## The Good Life

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**Canonical URL:** [The Good Life](https://www.imf.org/-/media/files/publications/fandd/article/2021/december/kimball.pdf)

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### GDP limitations and motivation for Beyond GDP measures
- GDP measures total output of goods and services but omits many dimensions of well-being (leisure, relationships, emotional experiences).
- Example statistic: real (inflation-adjusted) per capita GDP rose from $58,333 in the fourth quarter of 2019 to $58,454 in the second quarter of 2021, which would imply the United States was slightly better off by that metric, despite substantial human and social costs from the COVID-19 pandemic.
- Key point: GDP can be misleading for assessing national well-being because it relies on market transaction data and market prices that do not reflect nonmarket goods or distributional differences in marginal value of dollars.

### The Human Development Index (HDI)
- HDI roots: capabilities approach (Amartya Sen) and elaboration by Martha Nussbaum on core capabilities (life span, health, freedom from violence, imagination and thought, emotions, freedom to chart one’s course, social relationships, natural world, play, political participation, property rights).
- UNDP description: HDI is “a summary measure of average achievement in key dimensions of human development: a long and healthy life, being knowledgeable, and having a decent standard of living. The HDI is the geometric mean of normalized indices for each of the three dimensions.”
- Properties and limitations:
  - Geometric mean implies a percentage change in HDI is the equally weighted average of the percentage changes of its components.
  - HDI’s choice of three dimensions and their weights is somewhat arbitrary and was influenced by data availability in 1990.
  - HDI omits many aspects of well-being (leisure, relationships, emotions, distributional concerns) and lacks real-time responsiveness (latest available numbers were for 2019 at time of writing).

### Toward a survey-based national well-being index
- Objective: construct an index that includes many more dimensions of well-being and weights them based on the values of the people in the country.
- Proposed weighting principle: relative marginal utilities—estimated from stated preferences in specially designed surveys.
- Two types of survey questions:
  - Rating questions: respondents move a slider from 0 to 100 to indicate their level of an aspect of well-being over the past year.
  - Trade-off questions: respondents choose between two options where levels of one or more aspects are slightly different, revealing implicit weights.
- Aggregation logic: reported levels from ratings substitute for quantities; weights from trade-offs substitute for prices; personal well-being indices are aggregated into national indices, with adjustment for inequality aversion when society prefers more equal distributions of well-being.

### Quantified findings from stated-preference surveys (selected weights)
- Method: in Benjamin, Heffetz, Kimball, and Szembrot (2014) respondents answered trade-offs on 136 aspects of well-being; table illustrates 18 aspects with weights normalized so the top aspect = 1.00.
- Aspects and weights (exact values preserved):
  - Freedom from corruption, injustice, and abuse of power in your nation (normalized to 1.00) — 1.00
  - People having many options and possibilities in their lives and the freedom to choose among them — 0.90
  - People being good, moral people and living according to their personal values — 0.90
  - People’s sense that they are making a difference, actively contributing to the well-being of other people, and making the world a better place — 0.82
  - People’s freedom from being lied to, deceived, or betrayed — 0.77
  - Society helping the poor and others who struggle — 0.77
  - People’s health — 0.74
  - Freedom of speech and people’s ability to take part in the political process and community life — 0.74
  - People’s financial security — 0.72
  - The extent to which people feel the things they do in their lives are worthwhile — 0.62
  - How happy people feel — 0.59
  - The condition of animals, nature, and the environment in the world — 0.56
  - People’s knowledge, skills, and access to information — 0.54
  - People’s chances to live long lives — 0.49
  - How satisfied people are with their lives — 0.46
  - The average income of people in your nation — 0.44
  - People feeling that they understand the world and the things going on around them — 0.38
  - People not feeling anxious — 0.23
- Observations drawn from these weights:
  - Top-weighted aspects are capabilities in Sen’s sense and enable a good life rather than guarantee it.
  - Many aspects with weights at least 75 percent of the top aspect are missing from measures like the HDI.
  - Some widely collected indicators (e.g., people not feeling anxious) have relatively low weights (0.23), while “people’s health” (0.74) and “people’s financial security” (0.72) have high but not topmost weights. Knowledge, long lives, and average income have weights no higher than 0.54, 0.49, and 0.44 respectively.

### Implementation challenges and methodological advances
- Calibration of scale use:
  - People differ in how they use rating scales (some use 0–100, others 50–100). Calibration questions can detect and correct for systematic scale-use differences across individuals and over time.
- Demographic heterogeneity in trade-offs:
  - Trade-offs likely vary with age, education, and overall well-being. Using systematic tendencies allows constructing reasonable weights without estimating each individual’s weights separately.
- Accounting for inequality:
  - National well-being should reflect distributional judgments; transform personal well-being indices using a chosen level of inequality aversion before aggregation when society prefers equality over unequal distributions with the same mean.

### Policy implications and recommendations
- Monitor a broader set of metrics beyond GDP that reflect capabilities and multiple well-being dimensions.
- Use survey-based stated-preference methods to derive weights that reflect citizens’ values rather than imposing arbitrary weights.
- Implement calibration questions to improve comparability of self-reported measures over people and time.
- Incorporate inequality aversion explicitly when aggregating personal well-being into national indices to reflect societal preferences about distribution.
- Prioritize developing real-time, widely comparable data collection (surveys) so well-being indices can inform timely policymaking.

*Source: Daniel Benjamin, Kristen Cooper, Ori Heffetz, and Miles Kimball, “Measuring the Essence of The Good Life,” Finance & Development, December 2021.*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2021/december/kimball.pdf_