Academic journal article New Zealand Sociology

Wellbeing Economics: A Policy Framework for New Zealand

Academic journal article New Zealand Sociology

Wellbeing Economics: A Policy Framework for New Zealand

Article excerpt

1 Introduction

In 2008, French President Nicolas Sarkozy invited three eminent economists - Joseph Stiglitz, Amartya Sen and Jean-Paul Fitoussi - to head a high profile commission to examine gross domestic product (GDP) as a measure of economic performance and social progress. The commission described the unifying theme of its subsequent report in the following terms (Stiglitz et al, 2009: 12; emphasis in the original): "the time is ripe for our measurement system to shift emphasis from measuring economic production to measuring people's well-being". The purpose of this article is to propose that this renewed focus on wellbeing provides an opportunity to consider more fundamental questions about how wellbeing is framed in economic policy advice. The article draws on the authors' research on economic policy over the last three decades, particularly our recent joint research on aspects of 'wellbeing economics' (see, for example: Dalziel et al, 2006; Dalziel and Saunders, 2003, 2005, 2011 and 2014a; Saunders and Dalziel, 2004 and 2010; and Schischka et al, 2008). The article also reflects wider international trends, including: the OECD's mission "to promote policies that will improve the economic and social well -being of people around the world" (OECD, undated) and its Better Life Index (OECD, 2011); the well-being framework created by the Australian Treasury (Henry, 2006); the National Wellbeing Programme launched by the United Kingdom Prime Minister, David Cameron, in November 2010 (see Self et al, 2012); the Framework for Measuring Sustainable Development published by Statistics New Zealand in 2009; and the living standards framework recently introduced by the New Zealand Treasury (see Gleisner et al, 2012).

Section 2 presents the intellectual sources of our wellbeing economics framework. Like so much of economics, pointers can be found in Adam Smith (1776) who explicitly criticised the mercantile system for sacrificing the interest of the consumer to that of the producer. The authors' major inspiration, however, comes from two sources: Marilyn Waring's (1988) comprehensive criticism of gross domestic product for omitting certain economic activities that are essential for wellbeing; and the capabilities approach of Amartya Sen, presented for example in his 1989 book Development as Freedom. The section finishes with five principles of wellbeing economics as a policy framework. The remainder of the article demonstrates how the wellbeing economics framework is built on those intellectual foundations. This begins with purposeful behaviour by individuals and households (section 3). It recognises ways in which communities of people self-organise to improve their members' wellbeing (section 4). It understands the market as a strong engine for raising living standards and wellbeing (section 5). It considers central government as another community institution able to make its own unique contributions to wellbeing (section 6). The article finishes in section 7 with a brief conclusion that introduces the idea of transforming New Zealand's 'welfare state' into a 'wellbeing state'.

2 Intellectual Foundations

Adam Smith's Inquiry into the Nature and Causes of the Wealth of Nations is universally accepted as the founding text of modern economics. It includes the following comment on the purpose of all production (Smith, 1776, Volume 1, Book IV, Chapter 8):

Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer. The maxim is so perfectly self-evident, that it would be absurd to attempt to prove it. But in the mercantile system the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce.

Smith's 'perfectly self-evident maxim' lends support to the 'unifying theme' of Stiglitz et al. …

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