By Arthur Grimes*
(This article is part of Interest.co.nz's Election Series).
Current state of play
The Labour-led government has made a feature of its wellbeing approach to public policy, grounded in the Treasury's Living Standards Framework (LSF). The LSF is a slightly modified version of the OECD's Better Life Index and of the Ministry of Social Development’s wellbeing framework that underpinned successive Social Reports dating from 2001.
Like the OECD, the Treasury's framework has four so-called ‘capitals’ that support future wellbeing. These include: human capital (e.g. skills), social capital (relationships between people), natural capital (environmental properties), and financial/physical capital. Within this framework, the four capitals underpin 12 separate domains of wellbeing. These domains include the 11 domains that the OECD includes in its approach – outcomes such as health, skills, housing and incomes – plus one extra domain, cultural wellbeing.
While the LSF represents little in the way of conceptual advance on prior approaches, it could have contributed to some further advances. First, it could have set targets (in conjunction with government) for each of the domains. Second it could have assigned accountabilities for meeting those targets. Third, it could have incorporated mechanisms to help prioritise policies targeted at different domains of wellbeing. But no such targets, accountabilities or prioritisation mechanisms were adopted alongside the LSF.
So how has the LSF been used for making policy? The 2019 Budget paid lip service to the LSF and to the wellbeing approach. However, to an external observer, there was no explicit use made of the LSF’s 12 domains or 4 capitals in the design of policy.
The 2020 Budget and accompanying policies, released amidst the covid pandemic, made no apparent use of the LSF. One can characterize the response to covid as giving a weighting of 1 to health and 0 to all other wellbeing domains. I happen to agree with the government's short-term approach to the covid pandemic, so I am not disputing the nature of the policy responses; but the LSF has been of little use in designing those responses.
Future directions
So what is the likely future path for a wellbeing approach to policy based on the LSF? If a National-led government were to be elected, the explicit wellbeing approach to policy would almost certainly be dropped along with the LSF. When I addressed a Select Committee of Parliament enquiring into the wellbeing approach last year, the body language and questions of the current leader of the National Party showed that she had little time for the current wellbeing approach.
Instead, I expect a National government would reinstate something along the lines of the last National government’s Better Public Services (BPS) targets. In today's lexicon, the BPS targets comprised a wellbeing approach with clear targets and accountabilities attached. For instance, they included explicit targets to reduce criminal offending, to increase educational attainment and to reduce rheumatic fever. These targets were all abolished by the incoming Labour government even though they had demonstrable wellbeing benefits. Labour did institute targets for child poverty but that was a small nod to setting wellbeing targets compared with National’s much more explicit approach to announcing targets for various aspects of wellbeing.
If a Labour government were to be returned, I expect a continuation of the current wellbeing approach to policy if only for continuity reasons. The question is what use will be made of Treasury’s Living Standards Framework? It can either be retained in its current ineffectual form or be re-engineered.
If the LSF is to be revamped, it could be re-engineered to make it more useful for prioritisation in three directions. First, weights (representing priorities) can be placed on the different domains. These weights would signify where the greatest deficiencies currently lie in relation to the other domains. For instance, it could be that the greatest emphasis needs to be placed on safety or on community development. This approach can be thought of as a macro prioritisation tool that helps government decide where major expenditures need to go in order to lift our wellbeing performance. It can also be used to decide where expenditures can be reduced.
A second re-engineering could be to adopt weights relating to outcomes for different demographic groups. For instance, existing Treasury analysis shows that the over-65s are advantaged across most domains relative to younger people, so assistance could be reduced for this particularly advantaged group.
Thirdly, the LSF can be re-engineered to put greater emphasis on holistic wellbeing as reflected in people’s rating of their own life. This rating is often known as subjective wellbeing or, simply, life satisfaction. Currently, subjective wellbeing is one of the 12 domains within the LSF but it has no greater importance than the other domains. Modern wellbeing analyses suggest that the other 11 domains contribute to overall subjective wellbeing so this latter domain should be placed at the head of a hierarchy with the other domains contributing to overall life satisfaction.
Treasury's cost benefit analysis tool, CBAx, can be extended to encompass an approach termed cost wellbeing analysis (CWA). This approach to policy looks at how the costs of individual programmes relate to the benefits that they achieve, but the benefits are not measured in traditional dollar terms. Instead, they are measured in terms of the boost that they give to people's overall wellbeing. This type of analysis is already conducted in a number of other countries and represents an advance compared with current cost benefit analysis techniques. Analysis using CWA could lead to a more disciplined application of a wellbeing approach to public policy that is in keeping with the broad aims of the current government. It would represent a major advance in using wellbeing to help prioritise public policy choices.
Which of these directions is ultimately undertaken – the Better Public Services targeting type of approach or a cost wellbeing analysis approach – is not as important as ensuring that clear accountabilities are in place for achieving clearly defined wellbeing targets. Making these targets explicit – and making the accountabilities explicit – would represent a major advance for wellbeing policy whoever is in power.
*Arthur Grimes is Professor of Wellbeing and Public Policy in the School of Government at Victoria University of Wellington, and Senior Fellow at Motu Research.
28 Comments
A lot of wellbeing indicators are not easily quantifiable. This means that measuring them produces unreliable information that are not useful for making any decisions. What is worse is that the subjectivity involved means that they are open to manipulation by whoever is in charge of the measurement by selecting the measurement approach most accommodating to their ultimate objectives. There is a very real risk that not only wellbeing is not informing decisions, but that it will be abused to justify inappropriately politically motivated decisions.
At a minimum, measurement of well-being must not be left to government. You will need a body that is truly independent of government to be in charge of such measurement.
I totally agree with your last statement there: we need an autonomous agency owning and managing this, taking a broader view of the factors that contribute to wellbeing outside public sector.
Health, education and social infrastructure plays a vital role in long-term wellbeing but so do things like housing quality and affordability, much of the control for which lies with our private sector. Sure public entities have regulatory authority over every aspect of the economy but including private activity into such measures could go a long way in quantifying the effects of public policy changes on overall wellbeing.
The appraisal of what both Majors would do, is reasonable. But....
Wellbeing is easily defined - the ability of a generation in the future (the NA Indians reckoned by the seventh generation hence, so say 200 years) - to have the same access to resources and the same sink-opportunities, that we do. The qualifier being: per head. This is therwise known as real sustainability, logical really; unsustainability is a sitter to lead to unwellbeing.
Wellbeing of the current generation, in that light, is merely indulgence at the expense of.
The 'four measures' are oxymoronic, as Treasury and Grimes have been told. Energy is the 100% underwrite of all activity, all life. To equally-weight so many things, is horsepoo. Cognitively dissonant. I feel sorry for these people; they were taught wrong. It worked until it didn't (the same way the mole on my left cheek has stopped me getting bowel cancer - retroactive reinforcement of false assumptions is a sod).
We need to move further down this wellbeing path, all the way to a Steady-State Economy.
Say goodbye to growth in consumption, but. Which asks: quo vadis debt?
I think your are exuding a slight excess of cynicism PDK. Well being can also just be measured through the apportionment of equity. Currently in our society equity is not broadly distributed. As you indicate access to resources is a big part of this, but as technology improves and the generation of power for example becomes easier and cheaper, then access to it should be easier (read cheaper) for everyone. Problem is this is not the case. Most of these issues are rooted in legislation and regulation which tends to favour the top of the society/business at the expense of everyone else. So even in a world where we are choosing to take growth backwards, well being can still be improving.
Here, in a COVID and post-COVID world there remains the opportunity for the Government (whoever it is) to create the great reset. To constrain or even stop growth to build resilience and a sustainable future, as well as ensuring that everyone gets a piece of pie, not just crumbs. Rolling into this election though, are we seeing signs of such a vision? I don't think so.
I'd suggest we're not likely to have a 'great reset' of any real significance as long as one side thinks we can just add people to create prosperity for a few while making the basics of life very expensive in a low wage economy, while the other thinks you can tax your way to equality and end up with equity as a convenient by-product.
Dunno, I reckon he makes a fair point. We seem to in to many ways have abandoned Burkean conservatism and its regard for what we pass to the next generations. We are focused on living beyond our means and avoiding a user-pays approach to consumption and its effects.
PDK does make a fair point re access to resources, and we are living well beyond our means, and unless you are relatively wealthy there is no way to avoid the current race to the bottom. Sure you can stop driving and buy a push bike, use public transport and so on, but those will largely lead to constraints on where and what you can work at to earn a living. Wealth provides some solutions, but not many of the young are wealthy. To make society fairer, while living within our resource constraints, there really does need to be a reset.
A thoughtful contribution. But the aversion to any form of cost/benefit analysis (however measured, and longitudinal series are required for long-term utility) is exemplified by the current refusal to weigh up even the grossest Costs of lockdowns against the rather nebulous Benefits (lives extended, at an assumed $/QALY). Michael Reddell has beaten this drum often, and Eric Crampton has Interesting sidebars from time to time.
The issue is simply expressed: any such analysis is liable to throw up awkward political questions, so it's much easier to avoid them by refusing to set targets (as Grimes notes) or to do any substantive analysis whatsoever. It may not look pretty when the victors' historians do the write-up, but that's exactly where we sit, like it or not.
Shamubeel Eaqub's initial analysis of the economic cost of the first lockdown shows that it was likely less costly than the alternative: https://www.stuff.co.nz/business/opinion-analysis/300083404/heres-why-l…
A lot of the time (not suggesting that you are one of them) people mistake comparing the costs of the lockdown we had to the status quo, when the status quo is not what we would have had at all.
We are always pleased to hear Sham's opinions, but don't pretend they have anything to do with facts. The reason we did quite well financially during the lockdown was because of the people who were not locked down. The freezing works and dairy factories were going flat out. Anyone involved in exporting stuff was going flat out. All the Kiwis heading offshore for holidays were forced to stay here and keep their money here as well. The Swedish version is being shown more and more, with the benefit of hindsight, to be the better compromise.
One problem with wellbeing targets is they always poor measures and never address real problems. For instance, reducing poverty, (under the current definition) can be achieved by reducing the median income. Similarly the ECB has a paper highlighting how increasing house prices reduces inequality.
Measured properly, child wealth is child access to resources and energy.
Child poverty is therefore the reverse. Yes, you can spread the current jam more equitably, but the emptying of the jar becomes the issue with increasing urgency.
House 'prices' most;y reflect the widening gap between jam expectations and jar-emptying - numerical bets which bear less and less relativity to real activity (real underwrite). So they go hand-in-jamjar with child poverty - two manifestations on pending scarcity.
Incomprehensible
quote "reducing poverty can be achieved by reducing the median income"
and "ECB paper shows how increasing house prices reduces inequality"
I'm sure you highlight 2 glaring stupidities doing the rounds in the Northern Hemisphere
RBNZ has already taken the increasing house prices to heart
Child Poverty is an omnibus headline that goes nowhere
Where is it
Is it spread proportionately over the entire population of NZ
One suspects not - further and better particulars required
Is it a North Island problem or is it a South Island problem
Is it Wellington or Auckland or cental NI
Is it urban or rural
Is it sectoral
Is it specific to identifiable suburbs
Is it general or is it specific
On the jobs domain the Government has just poured $15 billion at it
In the last 3 years $1 billion has been outlaid on 2 specific ethnicities, regardless of their needs
I went to Bali a couple years ago and travelled outside the normal holiday hotspots. The poverty and inequality was dreadful. Even rich people in these locations cannot really enjoy living there as life is so horrendously unfair. NZ is heading this way thanks to Labours attempt at boosting the housing market. What happened to Jacinda? My how she has changed.
It's the model of our last 15+ years of government and central banking. I am hopeful that the current crisis is not completely wasted, but given the Reserve Bank's work to drive inequality to greater depths it looks increasingly difficult for politicians to step up and take meaningful action. One would hope they do find some courage.
Government would do well to steer very wide of expressing specific goals and targets. The public are sceptical they are actually committed and they have only served as a rod for opposition to beat government with.
Nine tenths of strategy is implementation but government tend to be better at the other tenth of strategy formation.
I think there is a deliberate oxymoronic attempt with the use of Well being and targets in the same sentence.
The whole purpose of Wellbeing, being targets is so they cannot be measured, and by definition can be anything the user wants them to be to achieve the result they want. It's about feelings, rather than the facts.
After all, you cannot put a $ value on human life, as the CV19 response has shown, or wants you to believe.
But Yes real targets have performance measures, and a target will require numerous measures to be met to meet the target requirements.
The main issue is that they confuse measures as targets, so 'measure' the success of meeting targets based on just one measure.
The classic living example we have is confusing housing affordability with just building more houses. All we have ended up with is more unaffordable housing.
A true housing target would included numerous measures like land availability and cost, council and infrastructure costs, cost of materials, income/house multiples, Mortage ratios, LVR's, etc.
I think the 4 capitals and 12 domain framework is quite sufficient. I think if one further complicates the framework with targets - then any reporting on it is less qualitative, and the focus becomes a quantitative report with little critical thinking/analysis.
I'd have thought what TSY would do with the framework is provide an independent analysis of how the budget once released/determined performs against the framework; a kind of retrospective qualitative analysis that would identify the distributional effects (across the four capitals) and weightings that can be seen to have been applied to each of the domains by the budget just released. It would serve as a kind of 'gap' analysis for future reference by Ministers in the next round of wellbeing priority and eventual Vote setting.
Instead, I expect a National government would reinstate something along the lines of the last National government’s Better Public Services (BPS) targets. In today's lexicon, the BPS targets comprised a wellbeing approach with clear targets and accountabilities attached. For instance, they included explicit targets to reduce criminal offending, to increase educational attainment and to reduce rheumatic fever. These targets were all abolished by the incoming Labour government even though they had demonstrable wellbeing benefits.
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