Short term choices and long term well-being

When economists argue against Government intervention on the grounds that markets left to their own devices eventually find a benign equilibrium, a frequent riposte is to quote John Maynard Keynes: ‘The long run is a misleading guide to current affairs. In the long run we are all dead’.  Might this insight shape the debate about new measures of well-being?

Yesterday I chaired a conference which had well-being as one of its themes. The man from the Office of National Statistics described the preparation being done for the inclusion of well-being questions in the 2011 Integrated Household Survey. There was also a lot of praise for NEF’s report ‘Measuring our progress: the power of well-being’ which was published earlier this week.

NEF propose what they call a dynamic model of well-being which links external conditions (eg income, employment) and personal resources (eg self-esteem, resilience) to good functioning (eg having autonomy, being connected to others) and good feelings (eg happiness, satisfaction).

NEF’s work is powerful, as might be expected given the think tank has been looking at this issue for a decade. There is an interesting discussion in the paper about the relationship between objective ‘drivers’ and subjective ‘outcomes’ in terms of feelings of well-being. NEF says that a key tool emerging from the information to be compiled by ONS should be what they call drivers of well-being (DoW), those factors which are shown to be most relevant to well-being and therefore should be prioritised in policy making and resource allocation.

This can all get quite technical (I suspect all the issues I cover in this post have been well rehearsed in the burgeoning well-being literature). Indeed, there is a danger that a debate about what really matters to most people becomes one that only a few people can understand. So I am loath to introduce a new dimension of complexity, but this is where Keynes comes in.

The relationship between objective circumstance and well-being is itself dynamic. To give a trivial example, if I had been asked last week how I felt about life just before an expensive, intrusive and painful dental procedure I might have been even more gloomy than normal. But this is just a temporary phenomenon and very soon – in fact already - I actually feel better about myself for having sorted out my problem.

The shadow cast by today’s experiences varies greatly in length. Some bad experiences diminish in significance and can even make us stronger; for example curable physical illness, well managed bereavement, business failure. Others are much more likely to have long term detriment; for example, childhood neglect or acute mental illness.

Which brings me back to Keynes. Being always inclined to take a charitable view of politicians’ motives (something which has made me a target for some rather juicy abuse in the past), I don’t think the Coalition Government is uncaring about those being impacted by its crash austerity programme. However, I also think – and here there is an echo of Mrs Thatcher – the Coalition believes it is worth paying a high price in the short to medium term to achieve a fundamental restructuring of the state and of societal expectations.

As we have seen this week, part of that price is very high youth unemployment. But we also know that if young people experience a lengthy period of unemployment it appears to have lifetime effects on their ability to gain and hold on to a job; they may get work when the economy picks up but they are much more likely to lose it when the economic cycle turns again.

Weighting objective factors by their long term impact on well-being could help to encourage more responsible policy making.  It should influence the case made not just by Government but by the Opposition.

Coalition ministers accuse those who argue against severe austerity of being short-termist and irresponsible, but in opening up a debate about well-being (for which he is to be applauded) David Cameron may be providing the basis for a counter argument. It is certainly true that sooner or later the economy will pick up, austerity will end and people’s life circumstances will improve. In this sense the Coalition strategy is bound to succeed in the end. But not only is Keynes right that in the long run we are all dead, in the long run many will be scarred by - and all of us paying the price for - what has happened in the short term.