“There are no standardized measures for basic concepts”
Martine Durand, Director of Statistics and Chief Statistician at the OECD, on the challenge of defining, measuring, and ensuring sustainable well-being.
In 2011, the OECD developed the Better Life Initiative, which measures and compares quality of life at the national level. What are the goals of the initiative?
The Better Life initiative has three main goals:
The first is to collate a wide range of internationally comparable indicators of well-being that can inform policy in a number of ways. This includes assessing how countries perform in the many areas that shape people’s lives, and how this performance evolves over time. These indicators can also help evaluate the impact of policies on specific aspects of well-being.
Second, we aim to develop better ways to measure current and future well-being, notably by taking stock of available data, evaluating its quality, and recommending the actions needed to make lasting improvements.
Finally, we want to initiate a dialog about well-being with citizens to measure public perceptions and understand what matters most in people’s lives.
Apart from measuring well-being today, the OECD has also identified four factors that can shape well-being in the future. What are these factors?
Our framework looks at future well-being by considering re-sources that persist over time, and that can be thought of as “capital” – i.e. resources that are capable of storing value, and that can generate a stream of benefits for people and society over time. We have identified four types of capital:
Economic capital refers to both produced capital, e.g. man-made tangible assets, and financial capital, that is money in the bank, or shares in a company. Natural capital refers to aspects of the natural environment. It can include specific assets, like energy resources, as well as broader ecosystems – i.e. the joint functioning of, or interactions between, different environmental assets. Human capital can be defined in several different ways, but typically refers to aspects such as people’s knowledge, skills, competencies, and health. Social capital refers to the social norms, trust, and values that foster cooperation within or among different groups in society.
How would you evaluate their current state?
Each type of capital includes many different assets and re-sources. Some of these are well measured, while others lack robust internationally comparable measures. For example, having clean air to breathe is an important aspect of our natural environment. While the average level of air pollution has been falling in many OECD countries in the last ten years, this is not universally true. There are big differences in exposure to pollution, depending on where people live.
For many people living in large cities around the world, air quality is a critical issue for health and well-being, and will continue to be in the future. We can also assess trends in levels of education, for example, which gives us some insight into the development of human capital. Over the last 15 years, we have seen a steady increase in the educational levels of working-age people across most OECD countries. But countries are developing the skills and knowledge of their populations at different rates.
What are the main challenges of monitoring and measuring the types of capital that determine well-being over time?
There are many challenges. One of them is getting definitions right from the start. Social capital, for instance, is hard to define because its scope is less clear than those of other types of capital. For this reason, it has been conceptualized in many different ways. Our solution to this has been to find the common ground among the various approaches. For example, we are very interested in aspects of trust, both in other people and in institutions, as a form of “social capital” that helps to foster well-being through better and more efficient cooperation between different people in society.
OECD Better Life Index
Another typical challenge is finding accurate indicators, even when the concept is well defined. For instance, economic capital is the best-defined of all capitals, as it relies on a long-standing tradition of economic thought, which is also reflected in well-established measurement frameworks such as the System of National Accounts. However, even for economic capital, we lack ways of measuring relatively basic concepts such as household wealth beyond simply financial wealth – which does not include home or land ownership, for example.
You’ve already pointed out the challenge of defining resources like social capital. With regard to that, how would you value and measure asset changes?
Most indicators of social capital are based on surveys about trust in others or toward institutions, social norms, people’s attitudes toward different groups, or beliefs about the helpfulness of others. Assessing changes to these assets over time boils down to looking at how self-reporting of trust and other norms varies from one period to another. This helps for instance in understanding whether events, such as the Great Recession, led to a significant depletion of social capital. However, it is harder to understand what type of investment would be needed to restore trust to pre-crisis levels. We have just launched a project on trust at the OECD to try and address this issue.
What role do companies like Robert Bosch GmbH play in increasing economic, environmental, human and social capital?
Companies can play a vital role in ensuring the sustainability of well-being over time. They do this through careful environmental management, for instance, as well as by reducing emissions and adopting sustainable production processes.
All of this is critical for preserving stocks of natural capital over time. By creating wealth and investing in new technology and innovation, companies help develop the economic capital that future generations will rely on. As major employers, companies also have a role in developing human capital and social capital, both formally through education and training, and by providing for the health and well-being of their staff, and fostering strong local communities.