It is quite fitting that in six months’ time, Wellington will be playing host to one of the world’s premier conferences on economic wellbeing.
News that New Zealand will be the first country to make wellbeing a core part of future budgets quickly caught the eyes of many of the world’s experts in this area.
One of those experts is Chairman of Wellbeing and Public Policy and Professor at Victoria University’s School of Government, Arthur Grimes, who has been studying wellbeing economics for years.
And it’s a good time to be researching this field.
“We want to measure the success of our economy better – we aren’t satisfied with just measuring GDP growth,” said Finance Minister Grant Robertson late last year.
He was announcing the Government would assess bids for budget spending against a wellbeing framework in its 2019 Budget and will amend the Public Finance Act to make this a priority.
As Treasury seeks feedback and submissions on the framework, it’s likely Grimes will play a part in helping to shape what the policy looks like in the future through that process.
It all starts with one question – what is economic wellbeing?
“It is essentially designing economic policies to make people’s lives better – not necessarily to give them higher incomes, but that may be part of it,” Grimes says.
Although an official economic wellbeing measure has never been implemented by a Government, Grimes says at a local government level it has been put into practice in the past.
In the UK, for example, accounting for wellbeing is within local government legislation.
It is the job of the councils to account for not just economic wellbeing but social, personal and environmental wellbeing as well.
That used to be the case for New Zealand, until it was removed by the previous Government.
“I think [the Government] thought that local government should stick to its knitting – footpaths and water and things like that – rather than thinking they should have a broader role in improving people’s wellbeing,” Grimes says.
The social, personal, environmental and economic wellbeing indicators have all been flagged by Robertson as areas of interest for his wellbeing measures.
This seems to be the basis for Treasury’s approach so far.
It has drawn on the OECD’s ‘How’s Life?’ analysis to create a ‘Living Standards Framework’ based on four capitals - natural, social, human and financial/physical.
Grimes says this approach is “fantastic” from a sustainability angle but wants to see how that all marries up with policies that “make people feel better about themselves.”
“We know from the literature, especially from the UK, that money spent on mental health activities probably has the biggest bang for its buck in terms of subjective wellbeing, making people’s lives better.
“That’s the type of approach I would really like to see cemented in here.”
This is an area that has been researched a lot by the London School of Economics.
In these instances, the research starts directly from subjective wellbeing itself – “measuring how people feel about themselves and work to see what it is that has the biggest impact on people’s subjective wellbeing,” Grimes says
He says the policy has the potential to amount to quite a lot, but also has the potential to be window dressing.
“That’s going to be the really hard test of both the Treasury’s work and the Government’s, to see how they really tied it down and say ‘these policies here that we’re implementing, we think will make people’s lives better through this mechanism, to this degree.”