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Beyond GDP Measuring social progress in Europe. Koen Decancq – Erik Schokkaert Frankfurt June 2013. Introduction. Recent interest in going “ beyond GDP” This paper: how can ( should ) we measure social progress ? Answer on three levels :

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beyond gdp measuring social progress in europe

Beyond GDPMeasuringsocialprogress in Europe

Koen Decancq – Erik Schokkaert

Frankfurt June 2013

introduction
Introduction
  • Recent interest in going “beyond GDP”
  • This paper: howcan (should) we measuresocialprogress?
  • Answeronthreelevels:
  • Principlesfor a measure of socialprogress
  • A specificproposal: equivalent income.
  • Illustration: well-being and socialprogress in Europebetween 2008 and 2010.
outline
Outline
  • Principlesfor a measure of socialprogress.
  • A specificproposal: equivalent income.
  • Illustration: well-being and socialprogress in Europebetween 2008 and 2010.
principle 1 focus on individual well being
Principle 1: focus onindividualwell-being

The ultimatecriterion to evaluatesocialprogress is the well-being of individualsmaking up a society.

  • Quidfuturegenerations?
  • Sustainability as restriction to beimposedon present generations.
principle 2 focus on outcomes
Principle 2: focus onoutcomes

Information must becollectedon the different dimensions of lifethat are important for the well-being of individualcitizens.

  • Well-being is notfullydeterminedbyincomeormaterialconsumption.
  • Otherdimensions of life are essential (e.g. health, quality of socialinteractions and of the natural environment, safety, … ).
  • Development of lists of specificpolicy indicators is a different issue. We focus on “outputs” ratherthanon “inputs”.
principle 3 accounting for cumulative deprivation1
Principle 3: accounting forcumulativedeprivation

Accounting forcumulativedeprivationrequiresthatonefirstconstructsan index of well-being at the individual level and thenaggregates these well-being indices acrossindividuals.

  • Comparewith the HDI …
  • … and MPI
principle 4 respect for individual ideas about a good life
Principle 4: Respect forindividualideasabout a goodlife

The weightingschemeapplied to construct the measure of individualwell-beingshould respect the individualideasaboutwhat is a goodlife.

  • Thisdiscards the use of objective indicators, such as the HumanDevelopment Index, MPI, …
principle 5 avoidance of physical condition neglect
Principle 5: avoidance of physical-conditionneglect
  • Thenwhynotuse “happiness”?
  • Becauseit does not respect individualideasabout the goodlife!
    • “A personwho is ill-fed, undernourished, unsheltered and illcanstillbe high up in the scale of happinessordesire-fulfillmentifheorshe has learned to have ‘realistic’ desires and to takepleasure in smallmercies” (Sen, 1985).
  • Muchevidenceonadaptation in the empiricalliterature.

Happinessor (subjectivelifesatisfaction) maybeone of the important dimensions of life, butitshouldnotbeseen as anencompassingmeasure of individualwell-being.

principle 6 inequality aversion
Principle 6: inequalityaversion

Justicerequires accounting forinequality in individualwell-being.

outline1
Outline
  • Principlesfor a measure of socialprogress.
  • A specificproposal: equivalent income.
  • Illustration: well-being and socialprogress in Europebetween 2008 and 2010.
a specific proposal equivalent incomes
A specificproposal: Equivalent incomes
  • Fixreferencevaluesfor all the non-incomedimensions.
  • Equivalent income = the hypotheticalincomethat, ifcombinedwith the referencevalueon all non-incomedimensions, would place the individual in a situationthatshefindsequallygood as her actualsituation.
pros and cons of equivalent incomes
Pros (and cons) of equivalent incomes
  • Equivalent income = actualincome minus the welfare loss incurredon the non-incomedimensions (measured as willingness-to-pay).
  • Satisfies all ourbasicprinciples.
  • Measurable in money terms, canbeintroduced in anysocial welfare, inequalityorpovertymeasure.
pros and cons of equivalent incomes1
(Pros and) cons of equivalent incomes
  • LessintuitivethanhappinessorHDI – but these approaches do notsatisfyourbasicprinciples.
  • Choice of referencevalues: An ethicalquestion (notpsychological!)
  • More information is neededabout “preferences” (or WTP)
    • Statedpreferences: Contingent valuationsurveys (environment, health).
    • Revealedpreference: estimatefromobservedchoices and behaviour.
    • Deriveinformationaboutwillingness-to-payfromlifesatisfactionquestions.
outline2
Outline
  • Principlesfor a measure of socialprogress.
  • A specificproposal: equivalent income.
  • Illustration: well-being and socialprogress in Europebetween 2008 and 2010.
social progress in europe an illustration
SocialProgress in Europe: An illustration
  • EuropeanSocialSurvey, 2008 and 2010. (SILC does notcontain a questiononlifesatisfaction).
  • 18 countries: 15 EU-members, Switzerland, Norway, the RussianFederation. About 52,000 individualobservations.
  • Dimensions:
estimating preference differences
Estimatingpreferencedifferences
  • Assumption: preferences do notdifferbetween different countries.
  • Different groups have different preferences:
conclusion
Conclusion
  • We stronglybelieve in the basic principles. Debateshouldbeabouttheirethical foundation.
  • The equivalent income is aninteresting concept, but theremaybeother approaches.
  • Ourempiricalillustration is onlymeant to beanillustration, butinterestingfindings

Data need: introducequestionson “willingness-topay” orsatisfactionwithlifeon a regular basis in SILC.