How to improve wellbeing and reduce misery

We spoke to Christian Krekel, from The Centre for Economic Performance (part of the London School of Economics and Political Science) about their ‘Wellbeing Value For Money’ initiative. Their work assesses UK government policies against how they improve people’s well-being, working closely with the Treasury and policy-makers to offer alternative ways of defining what is value for money.

The initiative’s new report, Value for Money: how to improve wellbeing and reduce misery (Sept ’24),  calls for a radical change in policy-making. It argues that policies, and how ministers choose to prioritise spending, should be judged using a cost-benefit analysis which includes a comprehensive valuation of their effects on wellbeing. Judged this way, therapies for mental health and guaranteed apprenticeships, for example, give much better value for money than most new roads. 

What’s the story behind the wellbeing initiative?

The story behind wellbeing is really an old one. It goes way back to the Enlightenment, with pioneering Utilitarian thinkers such as Jeremy Bentham arguing that one should “create all the happiness one is able to create, and remove all the misery one is able to remove”. However, those earlier thinkers did not have the tools to put that dictum into practice. The new science of wellbeing now provides policy-makers and analysts with the measurement and methodological tools to maximise total wellbeing in society, subject to constraints. That is a revolutionary step towards a much more humane objective than just increasing GDP, which does not capture the many things that are dear in our lives. Creating a happy society is not a utopian fiction anymore but a feasible reality.

The new science of wellbeing now provides policy-makers and analysts with the measurement and methodological tools to maximise total wellbeing in society…Creating a happy society is not a utopian fiction anymore but a feasible reality.

What kind of progress have you seen your work making? And towards what?

We have made enormous progress in estimating the determinants of people’s wellbeing over their life course, specifically of their life satisfaction, and we have extended established tools for policy appraisal, in particular cost-benefit and cost-effectiveness analysis, to incorporate measures of life satisfaction, or WELLBYs (defined as one point of life satisfaction measured on a zero-to-ten Likert scale for one individual for one year).

…policy analysis based on wellbeing data is not just an abstract theory but can be readily done in practice, today.

These tools have now been included in official guidelines for policy analysis by HM Treasury in the UK, which monetarily values 1.0 WELLBYs at GBP 13,000. There is similar interest by governments in Australia and New Zealand, in the Nordics (Denmark and Norway), and some nascent developments in the US. Despite this, however, many policy analysts do not yet apply our tools in their daily work, because they lack good examples of how this can actually be done. This is what our new book is all about: in cooperation with UK Government, we look at interventions across the whole policy spectrum to demonstrate that policy analysis based on wellbeing data is not just an abstract theory but can be readily done in practice, today.

What makes the work hard? Or what most gets in the way?

When appraising a policy from a wellbeing perspective, for example in cost-benefit analyses, it can sometimes be tricky to find the ‘right’ coefficient that gives you the likely impact of that policy on people’s wellbeing. Often, we must estimate that impact ourselves, as opposed to taking it ‘off the shelf’ from the literature. There is also the issue of double-counting, where one needs to avoid double-counting benefits and costs, which can also be tricky and likewise requires own study.

On the flip side, both issues can give you great ideas for future research and, thereby, enhance our evidence base on what matters (and not) for people’s life, as well as by how much. And similar issues exist for other welfare measures too, not only for wellbeing.

Where do you think the opportunities are for greater progress?

One of the big advantages of our new method is that we can analyse the whole spectrum of policy using the same unit of benefit: people’s wellbeing, measured in terms of life satisfaction (WELLBYs). This allows us to say whether, for example, building a new highspeed railway produces more (or less) WELLBYs per Pound than mental health treatments, or R&D subsidies.

One of the big advantages of our new method is that we can analyse the whole spectrum of policy using the same unit of benefit: people’s wellbeing

This approach goes far beyond comparisons that can be made based on GDP alone, specifically for the new economy where many of its elements are not easily put into monetary terms. It is fair to say that a wellbeing orientation in policy analysis as we suggest would likely change some (though not all) policy priorities: for instance, evidence on wellbeing suggests that policies targeting income and private consumption would generally receive less weight relative to policies targeting health (especially mental health), social relations, decent work, or the natural environment. Such policies would get “priority” over, say, physical infrastructure. This effectively allows us to maximise happiness in society.

What could people who read this newsletter do to support your work?

First of all, if you are interested in our work, we would love to hear from you to talk about potential opportunities on how to collaborate. Our methodology is not limited to public policy. It is already being applied by other organisations, such as charities, who are interested in demonstrating their ‘social value’ by using wellbeing data. We also cordially invite you to join our weekly LSE Wellbeing Seminar, where we regularly present findings from our work and those of other researchers on wellbeing.