PLAYING THE WELL-BEING GAME

The OECD has recently come out with this survey of well-being indicators in OECD countries.

We all know that GDP/head isn’t everything.  But it’s amusing to see governments in countries that are economic losers wanting to focus on other elements of well-being. Sarkozy in France with his happiness trope, aided and abetted by Joseph Stiglitz, is a case in point. Unfortunately for people like Sarkozy, the happiness literature suggests that happiness seems to correlate quite closely with income and wealth!

I’m somewhat underwhelmed by the OECD’s metrics.   The criteria touch on the importance of individual liberty, but only somewhat tangentially.   Consultation is regarded as more important than consent or compensation in matters of taxation and regulatory takings. Induced state dependency is apparently OK if the dependents feel happy and secure in their dependency. (This notion comes through again in the ‘Work-life balance’ section where too much work is more likely to be a bad thing than too much leisure in terms of OECD norms.)

No distinction seems to be drawn between satisfaction through achievement and satisfaction from stupor-inducing drugs, dissolute living, or armchair-TV sloth. There is a ‘feel good’ aspect to the OECD’s approach.

Australia comes out on top on governance – because it has such a high voter turnout.  Is this convincing when voting is compulsory in Australia?

I doubt that public policy making can be improved by the new measures. The imperative for political parties is to get re-elected. Providing them with a richer set of measures than GDP is not going to alter this imperative. They are still going to be in the game of using other people’s money to buy votes from their target constituencies.

I would prefer to use market measures rather than surveys to assess the relative attractiveness of countries. For example, indicators of actual and suppressed demand for residency, country by country, should provide useful information. The United States is the No 1 country in the world for immigrants.  The net migration flow is from New Zealand to Australia. Not everyone finds the United States or Australia attractive but migration patterns tell us something about the preferences of people at large. 

Others have poked holes in the OECD’s analysis. A comment on the Marginal Revolution blog reads as follows:

I did a Principal Component Analysis on the OECD’s model. Maybe unsurprisingly in the SWPL-based weights in this model, the United States only comes out on top if I prefer:

–   high income
–   no community
–   bad education
–   bad environment
–   high governance
–   poor health
–   no life satisfaction
–   poor safety
–   poor work life balance

However, after having lived in and worked for many years in four other OECD countries, on three different continents, my experience has been exactly the opposite.  So I decided to come and live in the fifth country, the United States.

The amount of hidden bias in these international organisations like OECD, WHO and UN is truly astounding.

Australian economist (and author of several Business Roundtable studies) Winton Bates has also blogged on the OECD’s well-being indicators here.

I am not sure the OECD’s better life index is meant to be fun. But I have had some fun playing with it. The index is interactive. The fun comes from giving different weight to 11 different criteria (or topics as they are described by the OECD) and then observing how this affects rankings of well-being of OECD countries.

Bates plays this game and concludes that New Zealand comes out quite well on all rankings, although consistently after Australia.  Then he concludes:

Having had some fun, the more serious question that comes to mind is whether a focus on the OECD’s well-being indicators (and other similar constructions) is likely to distract political attention away from much-needed economic reforms to improve the economic strength of some economies. For example, if well-being indicators suggest that people in some lovely country (New Zealand comes to mind) tend to enjoy living standards substantially higher than other countries with comparable per capita GDP levels, there may be a tendency for the government of that country to become complacent about establishing conditions more favourable to further improvement of living standards.

How true! As one expatriate wrote to me recently about New Zealand:

Things are just too easy, too comfortable; we are too isolated and too willing to leave important things to the government, even when their lack of competence is well understood.

It seems to be a combination of laziness and an unpreparedness to think things through (even when they’re not working). Being first class is not the Kiwi way (we prefer to muddle through and complain).

We’re not on our own. The big government disaster that is California is losing businesses and people to more dynamic, low-tax states such as Texas. But hey!, life’s a beach in California and dynamic industries like those in Silicon Valley survive against the odds.  A crisis may not happen soon. As Adam Smith famously put it, “There’s a lot of ruin in a nation.”

The Treasury has been playing a similar game.  I will blog on that soon.