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Beyond GDP: Measuring social progress in Europe. Koen Decancq – Erik Schokkaert Stirling June 2014. Introduction. “Beyond GDP” Quest for a measure of social progress Discussion on three levels: Principles for a measure of social progress

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beyond gdp measuring social progress in europe

Beyond GDP:Measuringsocialprogress in Europe

Koen Decancq – Erik Schokkaert

Stirling June 2014

introduction
Introduction
  • “Beyond GDP”
  • Questfor a measure of socialprogress
  • Discussion on three levels:
    • Principlesfor a measure of socialprogress
    • A specificproposal: equivalent income.
    • Illustration: well-being and socialprogress in Europe between 2008 and 2010.
introduction1
Introduction
  • “Beyond GDP”
  • Questfor a measure of socialprogress
  • Discussion on three levels:
    • Principlesfor a measure of socialprogress
    • A specificproposal: equivalent income.
    • Illustration: well-being and socialprogress in Europe between 2008 and 2010.
principle 1 focus on individual well being
Principle 1: Focus on individual well-being

The ultimate criterion to evaluatesocialprogress is the well-being of individuals making up the society.

principle 2 focus on outcomes
Principle 2: Focus on outcomes

The well-being of individualsdepends on the outcomes in the different dimensions of life.

  • Well-being is notfullydeterminedbyincome.
  • Otherdimensions of life are essential (e.g., health, quality of socialinteractions and of the natural environment, safety, … ).
principle 3 account for cumulative deprivation2
Principle 3: Account forcumulativedeprivation

Accounting forcumulativedeprivationrequiresto construct first anindex of well-being at the individual level and thenaggregatethese well-being indices acrossindividuals.

  • Comparewithdashboards of development
  • … and the Human Development Index (HDI)
principle 4 respect for individual ideas about a good life
Principle 4: Respect forindividualideasabout a goodlife

The measure of individual well-beingshould respect the individualideasaboutwhat is a good life.

  • Thisdiscards the use of objective indicators, such as the Human Development Index (HDI)
  • And also the MultidimensionalPoverty Index, …
life satisfaction measures do not respect preferences1
Life satisfaction measures do not respect preferences
  • IfAnn and Bob have the samepreferences, respect forpreferences means thatAnn shouldbeseen as better off thanBob.
  • Now look at whatcould happen, when we askto Ann and Bob howsatisfiedtheywouldbe in bothsituations
  • Bob is happierthan Ann
  • Thenwhynotuse “happiness”?

5 for Ann

9 for Bob

3 for Ann

7 for Bob

principle 5 inequality aversion
Principle 5: inequalityaversion

Justicerequires accounting forinequality in individual well-being.

  • Social welfare = M (1 - I )

Average

Inequality

outline
Outline
  • Principlesfor a measure of socialprogress.
  • A specificproposal: equivalent income.
  • Illustration: well-being and socialprogress in Europebetween 2008 and 2010.
a specific proposal equivalent income
A specificproposal: Equivalent income
  • Fix referencevaluesfor 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
  • Pros:
    • Satisfies all our basic principles.
    • Measurable in money terms, canbeintroduced in anysocial welfare, inequality or povertymeasure.
  • Cons:
    • Lessintuitivethanhappiness or HDI – but these approaches do notsatisfyour basic principles.
    • Choice of referencevalues: anethical question, hence room fordebate.
    • More information is neededabout “preferences”.
outline1
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
  • European Social Survey, 2008 and 2010.
  • 18 countries: 15 EU-members, Switzerland, Norway, the Russian Federation. About 52,000 individualobservations.
  • Dimensions:
estimating preference differences
Estimatingpreferencedifferences
  • Assumption: preferenceheterogeneitybetweensocio-demographicgroups, notbetweencountries.

c

conclusion
Conclusion
  • We stronglybelieve in the basic principles. Debateshouldbeabouttheirethical foundation.
  • The equivalent income is aninteresting concept, but theremaybeother approaches.
  • Ourempiricalillustration is onlymeant to beanillustration, but interesting (first) findings.
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