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Measuring and Promoting Wellbeing

Measuring and Promoting Wellbeing: How Important is Economic Growth?

Andrew Podger
Dennis Trewin
Copyright Date: 2014
Published by: ANU Press
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  • Book Info
    Measuring and Promoting Wellbeing
    Book Description:

    Australia continues to be at the forefront of international work on measuring and promoting wellbeing, Ian Castles being a significant contributor over the last forty years as an official and academic. This book combines a selection of Castles’ important work with contemporary research from a range of contributors. The material is in four parts: 1. The role of economics in defining and promoting wellbeing 2. Measuring real income and wellbeing 3. Measuring inequality 4. Climate change and the limits to growth. The issues canvassed are both long-standing and current. Does economic growth contribute to wellbeing? How different is income to wellbeing? How do we measure societal wellbeing and take its distribution into account? The book will be of value to all those looking to informed debate on global challenges such as reducing poverty, sustaining the environment and advancing the quality of life, including politicians, commentators, officials and academics.

    eISBN: 978-1-925021-32-5
    Subjects: Management & Organizational Behavior

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-viii)
  3. Preface
    (pp. ix-x)
    Andrew Podger and Dennis Trewin
  4. Contributors
    (pp. xi-xiv)
  5. 1. Economic Growth, Wellbeing and Protecting the Future: An Overview of the Castles Symposium
    (pp. 1-18)
    Andrew Podger, Dennis Trewin and William Gort

    Australia has for many decades been at the forefront of efforts to improve measurement of wellbeing, and is investing significantly in continuing this work. There is increasing international interest in the field highlighted by such contributions as Bhutan’s famous ‘Happiness Index’ and the 2009 Stiglitz, Sen and Fittoussi report commissioned by French Prime Minister Sarkozy which has heavily influenced work by the OECD. Australia has also been exploring ways to make use of such measures and their underpinning concepts of wellbeing in advising on public policy. Behind all these efforts has been widespread criticism of the use of GDP and...

  6. Part One: The Role of Economics in Defining and Promoting Wellbeing

    • 2. Economic Growth and Wellbeing: Ian Castles’ Contribution
      (pp. 21-28)
      Michael Keating

      Ian’s path and mine first crossed almost 50 years ago in the early 1960s. I had been seconded from the then Bureau of Census and Statistics to work on some of the Treasury submissions to the Vernon Committee. This committee had been established to advise on the future development of economic policy, following the almost defeat of the Menzies government in 1961. At the time all of Treasury, which then included today’s Finance Department, the Tax Head Office, and most of the Statistics Bureau, was located in West Block. Clearly government was smaller then. Now each of these agencies and...

    • 3. Ian Castles: Scholar as Truth Teller
      (pp. 29-38)
      William Coleman

      Ian Castles possessed a rare suite of talents. Not many people have the requisites to become successful agency heads. Only a few of those will succeed in careers of public advocacy after their formal retirement. And still fewer will additionally contribute to scholarship. Castles did all three.

      This chapter shines a light on the scholarly dimension of Castles by examining his 1984 paper ‘Economics and Anti-Economics’.¹ This paper is equally remarkable and neglected. It is neglected: until this volume was published the paper was almost impossible to obtain. And it is remarkable: we may wonder how could a senior public...

    • 4. Economics and Anti-Economics
      (pp. 39-106)
      Ian Castles

      The paper traces the development of mainstream British economics during the century following the publication ofThe Wealth of Nationsin 1776. The emphasis is not on the economists’ formal statements of principles and doctrines, but on the policy prescriptions and social attitudes which they inferred from them.

      It is suggested that the economists saw a clear connection between their economic principles and their attitudes to other controversial questions, including issues related to civil liberties, public education and the role of women; and that the economists’ opponents – the anti-economists – also saw the connection.

      The paper shows that the attitudes of...

    • 5. Economic Growth: Is it Worth Having?
      (pp. 107-160)
      Ian Castles and Treasury

      This paper re-assesses economic growth in the light of questions that have been raised about its desirability in recent years. It pursues five main themes.

      First, the paper recognises that economic growth is not to be pursued for its own sake. It is best conceived of not as an objective in its own right but as the likelyresultof policies directed to improving the welfare of the community without using resources wastefully. Secondly, and that observation notwithstanding, it suggests that those who question economic growth on the grounds that it means increasing pollution are attacking growth rather than pollution...

  7. Part Two: Measuring Real Income and Wellbeing

    • 6. Measuring Progress: The International Context
      (pp. 163-190)
      Brian Pink, Sue Taylor and Hannah Wetzler

      Progress is an idea that echoes and has echoed throughout societies across the world. The idea of progress and what it means has influenced how societies and nations understand themselves, how they change over time, and how they relate to other nations.

      The idea of progress as societal improvement has a long history. Notions of national or societal progress can be traced back to early civilisations, and were discussed by the early philosophers including Aristotle and Socrates. More modern ideas around progress were further developed throughout the Reformation and the Industrial Revolution. In the nineteenth century, for example, political economist...

    • 7. The Four Approaches to Measuring Wellbeing
      (pp. 191-208)
      John Hawkins

      Discussions of the relationship between wellbeing and material progress go back a long way. One of the earliest extant comes from Aristotle:

      What is it that we say political science aims at and what is the highest of all goods achievable by action? … It is happiness, and we identify living well and doing well with being happy… the life of money-making is one undertaken under compulsion, and wealth is evidently not the good we are seeking; for it is merely useful for the sake of something else.²

      Economic growth in classical times was so slow as to be unobservable...

    • 8. The Need for Wellbeing Measurement in Context
      (pp. 209-222)
      David Gruen and Duncan Spender

      This chapter aims to shed light on both the role of the Treasury wellbeing framework and Treasury’s perspective on wellbeing measurement, by focusing on the broad context in which Treasury’s wellbeing framework sits.

      Treasury can help improve wellbeing without having in its possession a complete, agreed approach to wellbeing measurement.

      The Treasury mission requires us to serve our ministers, and the nature of democracy suggests a positive relationship between the service of ministers and improving societal wellbeing.

      The Treasury wellbeing framework reminds Treasury staff to inform their advice with an understanding that wellbeing is driven by several distinct considerations and...

    • 9. The Wellbeing of the Australian People: Comments on the Treasury’s Framework
      (pp. 223-242)
      Jonathan Pincus

      Treasury Secretary Martin Parkinson begins the 2011-12 Annual Report thus (Treasury 2012a): ‘The Treasury has a long-standing commitment to improving the wellbeing ofallAustralians by delivering quality advice to government and by providing assistance in the implementation of key policy initiatives’ [emphasis added]. Then follows the now-standard Treasury statement of ‘the wellbeing of the Australian people’ (or TWOTAP). This statement is front and centre of Treasury’s presentation of self, including in its ‘Strategic Framework’. TWOTAP consists of a short general discussion of wellbeing and its importance to Treasury, followed by a list of five ‘dimensions’ of wellbeing, said to...

    • 10. Subjective Wellbeing and the Mismeasure of Progress
      (pp. 243-252)
      Richard Eckersley

      The past two decades have seen a remarkable surge in interest in measuring the progress of societies. The debate has focused on adequacy of economic indicators, notably per capita income or GDP (gross domestic product). Measures of subjective wellbeing (SWB) are attracting particular attention, with several national statistical agencies, including the Australian Bureau of Statistics (ABS), examining their value for inclusion in sets of indicators of national progress.

      The statistical models of progress have a high degree of internal consistency: all or most of the dominant indicators are correlated. Some economists say GDP is associated with so many other measures...

    • 11. Measuring Wealth and Welfare: Why HDI and GPI Fail
      (pp. 253-270)
      Ian Castles

      Earlier this year [1997], the World Bank releasedWorld Development Indicators, a comprehensive database of statistics relating to the wealth and welfare of the world’s peoples. The new annual publication provided some 600 indicators for nearly 150 countries. In his Foreword to the hard-copy version, the Bank’s President, James Wolfensohn, expressed the hope that the new publication

      will become the principal mechanism by which the world measures progress in reducing poverty and in enriching the lives of people everywhere.²

      At the masthead of Chapter 1, the World Bank reproduced the celebrated injunction of Sir William Petty, inventor of the concept...

    • 12. Measuring Economic Progress: From Political Arithmetick to Social Accounts
      (pp. 271-280)
      Ian Castles

      I am delighted to give the Eighth Colin Clark Memorial Lecture. The Department of Economics, the Economic Society of Australia in Queensland and the Queensland Treasury are to be congratulated upon their initiative and their continuing support, and I give special thanks to the department for honouring me with the invitation to present the 1998 lecture, and for its welcome to me in recent days.

      Previous speakers in the series have contributed much to the development of our knowledge of the work of one of the most influential scholars of the century, and our understanding of its significance. But there...

    • 13. The Mismeasure of Nations: A Review Essay on the Human Development Report 1998
      (pp. 281-296)
      Ian Castles

      The annualHuman Development Report,published for the United Nations Development Program (UNDP) by the Oxford University Press, is promoted by the UNDP as ‘the only comprehensive guide to global human development available on the market’ (UNDP 1998c). Since the series was launched in 1990, these reports have been extraordinarily influential. According to Amartya Sen, speaking at a memorial meeting for the originator of the series, Mahbub ul Haq, on 15 October 1998, theHuman Development Report‘had a profound effect on the way policy makers, public servants and the news media as well as economists and other social scientists...

    • 14. Measuring Economic Progress
      (pp. 297-340)
      Ian Castles

      Economists have been inquiring into the nature and causes of the wealth of nations for centuries,³ but the regular and systematic construction of official quantitative measures of relative economic progress is a phenomenon of recent decades. A key role in this transformation was played by Colin Clark, who held that ‘[c]omparisons of economic welfare between one community and another, one economic group and another, and between one time and another, are the very framework of economic science’ (Clark 1951: 16).

      Clark’s Joseph Fisher Lecture in Commerce at the University of Adelaide in 1938 was a milestone, because it was in...

    • 15. Reporting on Human Development: Lies, Damned Lies and Statistics
      (pp. 341-368)
      Ian Castles

      Popular opinion is mistaken in attributing thebon motabout ‘lies, damned lies and statistics’ to the American humorist Mark Twain, and Twain himself was probably mistaken in attributing the jest to the British statesman Benjamin Disraeli. In fact, the lasting slur upon statistics and statisticians was first brought to public notice in 1892, by one of the leading statisticians of the day.

      As a senior public servant, Robert Giffen, head of the statistical department in the British Board of Trade, would have thought it improper to use the word ‘damned’ in a public address. But he introduced his paper...

    • 16. International Comparisons of GDP: Issues of Theory and Practice
      (pp. 369-396)
      Ian Castles and David Henderson

      This article combines a general theme, which though not new remains a subject of lively debate, with specific instances, illustrations and proposals for change. Our chief concern is with how international comparisons of real GDP and GDP per head are best made. We set out the case for using purchasing power parity (PPP) converters for this purpose, rather than exchange rates, and give reasons for rejecting various arguments that are still widely made to the contrary.² In doing so, we give instances of the differing current practices of international agencies, argue the case for greater uniformity and consistency, and make...

  8. Part Three: Measuring Inequality

    • 17. What Can We Learn from International Evidence on Trends in Income Distribution?
      (pp. 399-422)
      Henry Ergas

      In an essay comparing living standards in Australia and Japan, Ian Castles described the challenge for policymakers as being that of using ‘the skills and strengths of their peoples to improve opportunities for the enhancement of their well-being in its broadest sense’ (Castles, 1990: 16). There was, he noted, ‘little point in trying to encapsulate the differences [in wellbeing] in any single measure’ (ibid: 15), but that hardly meant one should not attempt to measure carefully what could be measured. It was in that spirit that Castles undertook several international comparisons of living standards and income distribution, including between Australia,...

    • 18. Changes in Inequality in Australia and the Redistributional Impacts of Taxes and Government Benefits
      (pp. 423-476)
      J Rob Bray

      This paper is concerned with trends in income inequality in Australia over recent decades and the impact of government taxes and benefits. It comprises three main sections. The first considers some of the broad changes which may have contributed to changes in the distribution of income; the second tracks shifts in the distribution of income; and the third considers the contribution of specific components of income, in particular government taxes and benefits, to the level and change in income inequality.

      In presenting this as a quantitative analysis the paper utilises three main sources of data – the ABS Survey of Income...

    • 19. What Difference Does Government Make? Measuring Redistribution in a Comparative Perspective
      (pp. 477-516)
      Peter Whiteford

      Government policies in all countries affect the distribution of household income. In high-income countries, they do so through a range of programs but most directly through the cash transfers paid to households and the direct taxes and social security contributions collected from them. In addition, other social spending programs and other forms of taxes impact on households. Different welfare states may pursue a variety of social objectives, with the balance and priority given to each of them varying across both countries and between programs. A critical issue that all governments confront – particularly when considering policy reforms – is whether the redistributive...

    • 20. Money Income Distribution and Redistribution in Australia, Sweden and the United States 1984
      (pp. 517-576)
      Ian Castles

      This paper compares the distribution of household money incomes in Australia, Sweden and the United States, and examines the association between the private incomes and cash benefits received and the direct taxes paid by various household groups within each of the three countries.

      Over the years, many attempts have been made to compare the distribution of the money incomes of families in Australia with the corresponding distribution in other countries. In a review of the literature published in 1978 in the Surveys of Australian Economics series for the Academy of Social Sciences in Australia, Richardson commented:

      The hazards of international...

    • 21. Living Standards in Sydney and Japanese Cities: A Comparison
      (pp. 577-606)
      Ian Castles

      In theReport on the Economy(theEconomic White Paper) for the fiscal year 1988, the Economic Planning Agency of the Japanese Government devoted a chapter to ‘Issues for Enriching Livelihood of the People’.³ After noting that Japan’s per capita income was the world’s highest and that ‘In the broad view, it can be said that Japan has achieved affluence’, the Report went on:

      However, the people’s view diverges somewhat. Even when we account for the people’s desire for improvement by always seeking something better, conditions have not reached a state where the people are satisfied and have a sense...

  9. Part Four: Climate Change and Limits to Growth

    • 22. Climate Change and Related Issues: Ian Castles’ Contributions in Perspective
      (pp. 609-628)
      David Henderson

      Ian Castles was a top Australian civil servant: the last two posts that he held were as Secretary of the Department of Finance and as Australian Statistician. He and I met in 1995, when we were both retired officials; and some years later, as recounted here, we became jointly involved, as close collaborators, on issues relating to climate change.

      This chapter tells the story of our collaboration. In doing so, it develops two related themes. First, it brings out Ian’s distinctive contributions in three related subject areas: inter-country measures of output and real expenditure; the continuing climate change debate; and...

    • 23. Addressing Wellbeing in the Long-Term: a Review of Intergenerational Equity and Discount Rates in Climate Change Analysis
      (pp. 629-662)
      Mark Harrison

      Most government policies give rise to a stream of costs and benefits over time. To evaluate them requires us to compare costs and benefits received in different time periods. That requires choosing a discount rate, which determines the value of future costs and benefits relative to current ones.

      The choice of discount rate can make a significant difference to whether the present value of a project is positive, and to the relative desirability of alternative projects, especially when costs and benefits accrue at different times and over long periods.

      A typical project involves upfront costs, with the benefits coming later....

    • 24. Limits to Growth … Again
      (pp. 663-672)
      Jeff Bennett

      The numerous definitions of sustainability that appear in the economics, ecology and policy literature all focus on the key societal goal of self-preservation. No society wants to see itself reduced in stature with the passage of time just as most of the individuals who comprise society want to see their descendants enjoy a quality of life that is at least as good as their own.

      The constant and apparently accelerating rate of change in the factors that determine the wellbeing of society make the goal of sustainability increasingly ‘top-of-mind’ for individuals and society’s decision makers. For example, concerns that we...

    • 25. Scientists, Statisticians and the Prophets of Doom
      (pp. 673-682)
      Ian Castles

      In theUnnatural Nature of Science(1992), Lewis Wolpert, FRS, Professor of Biology at University College, London, concluded that ‘Science is one of humankind’s greatest and most beautiful achievements and for its continuation, free and critical discussion, with no political interference, is as essential today as it was in Ionia’.²

      In principle, the international science community accepts the vital importance of such ‘free and critical discussion’, and asserts the need for these values of science to be applied to the world's problems. The most recent such proclamation came from 63 academies of science after a meeting in Tokyo in May...

    • 26. Global Warming and the ‘Scientific Consensus’ 1939–2001
      (pp. 683-692)
      Ian Castles

      The probability that human activities are producing significant changes in the earth’s climate is increasingly being seen as one of the world’s major problems. Yet in 1939, within the lifetime of many of us, one of the world’s leading scientists urged governments to take deliberate action to bring about global warming.

      InThe Social Function of Science,one of the most influential books of the century, the British physicist JD Bernal, FRS argued that in ‘a fully organised world society’ it should ‘no longer be a question of adapting man to the world but the world to man’. In that...

    • 27. Ian Castles and the IPCC – Selected Letters
      (pp. 693-720)

      The following are selected letters from Ian Castles to Dr Rajendra Pachauri, Chairman of the Intergovernmental Panel on Climate Change, between 2002 and 2004. Some attachments to the letters are not included, nor are some web references which may no longer be available.¹ To the best of our knowledge, Dr Pachauri never replied substantively to these well researched and carefully crafted letters despite their implications for the vilidity of the IPCC work.

      The letters illustrate Castles’ original criticisms of the IPCC scenarios and the methodologies involved based upon statistical and economic considerations as distinct from climate science factors. While Castles’...

    • 28. The Stern Review: A Dual Critique
      (pp. 721-782)
      Alan Peacock, Colin Robinson, CR de Freitas, David Holland, David Henderson, Ian Byatt, Ian Castles, Indur M Goklany, Julian Morris, Nigel Lawson, Robert M Carter, Richard S Lindzen, Ross McKitrick and Robert Skidelsky

      The Stern Review was commissioned in July 2005 by the UK’s Chancellor of the Exchequer, Gordon Brown. It was conducted under the joint auspices of the Cabinet Office and the Treasury, and the final text was delivered to the Chancellor and the Prime Minister who both spoke at its launching at the end of October 2006. Sir Nicholas Stern is Head of the Government Economic Service in the UK and Adviser to the British government on the economics of climate change. Although the Review was commissioned and financed by Her Majesty’s Government, and largely drafted by British officials, it is...