Measuring Happiness and Making Policy Professor Paul Dolan Tanaka Business School Imperial College London

Income versus happiness A A B B C C D D Commute > 1hr/day Over 70 Has children Has degree

How do we decide? Is the measure conceptually appropriate? Is the measure conceptually appropriate? Is the measure normatively relevant? Is the measure normatively relevant? Is the measure empirically useful? Is the measure empirically useful?

Is the measure conceptually appropriate? Distinguish between good life and good for the individual Distinguish between good life and good for the individual Prudential value is suitable for most policy applications Prudential value is suitable for most policy applications –Both measures mostly contain prudential concerns The measure should be a complete account of well-being The measure should be a complete account of well-being –There is more to life than income (and happiness?) The measure should measure what it purports to The measure should measure what it purports to –Allows us to make intra and inter-personal comparisons There is no gold standard but there is ‘validity’ There is no gold standard but there is ‘validity’ –Both measures converge with and predicts health etc.

Is the measure normatively relevant? The measure must be acceptable to policy makers and to the general public, at least in time The measure must be acceptable to policy makers and to the general public, at least in time Income is attractive because the individual judges what will be in his best interests Income is attractive because the individual judges what will be in his best interests But may be questioned if it does not lead to LS But may be questioned if it does not lead to LS And if preferences are misguided, myopic etc. And if preferences are misguided, myopic etc. Support for LS may depend on language used Support for LS may depend on language used LS may be better than happiness, and misery better still? LS may be better than happiness, and misery better still?

Is the measure empirically useful? Is it intra- and interpersonally comparable? Is it intra- and interpersonally comparable? –Both shaped by expectations, shaped by circumstances  Brain imaging and physiological measures may help LS Is it cardinal? Is it cardinal? –LS performs better than income here Is measurement error low? Is measurement error low? –Both measures reasonably stable for most sub-groups Is it sensitive? Is it sensitive? –Income changes may not be meaningful but global LS may not pick up small effects of policy Is it practical? Is it practical? –Both relatively easy to collect

Conclusion Using different measures may result in different policies Using different measures may result in different policies No single measure is ever likely to satisfy all criteria No single measure is ever likely to satisfy all criteria But well-being measures are used in policy as if they do But well-being measures are used in policy as if they do Choice really depends on which criteria matter most Choice really depends on which criteria matter most –Some criteria may be more important in some contexts –And there may be various trade-offs between the criteria We need more conceptual clarity and empirical evidence We need more conceptual clarity and empirical evidence But subjective evaluations may well be the way forward But subjective evaluations may well be the way forward