that emphasises the fact that increasing the wellbeing of people creates positive outcomes for the economy. This in turn allows new investments to increase wellbeing, inclusion and participation. Thus, the Economy of Wellbeing presents the positive cumulative causation, or the virtuous circle, which will lead to the improving people’s capabilities to live good lives.

During the autumn many interesting events under the theme of Economy of Wellbeing have been organized. The high-level conference of Economy of Wellbeing in September in Helsinki brought together politicians, civil servants, researchers and civil society actors from different European countries. Economy of Wellbeing as a new policy approach was enthusiastically welcomed and almost all discussants seemed to be inspired by the concept. Later in October the EU council adopted conclusions on the Economy of Wellbeing which also portrayed the European wide interest on the new policy approach.

The civil society actors had important role in the high-level conference raising also somewhat critical voices on the current situation in Europe and the policy efforts of the EU. For example, the European Anti-Poverty Network (EAPN) and the Social Platform – European NGOs that organized their own events in Helsinki earlier in that week – reminded the participants that the guiding idea and policy goal of Economy of Wellbeing should be people’s wellbeing and that economy is only a tool for making this happen.

From the perspective of SOSTE Finnish Federation for Social Affairs and Health the message of EAPN and the Social Platform was of great importance. Indeed, in Finland SOSTE introduced the concept of Wellbeing Economy already in 2012 and slowly it has drawn more general attention in Finnish society. Before the EU presidency SOSTE was in close dialogue with the Ministry of Social Affairs and Health and it can be argued that the initiative of Economy of Wellbeing in Europe has its roots in civil society. This is a very good example of the power that NGOs and civil society can have in developing new visions and approaches that could change policies in the EU in the long-term.

The critical stance of NGOs – that the wellbeing of the people should always be the primary policy goal – has much importance, because the Economy of Wellbeing approach presented by the Ministry is also concerned over the “wellbeing” of the economy. There is a risk of “business as usual” being legitimised by the argument that besides the wellbeing of the people, we also need economic growth and sustainable public finances to achieve our goals. Hence, in time of an economic crises even austerity measures could be legitimised with Economy of Wellbeing approach.

Another important critique is the lack of – or at least too small – role for ecological and environmental perspectives. It is impossible to deny that at the time of climate crisis (and other ecological crises) the wellbeing of our planet is the most important policy issue and by neglecting it, we are not able to secure the wellbeing of people in our societies.

Therefore, it is very important that civil society actors continue to battle over the concept of Economy of Wellbeing in Europe. In the best scenario the initiative will bring us more policy space to build an actual Wellbeing Economy. An economic and social model that puts the wellbeing of all people and our planet first.

Mr. Jussi Ahokas is Chief Economist for SOSTE Finnish Federation for Social Affairs and Health – SOSTE is a member of WEAll

The OECD has convening power. It has influencing power. And it has the power of its policy advice. It can prescribe changes that are listened to the same way a patient listens to their doctors advice.

So when the OECD’s regular gatherings on measuring wellbeing and shaping policy show signs of moving away from the cosy ‘GDP and beyond’ mantra and the non-system-challenging focus on treatment, then it is worth taking notice.

There’s a new regime in town.

In Paris over one hundred people spent two days hearing from the governments leading the effort to embed a focus on wellbeing into policy agenda. By the end, people were joking that the audience must have ‘framework fatigue’.

Diverse governments, from the UAE to Iceland, from Scotland to Jersey, from France to New Zealand, from Finland to Paraguay set out their efforts to shape policy-making – and, crucially – budgeting, in accordance with promotion and enabling of wellbeing. Discussion was about taking this seriously, changing planning and spending accordingly: the OECD Secretary-General told the audience that: “if it ain’t in the budget, it ain’t really a priority”.

Tensions between different conceptions of wellbeing were, thank goodness, not swept under the carpet as they often are in such discussions. People recognised that a focus on multidimensional wellbeing and the drivers of wellbeing was not the same as rallying around a single number measuring subjective self-reported wellbeing.

But what is done with any measure matters: Professor Jeff Sachs warned that looking at narrow measures means narrow perspective: “the stock market rising”, he said “but US life expectancy is falling, [the US has a] suicide and opioid epidemic – our country is in crisis, but we don’t know it’s a crisis because we don’t look at the right data; this question is not even asked”.

Speaking of drugs, Sachs (channelling WEAll Ambassador Robert Costanza) likened the prevailing money and growth focus to an addiction: “making money is addictive and we have an addiction”. This was reinforced by Martine Durand, OECD Chief Statistician and Director of the Statistics and Data Directorate who said “GDP was never meant to measure wellbeing; it’s been abused and now we’re addicted to it – need to go to a clinic to stop this addiction”. Fortunately, the doctors on duty are willing to look the patient in the eye and tell them some hard truths.

One of these is grappling with the need for both of the ‘two S.C.s’ as I described them. This first is a focus survival and coping – treating people whose wellbeing is low. This is, of course a humane response. It is also not enough in the face of an inhumane economy that is the root cause of so much anxiety and stress, to both people and to planet.

Hence the need for the second ‘S.C.’: system change that asks why people’s wellbeing is low and what changes in the economic set up need to be undertaken in response? Gabriela Ramos, OECD Chief of Staff challenged delegates to think beyond celebration of amelioration: “Even the existence of social safety nets tells us people are falling and we need to catch them. But how do we keep them from falling?”

In terms of system change, there was also a frank discussion about the relevance of a growth orientated agenda in the richest countries. Of course ecological economists and others have been questioning this for years, but to have senior members of the policy making establishment state that growth doesn’t matter for quality of life in GDP-rich countries (asserting it is “irrelevant for rich country’s wellbeing”) and to even question why the OECD would maintain a programme under the heading of ‘Inclusive Growth’ seemed to be a new high point for the post-growth conversation.

Finally, an impatience with the disconnect between what the wellbeing community has been measuring and saying for years and slow progress in shifting the economic agenda was apparent. Angel Gurría, OECD Secretary-General, opened the conference by saying the world is “well past the point when a lack of data is an excuse – [now the] need is to rationalise and choose and targets which are the relevant indicators”.

If these two days were a heartening stock-take on the state of the debate on wellbeing measures and policy agendas, their timing was just as useful: Finland is currently President of the EU and has made the ‘economy of wellbeing’ it’s flagship agenda. At times, the Finnish contribution seemed a little out of place, better suited to a gathering 5 years ago in that it emphasised the business case for wellbeing and asserting that if governments boost wellbeing that will boost growth. Fortunately, if the rest of the OECD conference was anything to go by, the thinking has moved on and the question is now “what can growth do for wellbeing?”. Not the other way around.

By Katherine Trebeck, WEAll Knowledge and Policy lead

Based on the results of the 2018 IPCC Special Report, all countries and sectors should speed up emission reductions to limit global warming to 1.5 degrees. In addition to regulations, carbon taxes are effective at reducing emissions. Based on research, the best way to introduce them is via a budget-neutral environmental tax reform (ETR).

This research analyses the potential tax instruments that could be used in Finland to support emission cuts and the circular economy. From the potential pool of instruments, a total of three different types of ETR scenarios are formed and their impacts on the economy and emissions are analysed. The first scenario includes environmental taxes that mainly target firms and that might harm the cost-competitiveness of energy-intensive Finnish industries without compensations. The second scenario includes environmental taxes mainly targeting consumers; we analyse their regressivity, which is one of the main concerns regarding environmental and emission taxes. The third ETR scenario aims to promote circular economy solutions.

Based on the findings, all three scenarios would bring about the “double dividend” effect by significantly reducing emissions and increasing employment and GDP compared to baselines.

Minister of Social Affairs and Health in Finland, Pirkko Mattila, has set out new plans for prioritising “The Economy of Wellbeing” as a means to taking a holistic approach to tackle future challenges.

Read the full article on Open Access Government here.