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Home / IB / Economics / SL / Revision Notes / 3. Macroeconomics / 3.1 Measuring Economic Activity / 3.1.5 Alternative Measures of Well-Being


3.1.5 Alternative Measures of Well-Being


Alternative Measures of Well-being

  • Due to the limitations of using national income statistics to measure well-being and compare standards of living, alternative measures of well-being have been developed. These include:
  1. The OECD Better Life Index
  2. The Happiness Index
  3. The Happy Planet Index
  • While GDP focusses on production, happiness focuses on health, relationships, the environment, education, satisfaction at work and living conditions
  • National incomes statistics tend to present more positive data while national happiness surveys yield more normative data
  • There is a link between income and happiness and the Easterlin Paradox is often used to explain it. The paradox states that:
    • Happiness and increases in income have a direct relationship up to a point
    • Beyond that point, the relationship is less evident

OECD Better Life Index

  • The Organisation for Economic and Cultural Development (OECD) has created an index which aims to measure the  well-being of citizens in its 38 member countries
  • The Better Life Index has 11 variables which it considers essential to the well-being
    • Countries are rated on each variable and then comparisons can be made

 

The Eleven Variables of the OECD Better Life Index


Variable


Explanation

Housing

  • This considers living conditions and the proportion of household expenditure spent on housing

Income

  • This considers the net income and net wealth of households

Jobs

  • This considers job security, the average earnings of the country and the unemployment rate

Community

  • This considers the social support networks that exist in the economy

Education

  • This considers the quality of the education with a focus on educational attainment and skills

Environment

  • This considers the environmental health with a focus on air pollution and water quality

Civic Engagement

  • This considers voter turnout and community involvement in creating legislation (laws)

Health

  • This considers the quality of health with a focus on life expectancy and data from self reported health surveys

Life satisfaction

  • This considers the overall satisfaction that people have with their lives

Safety

  • This considers how safe people feel walking alone at night, together with the murder rate in the country

Work-life balance

  • This considers the percentage of employees who work long hours, together with the amount of time given to leisure and personal care

Happy Planet Index

  • The Happy Planet Index (HPI) attempts to measure sustainable wellbeing
  • Countries are ranked by how efficiently they deliver long, happy lives using the earth's scarce resources in a sustainable way
  • The HPI scores countries with a lower ecological footprint higher countries with more environmental degradation
  • The HPI measures a country's progress using three variables
    • Wellbeing
    • Life expectancy
    • Ecological footprint
       
  • HPI space Score space equals space fraction numerator wellbeing space cross times space life space expectancy over denominator ecological space footprint end fraction

 

screen-shot-2022-12-22-at-8-22-50-am

screen-shot-2022-12-22-at-8-23-23-am

The top 3 and bottom 3 countries on the HPI in December 2022 (Source: Happy Planet Index)

The Happiness Index

  • The Happiness Index is a survey that measures happiness in 10 different areas of a persons life
  1. Psychological Well-Being
    Optimism, sense of purpose/accomplishment
  2. Health
    Energy levels and ability to perform everyday activities
  3. Time Balance
    Enjoyment, sense of leisure, frequency of feeling rushed
  4. Community
    Sense of belonging, volunteer levels, sense of safety in the community
  5. Social Support
    Satisfaction with friends and family, feeling loved, and degree of loneliness
  6. Education, Arts, and Culture
    Access to cultural and educational events and diversity
  7. Environment
    Access to nature, pollution levels, and level of conservation
  8. Governance
    Trust in government, sense of corruption, and competency of authorities
  9. Material Well-Being
    Financial security and meeting basic needs
  10. Work
    Compensation, autonomy, and productivity

(Source: The Happiness Index)



  • 1. Introduction To Economics
    • 1.1 What Is Economics?
      • 1.1.1 Economics as a Social Science
        • 1.1.2 The Problem of Choice
          • 1.1.3 The Production Possibilities Curve Model (PPC)
            • 1.1.4 Modelling the Economy
            • 1.2 How Do Economists Approach The World?
              • 1.2.1 Economic Methodology
                • 1.2.2 Economic Thought
              • 2. Microeconomics
                • 2.1 Demand
                  • 2.1.1 Demand, Price & Quantity
                    • 2.1.2 Non-Price Determinants of Demand
                    • 2.2 Supply
                      • 2.2.1 Supply, Price & Quantity
                        • 2.2.2 Non-Price Determinants of Supply
                        • 2.3 Competitive Market Equilibrium
                          • 2.3.1 Market Equilibrium & Disequilibrium
                            • 2.3.2 Functions of the Price Mechanism
                              • 2.3.3 Consumer & Producer Surplus
                              • 2.4 Price Elasticity of Demand (PED)
                                • 2.4.1 Definition, Calculation & Determinants of PED
                                  • 2.4.2 The Significance of PED
                                  • 2.5 Income Elasticity of Demand (YED)
                                    • 2.5.1 Definition, Calculation & Illustration of YED
                                    • 2.6 Price Elasticity of Supply (PES)
                                      • 2.6.1 Definition, Calculation & Determinants of PES
                                      • 2.7 Role of Government In Microeconomics
                                        • 2.7.1 Reasons For Government Intervention In Markets
                                          • 2.7.2 Government Intervention: Indirect Taxes & Subsidies
                                            • 2.7.3 Government Intervention: Price Controls, Direct Provision & Regulation
                                            • 2.8 Market Failure: Externalities & Common Pool (Access) Resources
                                              • 2.8.1 Market Failure
                                                • 2.8.2 Negative Externalities
                                                  • 2.8.3 Positive Externalities
                                                    • 2.8.4 Common Pool (Access) Resources
                                                      • 2.8.5 Government Intervention to Address the Market Failure
                                                        • 2.8.6 Other Interventions to Address the Market Failure
                                                        • 2.9 Market Failure: Public Goods
                                                          • 2.9.1 Public Goods
                                                        • 3. Macroeconomics
                                                          • 3.1 Measuring Economic Activity
                                                            • 3.1.1 National Income & The Circular Flow of Income
                                                              • 3.1.2 National Income Terminology & Calculations
                                                                • 3.1.3 The Business Cycle
                                                                  • 3.1.4 Appropriateness of Using GDP/GNI to Measure Well-being
                                                                    • 3.1.5 Alternative Measures of Well-Being
                                                                    • 3.2 Variations in Economic Activity (AD & AS)
                                                                      • 3.2.1 Aggregate Demand (AD)
                                                                        • 3.2.2 Short-Run Aggregate Supply (SRAS)
                                                                          • 3.2.3 Alternative Views of Aggregate Supply (AS)
                                                                            • 3.2.4 Shifts of the Long-Run Aggregate Supply (LRAS)
                                                                              • 3.2.5 Macroeconomic Equilibrium
                                                                              • 3.3 Macroeconomic Objectives
                                                                                • 3.3.1 An Introduction to Macroeconomic Objectives
                                                                                  • 3.3.2 Economic Growth
                                                                                    • 3.3.3 Low Unemployment
                                                                                      • 3.3.4 Low & Stable Rate of Inflation
                                                                                        • 3.3.5 Potential Conflicts Between Macroeconomic Objectives
                                                                                        • 3.4 Inequality & Poverty
                                                                                          • 3.4.1 Measuring Inequality & Poverty
                                                                                            • 3.4.2 Causes of Inequality & Poverty
                                                                                              • 3.4.3 Using Taxation to Reduce Inequality & Poverty
                                                                                                • 3.4.4 Other Policies to Reduce Inequality & Poverty
                                                                                                • 3.5 Demand Management: Monetary Policy
                                                                                                  • 3.5.1 An Overview of Monetary Policy
                                                                                                  • 3.6 Demand Management: Fiscal Policy
                                                                                                    • 3.6.1 An Overview of Fiscal Policy
                                                                                                    • 3.7 Supply-Side Policies
                                                                                                      • 3.7.1 An Overview of Supply-Side Policies
                                                                                                        • 3.7.2 The Effectiveness of Supply-Side Policies
                                                                                                      • 4. The Global Economy
                                                                                                        • 4.1 Benefits of International Trade
                                                                                                          • 4.1.1 The Advantages of Free Trade
                                                                                                          • 4.2 Types of Trade Protection
                                                                                                            • 4.2.1 Tariffs
                                                                                                              • 4.2.2 Quotas
                                                                                                                • 4.2.3 Export Subsidies
                                                                                                                  • 4.2.4 Administrative Barriers
                                                                                                                  • 4.3 Arguments For & Against Trade Protection
                                                                                                                    • 4.3.1 Arguments For & Against Trade Protection
                                                                                                                    • 4.4 Economic Integration
                                                                                                                      • 4.4.1 Understanding Economic Integration
                                                                                                                        • 4.4.2 Types of Trading Blocs
                                                                                                                          • 4.4.3 The World Trade Organisation (WTO)
                                                                                                                          • 4.5 Exchange Rates
                                                                                                                            • 4.5.1 Types of Exchange Rate Systems
                                                                                                                              • 4.5.2 Causes & Consequences of Exchange Rate Fluctuations
                                                                                                                              • 4.6 Balance of Payments
                                                                                                                                • 4.6.1 Components of the Balance of Payments
                                                                                                                                • 4.7 Sustainable Development
                                                                                                                                  • 4.7.1 The Sustainable Development Goals
                                                                                                                                  • 4.8 Measuring Economic Development
                                                                                                                                    • 4.8.1 Single Indicators of Development
                                                                                                                                      • 4.8.2 Composite Indicators of Development
                                                                                                                                        • 4.8.3 Evaluating the Different Approaches
                                                                                                                                        • 4.9 Barriers to Economic Growth & Development
                                                                                                                                          • 4.9.1 Poverty Traps
                                                                                                                                            • 4.9.2 Economic, Political & Social Barriers
                                                                                                                                            • 4.10 Economic Growth & Development Strategies
                                                                                                                                              • 4.10.1 Trade Strategies, Diversification & Social Enterprise
                                                                                                                                                • 4.10.2 Market-Based & Interventionist Policies
                                                                                                                                                  • 4.10.3 Merit Goods & Inward Foreign Direct Investment
                                                                                                                                                    • 4.10.4 Foreign Aid & Development Assistance
                                                                                                                                                      • 4.10.5 Institutional Change
                                                                                                                                                        • 4.10.6 Evaluating Market Orientated Approaches Versus Government Intervention
                                                                                                                                                          • 4.10.7 Progress Towards Sustainable Development Goals

                                                                                                                                                        Author: Steve



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