Interview with Sir Richard Layard, London School of Economics
What is the well-being economy?
The concept of a well-being economy goes back to the 18th-century Enlightenment: what ultimately matters is the well-being of the population, and the aim of government should be to maximise that well-being. Indeed, the primary reason we have government is to improve our well-being. Moreover, we should be interested not only in the average well-being but in the absence of low well-being, particularly in the absence of misery at the bottom end of the distribution.
We measure life satisfaction with a simple question: overall, how satisfied are you with your life nowadays? Naught means not at all, 10 means completely. This gives sensible answers that can have big effects. For example, whether you’ll be alive in 10 years is predicted as well by your answers as by a complete medical diagnosis. Similarly, voting patterns are better explained than by a whole array of economic data. It’s a very powerful measurement.
Britain was the first to measure population well-being in 2011. The Organisation for Economic Co-operation and Development now uses it, and the United Nations has the Expert Group on Well-Being Measurement. There is also the Gallup World Poll and its annual World Happiness Report.
Measuring it is number one, but number two is making it the operational goal. Countries have moved in that direction to varying degrees. The Wellbeing Economy Governments alliance – WEGo – including Canada, New Zealand, Iceland, Scotland, Wales and Finland, has pledged to have well-being as the overarching goal of government.
In Britain government departments that use public money must use the Green Book to show the evidence-based, quantitative benefits and costs – whether monetisable or non-monetisable – of expenditure. Much of government policy is aimed at non-monetary benefits. The Green Book explicitly includes a ‘well-being valuation’ that has been the common metric for the last five years, known as a well-being year, or WELLBY. So the implied overall objective of public spending is population well-being. As a declarative statement that is extremely important.
What benefits has it brought?
Britain’s National Institute for Health and Care Excellence estimates treatment benefits in quality-adjusted life years, and recommends treatments that cost less than £30,000 per QALY as cost-effective. Some evidence-based psychological therapies for mental health enormously enhance individual well-being and enable people to come off welfare benefits. The savings through more people working and paying more taxes are enough to pay for the programmes. Since 2008 eight million people have received treatment: half have recovered from acute anxiety disorders or depression. A version has been extended to school children. These treatments have a profound effect on population well-being in a very cost-effective way.
What are the major tasks and challenges to applying a well-being framework more broadly?
We need good information on how all government policies affect population well-being. That requires proper experimental evidence with randomised control trials or well-analysed naturalistic data. I urge any government serious about well-being to set up a major research programme in conjunction with government departments to evaluate their policies.
Our book Value for Money: The New Cost-Benefit Analysis Targeting Well-being evaluates a range of policies for which we managed to find evidence. Some skills policies, such as apprenticeships, pay for themselves. Some have very high benefit-cost ratios; some have low benefit-cost ratios. We should see a radical reappraisal of public expenditure based on this kind of evidence – but politicians have got to will it. Policy should be made in a rational way, using evidence of what really makes a difference to people’s lives per pound or dollar of expenditure.
Has the digital transformation of the last ten years or so had an impact on well-being?
The digital revolution can enormously help with providing an information base. But, especially for young people, there’s serious harm, and not just through bullying, sextortion, suicide encouragement and so on. There’s so much evidence that the inevitable social comparisons are very harmful to human happiness. To have a whole technology that can take over five hours of a person’s day to do almost little else is a formula for declining happiness. Since 2010 happiness has been declining in the United States, and since 2015 youth happiness has been declining in the rest of the English-speaking world and to a lesser extent in the rest of western Europe. The digital world very much has its pluses and minuses.
What political choices should now be made?
A group of us is launching a campaign on youth well-being with a range of demands. One is the regulation of social media. Two is shifting the ethos of secondary schools towards more life preparation and self-management. This involves measuring well-being in schools nationally, already done in the Netherlands and Wales; this balances the huge weight on exam results for a more life-oriented secondary school education.
Third, on mental health – psychological therapies for behavioural problems have been successful; in Britain these problems are the single best predictor of whether somebody will be economically inactive in early adult life. The Incredible Years programme for training parents of badly behaved primary school children has been shown to reduce later antisocial behaviour by more than 50%.
Fourth, we want a psychological therapy programme for treating addiction; this would pay for itself in two years. Fifth, we want the restoration of ‘third spaces’, where young people can interact with trusted adults. We’ve got measurable effects of these on crime, educational achievement and mental health. And sixth is the apprenticeship system for people who don’t go to university.
Most of these would pay for themselves in savings.
It’s important for politicians to know that people’s well-being will affect their re-election more than the state of the economy, because it’s the most important thing that people want. Economic growth is a means to the end, not the end. Any sensible politician should stand for producing the happiest and most fulfilled lives possible for people.
