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Angus Deaton UN Forum on Official Statistics February 27 th , 2012. Measuring the unmeasurable. Measuring well-being. Old friends: GDP and family Newer friends: International comparisons Global inequality New and less familiar friends Happiness Life evaluation E motions

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angus deaton un forum on official statistics february 27 th 2012
Angus Deaton

UN Forum on Official Statistics

February 27th, 2012

Measuring the unmeasurable

measuring well being
Measuring well-being
  • Old friends: GDP and family
  • Newer friends:
    • International comparisons
    • Global inequality
  • New and less familiar friends
    • Happiness
    • Life evaluation
    • Emotions
  • For lack of time, some friends uninvited today
    • Measuring hunger and poverty
national accounts
National accounts
  • Remain as central as ever
    • Pillars on which everything else depends
    • New frontiers exciting, but much remains to be done with the old
    • We must not neglect
  • Refocusing towards well-being
    • GNP and NNP better than GDP
    • Drilling down: not only aggregates but who received what
    • Rethinking imputations
      • Tension between comprehensibility and completeness
      • Examples: FISIM and “actual” consumption
  • Lots of work to be done here
    • Extensions to what we have now
    • As well as improving NAS in many countries where they are weak
international comparisons
International comparisons
  • For comparing living standards, purchasing power parity exchange rates are essential
    • Need price level in each country
    • Lower in poor countries, e.g. PPP 20 rupees per $ in India versus ER of 50 rupees per $
  • After 1993 round, ICP greatly streamlined and professionalized
    • 2005 best ever: 146 countries, consistent methods
    • 2011 in progress now: 186 countries, other improvements
  • Yet there are deep unresolved conceptual issues
    • Are PPPs measuring the un-measurable?
    • In some cases where the countries are very different
    • Uncertainty is not always well recognized
slide5
Congo, DR

Large upward revisions

for many low income

countries

Sao Tome & Principe

2.5

Cape Verde

Guinea

Lesotho

Burundi

Ghana

2

Togo

Cambodia

Revisions down for oil producers and high oil prices in 2005

Guinea Bissau

Bangladesh

China

Namibia

Ethiopia

Philippines

Tonga

India

Fiji

Ratio of new to old PPP for 2005

1.5

Vietnam

1

Bolivia

Tanzania

Angola

Nigeria

Gabon

Kuwait

.5

Yemen

Congo, R

Lebanon

6

7

8

9

10

11

Logarithm of per capita GDP in 2005 international $

why the revisions
Why the revisions?
  • Improvements in procedures
  • Terms of trade effect are differently handled in ICP and National Accounts
  • Local price indexes are very different from international price indexes
    • Tension between comparability and representativity limits the range of goods and services
  • Perhaps we are not capturing the rise in the price level that we would expect in fast growing countries, except at benchmarks
    • India and China might be growing less rapidly in real international $ than we typically think
    • Major implications for the degree of inequality in the world
slide7
Gini coefficient for per capita GDP, weighted by population

.6

WDI 2008, 2005 prices

PWT 6.2, 1993 prices

.55

WDI 2007, 1993 prices

.5

PWT 5.6, 1985 prices

.45

1960

1970

1980

1990

2000

2010

year

slide8
Gini coefficient for per capita GDP, weighted by population

.6

WDI 2008, 2005 prices

PWT 6.2, 1993 prices

.55

WDI 2007, 1993 prices

.5

PWT 5.6, 1985 prices

.45

1960

1970

1980

1990

2000

2010

year

2011 icp eagerly awaited
2011 ICP eagerly awaited
  • Perhaps not resolve these issues
  • Will certainly cast more light on them
    • Will it show a further upward jump in global inequality?
  • A major unresolved intellectual issue
    • How to update between rounds and while awaiting new rounds
    • Impossibility theorems lurk
    • How to best square the circle
    • And measure the unmeasurable!
happiness
Happiness
  • If we could measure happiness, would we want to?
  • YES
    • Happiness is the ultimate aim of all human activity, the proper object of public policy, and the only valid measure of how people and societies are doing
  • NO
    • The hopeless beggar, the precarious landless laborer, the dominated housewife, or the over-exhausted coolie may all take pleasures in small mercies, and manage to suppress intense suffering for the necessity of continuing survival, but it would be ethically deeply mistaken to attach a correspondingly small value to the loss of well-being because of this survival strategy
    • A person who is ill-fed, undernourished, unsheltered, and ill can still be high up in the scale of happiness or desire fulfillment if he or she has learned to have `realistic’ desires and to take pleasures in small mercies
can we measure it
Can we measure it?
  • If we take the YES answer, or believe that adaptation may not be very important, still the question of whether actual questions reveal anything about the sort of happiness we might be interested in
  • Life evaluation questions
    • Imagine a ladder with rungs marked 0 to 10 where 0 is the worst possible life for you and 10 is the best possible life for you, where are you right now?
  • Emotional or hedonic questions
    • Did you experience a lot of happiness yesterday
    • Did you experience a lot of stress yesterday
    • Or sadness, anger, worry, pain
  • All different, they have different correlates and it is not obvious which, if any, is the right one for policy
slide12
Denmark

8

Norway

Panama

Finland

Costa Rica

Mexico

7

Singapore

Brazil

Guatemala

Venezuela

Germany

Argentina

Colombia

6

Japan

India

Thailand

Bangladesh

Russia

Korea

Average ladder score

5

Mozambique

Hong Kong

Hungary

Liberia

Lebanon

China

Pakistan

Angola

4

Kenya

Georgia

Burundi

Benin

Congo

Afghanistan

Sierra Leone

3

Togo

800

3,200

12,800

51,200

GDP per capita, 2005 international constant $

slide13
100

80

Percentage of population experiencing a lot of happiness

60

Denmark

Algeria

Italy

Iraq

Burundi

Estonia

Burkina Faso

Russia

Ukraine

Congo

Georgia

Lithuania

40

Madagascar

Belarus

Togo

20

800

3,200

12,800

51,200

GDP per capita, 2005 international constant $

emotions or life evaluation
Emotions or life evaluation?
  • Life evaluation perhaps closer to what we think of as well-being
    • Rather than fleeting emotional states
    • Especially states that are not close to deprivation
    • Yet stress and worry are important to people too
    • Arguably should be taken into account in policy
  • Very attractive to have people’s own assessments rather than those imputed to them by statistical or economic “experts”
    • Can people answer the question in a useful way?
useful findings
Useful findings
  • Strong negative effects of unemployment
  • Health is very important for well-being
  • So is marital status, friends, family
  • Money and education important for life evaluation
  • Money satiates for emotions, but not for life evaluation
    • Education has no effect on emotional life
  • Problems too!
slide16
Lehman collapse

7.5

Election day

Inauguration

7

???

6.5

6

01 Jan 08

01 Jan 09

01 Jan 10

01 Jan 11

Interview Date

slide17
7

Form 2

6.8

Transition question added

6.6

Obama approval retained

Satisfaction with the way US

is going removed

6.4

Inauguration

6.2

Political questions

dropped from F2

Form 1

6

01 Jan 08

01 Jan 09

01 Jan 10

01 Jan 11

Interview Date

very large context effects
Very large context effects
  • Ask people about whether they think America is going in the right direction
    • If they say “no”
    • Huge negative effect on their life evaluation report
    • No such effect if they are not asked the question, even if they think America is doing badly
  • People reinterpret the question as being about the US, not about them
    • Their life evaluation is not very firmly anchored, or not sure what the question means
  • We can add a buffer question that reduces but does not eliminate the context effect
    • These things need to be better understood before these questions can be endorsed and safely included in official surveys
  • NB Problem is tracking over time, not comparing people
finally
Finally
  • It is an exciting time to be an official statistician or and economist interested in measurement!
  • Thank you
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