1. objective “Imperial College London Inaugural Lectures should be viewed as a celebration in your career” I want to explain what I do –and raise some important issues for policy –in a way that is accessible to everyone here

2. background “the public gets what the public wants but I want nothing this society’s got” in this lecture, I will show –that our wants are sometimes a bit odd –how to value what society’s got using ‘happiness’

3. main collaborators Tess Peasgood, Economist, Sheffield Mat White, Psychologist, Plymouth Rob Metcalfe, Economist, Imperial Danny Kahneman, Psychologist, Princeton Richard Layard, Economist, LSE Nick Powdthavee, Economist, Institute of Education Jo Wolff, Philosopher, UCL

4. economics it’s all about scarcity and choice –we cannot do everything we would like to because our resources are scarce –so choices have to be made about how to allocate those resources

5. markets markets allocate resources according to our willingness to pay (WTP) –the more you are willing to pay for something, the more valuable it is to you WTP then represents a strength of preference –used as a measure of how things affect our well-being the public gets what the public wants –and in proportion to how much they want it

6. non-market goods how should we value goods and services that are not traded in the market –e.g. changes in the environment or your health? this question has challenged me most –along with how to take fairness into account but I will ignore this in the rest of what follows

7. non-market valuation most economists (and the UK Treasury) recommend inferring or eliciting WTP as if there were a market revealed preferences –e.g. how much more are you WTP for a house in a tree-lined street? stated preferences –e.g. what is your WTP for a tree-lined street?

8. health valuation health economists (and NICE) use quality-adjusted life years, with Q on a 0(dead) to 1(full health) scale trade-offs over health instead of wealth –imagine being unable to walk for the rest of your life –how many years in full health is equal to this? if you say 10/30, then being unable to walk = 0.33 so, it’s still based on what we want i.e. preferences

9. problems with preferences there are four main problems with using preferences to value non-market goods –forecasting –focussing –forgetting –feelings

10. forecasting we overestimate the duration of reactions and fail to predict adaptation –e.g. we imagine that paraplegia would start off bad and stay bad but there is evidence of adaptation to most of the good and bad things that life throws at us

11. focussing thinking about it means attending to it –e.g. we imagine being a ‘full-time’ paraplegic when we will be a ‘part-time’ paraplegic think of the pleasure from driving your car

12. forgetting ‘experts’ cannot avoid the focusing illusion –e.g. people with paraplegia imagine having been happier in the past they think about thinking about having been able to walk

13. feelings how much do you fear paraplegia? –how many years of life would you be willing to give up in order to avoid it? how much do you care about birds? –how much are you WTP for it? WTP to save 2000 migrating birds = $80 WTP to save 200000 migrating birds = $88

14. miswanting all of this suggests that the public gets what the public miswants –economists can no longer assume that we want (most) what we subsequently enjoy (best) you can miswant all you want with your money but please don’t do it with my (tax) money

15. wanting and enjoying we don’t have to think of well-being as wants –until 100 years ago well-being was ‘enjoyment’ Bentham’s pleasure and pain the more you are able to enjoy something, the more valuable it is to you typically interpreted by applied economists as overall ‘happiness’ or ‘life satisfaction’

16. some key findings it’s a happy life –if you are young or old –if you are healthy, wealthy (compared to others) and a little bit wise –if you are in work (any unemployment is bad) –if you are married or cohabiting and have lots of social contact having children has no effect

17. our research to value non-market goods, such the environment and health, using both ‘wanting’ and ‘enjoying’

18. valuing the urban environment Landore, South WalesHafod, South Wales 675 homes950 homes no regeneration regeneration e.g. street lighting, road resurfacing, house repairs

19. urban environment results Landore WTP = £750 (£250/year) difference in life sat across the areas = 7% –amount of income required to have the same effect on life satisfaction = £6000 big difference – but still not cost-beneficial –costs £17,000 per household

20. problems with life satisfaction do the ratings overcome the focusing illusion? –they remind the rich they are rich etc. over what time frame are the ratings? –difficult to calculate QALYs / compensations what might we do instead?

21. the day reconstruction method developed by Professor Kahneman and colleagues think of yesterday as a continuous series of scenes or episodes in a film and for each episode: –how long did it last? –what were you doing? –who were you with? –how did you feel?

22. selected DRM results who we are –low correlation with income –low correlation with being married and the things we do –sex is good –commuting is bad –time with the boss is bad time spent with children is pretty bad

23. beyond pleasure in the DRM we may value our lives and our activities for reasons beyond how pleasurable they are –we may find some things “rewarding” because they are meaningful or help others we have added these to an on-line DRM study of 600 Germans time with the boss is not so bad –and, at last, time with our kids is not so bad

24. valuing states of health the SF-36 health measure contains different levels of e.g. pain and mental health –can be used in valuing the Q in the QALY it has been used in various studies: –600 members of the UK general public asked to imagine being in different health states –10,000 in the British Household Panel Survey rate life satisfaction and describe health –plus our 600 DRM Germans

25. health state results ranking of impact on 0-1 scale is as follows: 1.Pain P 2.Mental health LS 3.Mental health P 4.Mental health DRM 5.Pain LS 6.Pain DRM different QALYs and health priorities based on whether preferences or experiences used –e.g. benefits of ‘talking therapies’ on the NHS

26. where does this leave us? crying out for more research, stupid normative debate (and public consultation) about how non-market goods and changes in well-being should be valued elicit valuations using different methods (and methodologies) to better explain the differences and to inform policy decisions

27. where does this leave me? final slide of my first inaugural six years ago: –to provide useful information for academics and policy makers –by continuing to collaborate with economists, psychologists, sociologists, ethicists, clinicians and policy-makers “some people might say my life is in a rut, but I’m quite happy living with what I got [to do]”