## Measuring the Essence of the Good Life ## Source details **Canonical URL:** [Measuring the Essence of the Good Life](https://www.imf.org/en/publications/fandd/issues/2021/12/measuring-essence-good-life-benjamin-cooper-heffetz-kimball) ## Other formats - [Markdown version](/en/publications/fandd/issues/2021/12/measuring-essence-good-life-benjamin-cooper-heffetz-kimball/index.md) - [Structured JSON version](/en/publications/fandd/issues/2021/12/measuring-essence-good-life-benjamin-cooper-heffetz-kimball/index.json) - [Bundle manifest](/en/publications/fandd/issues/2021/12/measuring-essence-good-life-benjamin-cooper-heffetz-kimball/bundle-manifest.json) ## Bibliographic details - Authors: DANIEL BENJAMIN, KRISTEN COOPER, ORI HEFFETZ, MILES KIMBALL - Published: December 2, 2021 --- ### Overview - GDP measures the total output of goods and services in an economy but has flaws when used to gauge the well-being of a nation’s residents. - Real (inflation-adjusted) per capita GDP in the United States rose from $58,333 in the fourth quarter of 2019 to $58,454 in the second quarter of 2021, yet this rise may not reflect broader social, emotional, and human costs of the COVID-19 pandemic. - The article argues for a complementary multi-dimensional measure of national well-being rather than replacing GDP with another one-dimensional metric. ### Limitations of GDP as a Well-Being Measure - GDP omits nonmarket aspects of well-being such as leisure time, relationships, and emotional experiences like anxiety and sense of purpose. - Market prices used in GDP do not account for differential welfare impact of spending across households (for example, a dollar spent by a family in poverty versus a billionaire’s family). - Data availability historically constrained broader indices; for example, the HDI’s dimensions reflect what was widely measured in 1990. ### The Human Development Index (HDI) - The HDI is described by the UNDP as “the geometric mean of normalized indices for each of the three dimensions” (a long and healthy life, being knowledgeable, and having a decent standard of living). - The geometric mean implies that a percentage change in HDI is the equally weighted average of the percentage changes of its components. - The HDI provides a single, simple number that summarizes country performance but is arbitrary in its choice of dimensions and weights. ### Toward Less Arbitrary, Stated-Preference-Based Indices - Aim: include many more than three dimensions of well-being and weight them based on the values of people in the country. - Surveys can overcome data constraints by capturing dimensions in real time; HDI performance during the pandemic is unknown because the latest HDI numbers available at the time of writing are for 2019. - Single-question happiness measures miss aspects people consider when making choices; multiple survey questions reintroduce the weighting problem. ### Proposed Survey-Based Approach and Methodology - Weights recommended are relative marginal utilities—estimated from stated preferences in specially designed surveys. - Previous work (Benjamin, Heffetz, Kimball, and Szembrot, 2014) asked about 136 aspects of well-being intended to comprehensively reflect proposed aspects of well-being. - An actual index should comprise fewer aspects and avoid or adjust for conceptual overlaps. - The published illustration used 18 of the 136 aspects to show results. - The weight on the top aspect—freedom from corruption, injustice, and abuse of power—is normalized to 1.00. - Two types of survey questions to construct personal well-being indices: - Ratings: respondents move a slider from 0 to 100 to indicate their level of an aspect of well-being over the past year. - Trade-offs: respondents choose between two options in which levels of one or more aspects are slightly higher or lower than the reported rating; national policy choice questions are an illustration. - Construction logic: substitute reported levels from ratings for quantities and use estimated weights from trade-offs in place of prices, analogous to consumption measurement in national accounts. ### Methodological Advances and Remaining Challenges - Calibration questions address large differences in how people use rating scales (e.g., some use 0–100, others 50–100); calibration ratings can correct for some scale-use differences across individuals and potentially across time. - Heterogeneity in trade-offs: demographic characteristics (such as age and education) and overall well-being likely affect trade-offs; systematic tendencies can be used to create reasonable weights without estimating each individual’s weights separately. - Inequality adjustment: the index should account for inequality in personal well-being, not merely aggregate personal indices; societal aversion to well-being inequality requires employing a level of inequality aversion to transform personal indices before totaling to a national index. ### Key Findings from the Stated-Preference Results - Many top-weighted aspects are capabilities in Sen’s sense and help make a good life possible. - Several important aspects of well-being with weights at least 75 percent of the top aspect are missing from many existing measures such as the HDI. - Some widely collected aspects have relatively low weights compared with top aspects: - “People not feeling anxious” is weighted less than a quarter of the top aspect. - For HDI-relevant aspects: “people’s health” and “people’s financial security” have almost three-quarters the weight of the top aspect. - Knowledge, skills, and access to information; understanding the world; long lives; and average income have weights no higher than 54 percent of the top aspect. ### Policy Implications and Recommendations - Policymakers and development practitioners should carefully consider which metrics they monitor and how those metrics are weighted: “What gets measured, gets treasured” and “What we give weight to, we value.” - A theoretically grounded national well-being index should: - Include multiple components beyond GDP and HDI dimensions. - Use survey-based stated preferences to derive weights that reflect population values and marginal utilities. - Correct for scale-use differences via calibration questions. - Incorporate demographic heterogeneity in trade-offs to generate feasible weights. - Adjust for inequality in personal well-being with an explicit inequality aversion transformation before aggregation. *Source: Measuring the Essence of the Good Life, F&D Magazine, December 2021.* --- ## Content in this bundle - **قياس جوهر الحياة الكريمة** - [قياس جوهر الحياة الكريمة (Markdown version)](/-/media/files/publications/fandd/article/2021/december/ar/kimball.pdf.md){rel="alternate" type="text/markdown"} - [قياس جوهر الحياة الكريمة (PDF)](/-/media/files/publications/fandd/article/2021/december/ar/kimball.pdf){rel="external" type="application/pdf"} - **Medir la esencia de una buena vida ● Finanzas y Desarrollo ● Diciembre de 2021** - [Medir la esencia de una buena vida ● Finanzas y Desarrollo ● Diciembre de 2021 (Markdown version)](/-/media/files/publications/fandd/article/2021/december/es/kimball.pdf.md){rel="alternate" type="text/markdown"} - [Medir la esencia de una buena vida ● Finanzas y Desarrollo ● Diciembre de 2021 (PDF)](/-/media/files/publications/fandd/article/2021/december/es/kimball.pdf){rel="external" type="application/pdf"} - **Quantifier l’essence du bonheur** - [Quantifier l’essence du bonheur (Markdown version)](/-/media/files/publications/fandd/article/2021/december/fr/kimball.pdf.md){rel="alternate" type="text/markdown"} - [Quantifier l’essence du bonheur (PDF)](/-/media/files/publications/fandd/article/2021/december/fr/kimball.pdf){rel="external" type="application/pdf"} - **Measuring the Essence of the Good Life** - [Measuring the Essence of the Good Life (Markdown version)](/-/media/files/publications/fandd/article/2021/december/kimball.pdf.md){rel="alternate" type="text/markdown"} - [Measuring the Essence of the Good Life (PDF)](/-/media/files/publications/fandd/article/2021/december/kimball.pdf){rel="external" type="application/pdf"} - **ЧЕМ ИЗМЕРИТЬ хорошую жизнь** - [ЧЕМ ИЗМЕРИТЬ хорошую жизнь (Markdown version)](/-/media/files/publications/fandd/article/2021/december/ru/benjamin.pdf.md){rel="alternate" type="text/markdown"} - [ЧЕМ ИЗМЕРИТЬ хорошую жизнь (PDF)](/-/media/files/publications/fandd/article/2021/december/ru/benjamin.pdf){rel="external" type="application/pdf"} - **美好生活的衡量指标 ● 《金融与发展》● 2021年12月号** - [美好生活的衡量指标 ● 《金融与发展》● 2021年12月号 (Markdown version)](/-/media/files/publications/fandd/article/2021/december/zh/kimball.pdf.md){rel="alternate" type="text/markdown"} - [美好生活的衡量指标 ● 《金融与发展》● 2021年12月号 (PDF)](/-/media/files/publications/fandd/article/2021/december/zh/kimball.pdf){rel="external" type="application/pdf"} --- _Source: https://www.imf.org/en/publications/fandd/issues/2021/12/measuring-essence-good-life-benjamin-cooper-heffetz-kimball_