Liam Dann: Government's well-being experiment a big challenge

In Bhutan, 'Gross National Happiness' has been measured for years. Photo / 123RF

Can you measure happiness? How about well-being?

If you think too long about the complexities it could get you down.

But cheer up, help is on the way.

In what may be a world first, Treasury – the Government's economic adviser and keeper of the national accounts – is adopting a "well-being" framework that could change the way policy decisions are made about almost everything.

Ideas about measuring more than just GDP growth are hardly new.

Remember how we laughed when the Buddhist kingdom of Bhutan adopted Gross National Happiness as a core part of its economic policy framework.

Back in 2008, as the tiny Himalayan nation moved from monarchy to democracy, it embedded happiness as a core measure in its national constitution.

Actually, Bhutan had been following the path much longer. The term Gross National Happiness was coined in the 1970s when King Jigme Singye Wangchuck used it as a one liner in an interview with a Financial Times reporter.

But there was rash of publicity in 2008 as the country moved to a democracy and produced a formal constitution. At the time it seemed like a bit of a joke.

Then the Western world had a financial crisis.

In the aftermath of the GFC, with interest rates artificially low, wage growth static, property and share markets soaring and inequality growing, the spotlight has gone on hard fiscal measures of well-being that have dominated economic thinking.

In the past decade plenty has been written about it by academics, think-tanks and government agencies.

In 2010 the UK's Office of National Statistics introduced a happiness index in an effort to broaden its measurement of national well-being.

But a statistics department report is not the same as a structural change to a nation's Treasury.

The OECD and many countries, including New Zealand, have also produced reports on ways to broaden the focus.

Treasury produced a Living Standards Framework in 2011 that adopts a "four capitals" model.

Effectively, it adds environmental, human and social considerations to the current focus on financial measures.

But, like the UK's index, it has been sitting dormant as a theoretical reference document for Ministers - until now.

The Government is serious about this stuff.

Finance Minister Grant Robertson has explicitly given Treasury the green light to put the Living Standards Framework into place at the foundation of its research and policy advice.

In 2019 Treasury is required to produce its first Budget with the new framework - a well-being Budget.

Is everybody happy? You bet your life they aren't.

Critics and sceptics - myself included - worry adding broader measures to economic analysis can make it less meaningful, less useful for decision making

There are hundreds of indicators that can measure well-being.

A strong case can be made for the importance of any of them.

Infant mortality, suicide rates, the incidence of preventable disease, rates of home ownership - these all offer clues as to the well-being of a population.

Or how about sexual freedom, gender equality? What about access to the internet, car ownership or clean air?

If I think about the things that make me happy we could include craft beer breweries per capita. Actually, that is high by global standards and I am pretty happy about it.

I could go on but my point is not to dismiss the new framework by reducing it to absurdity.

I can accept we've seen too much focus on GDP and it has failed to capture a meaningful picture of national well-being.

I see this as a failing that may have contributed to the political upheaval of the US presidential election and UK Brexit.

New Zealand has had good GDP growth for nearly a decade (less solid per capita but still positive). Yet there is a great deal of social dissatisfaction.

The vagaries of MMP to one side, this is reflected in the fact we changed Government in the middle of what traditional economic measures suggest is a golden era.

My point is that things get complicated pretty fast.

Everyone wants to end child poverty but look at the confusion and conflict around defining something as seemingly obvious as that.

How do we define malnutrition? Obesity? What is the appropriate weight for better well-being?

Each new indicator adds a fresh layer of complexity to the debate.

The challenge facing Treasury is extremely large.

It needs to settle on a set of indices that reflect the shared values of New Zealanders but that can also be aggregated to provide a useful decision-making tool set.

Secretary to the Treasury Gabriel Mahklouf certainly understands the scale of the challenge.

To his credit he is adopting an evolutionary approach. He hopes to produce a list of key indicators by the end of the year but accepts it won't be perfect or set in stone.

Economics is about trade-offs. We have finite wealth and resources and we have an almost infinite capacity for good ideas about where to deploy resources.

A broader framework may enrich our understanding of those trade-offs. But there is a risk of it swamping us and clouding our decision making.

One way or another it will be a fascinating experiment. Because we're doing this.