Well-being

Lord Skidelsky Excerpts

Thursday 12th March 2020 Lords Chamber

[Lord Skidelsky (CB)]

My Lords, I thank the noble Baroness, Lady Tyler, for introducing this important discussion. In 2013, I co-authored a book with my son called How Much is Enough?, so I have a continuing interest in the limits of GDP as a measure of a good life. Before we embark on a programme to improve people’s well-being, we should be aware of the considerable pitfalls in this endeavour, starting with the definition of the term itself, to which other noble Lords have alluded.

The only sensible definition that I can think of is “a state of contentment or happiness with one’s circumstances or in the way that one’s life is turning out”. I emphasise that because it is an entirely subjective state of mind. It is therefore wrong to think of well-being as having both a subjective and objective component. That is simply a mistake in thought. There are measurable, objective conditions for good states of mind and those are within the scope of policy, such as better health, less insecurity and less frantic pressure for change; a point mentioned by the noble Lord, Lord Tugendhat. But the connection always needs to be argued and based on evidence, not just assumed.

For example, it is implicitly assumed that economic growth is a necessary and sufficient condition of well-being. But suppose it is neither necessary nor sufficient? Suppose that we had a better quality of life if we had de-growth with a lower quantity of goods and services available. That point is never acknowledged by the advocates of well-being. My second point was made by the noble Lords, Lord Tugendhat and Lord Desai, about welfare as a measure of well-being. It was realised in the 19th century that an aggregate quantity of goods and services is not a good measure of welfare because welfare depends on how they are distributed. That gave rise to welfare economics. Over the last 30 years, the growth in average real income per head has been accompanied by a marked increase in inequality. Is that a good or a bad thing? Most of us would argue that the rise in inequality represents a fall in aggregate welfare, but how much of a fall? Welfare economics cannot say anything scientific about that and it is a matter of political judgment. So there is another point of difficulty, and the connection between welfare and well-being is another black box.

So, what can and should Governments do? Happiness researchers ask people what things make them happier, less happy, not very happy, not at all happy and so forth, and then rank their replies. Those replies serve as indicators of policy. The noble Lord, Lord Layard, has done so much, importantly, to open up this subject. He found that the seven big factors affecting happiness, in order of importance, were: family relationships, financial situation, work, community and friends, health, personal freedom and beliefs. An interesting finding was that people who believed in God were happier than people who did not, although I know of no policy being advocated to encourage that particular source of well-being.

Three of the noble Lord’s seven factors—financial situation, work and health—are directly related to economic conditions. The remaining four—family relationships, community and friends, personal freedom and belief—are weakly connected to economic conditions and, in some cases, not at all. So, policy should focus on creating those undisputed material conditions of a good life for all. They are the conditions of financial security, work security and health security. None of them, incidentally, involves adding new items to GDP: they increase GDP and well-being simultaneously.

The noble Lord, Lord Layard, says in his book that

“Unemployment … reduces income but it also reduces happiness directly by destroying self-respect and social relationships created by work.”


Even when in work, people fear unemployment and when unemployment goes up it has a major impact on the happiness of everyone, including those in work.

So, low and stable unemployment must be a major objective for any society. In the past 40 years it has not been a major objective of our kind of society, even though in 1997 all the Prime Ministers in the European Union agreed that Governments should guarantee their populations work or training. That pledge has not been followed up. Only Denmark, Holland—and Hungary, interestingly—have made any steps in that direction. It is about time we started.