Friday, 13 December 2013

How sustainable is well-being? Measuring resources for the future

This post, written by Carrie Exton (Statistics Directorate of the OECD), is part of the Wikiprogress series on How's Life? 2013 chapter on "Measuring the sustainability of well-being over time". 

"Life can only be understood backwards; but it must be lived forwards.” So said Søren Kierkegaard.  It is certainly easier to make sense of events with hindsight. The financial crisis that began in 2007 is likely to become a textbook example of a catastrophic event that very few (or certainly not enough) people saw coming. The 2013 edition of How’s Life?” shows the human cost of the financial crisis, reminding us that, much like stock market investments, people’s well-being can go down as well as up. So how can statistics help us to understand whether the choices made by current generations are likely to put the well-being of future generations at risk? 

Most statistics tend to look backwards. For one thing, it’s a lot easier to measure things that have already happened. But measures of progress also need to look forwards. That is why How’s Life? 2013 also includes a chapter about measuring the sustainability of well-being over time. It’s not the most attention-grabbing part of the report: there aren’t many pictures, and you won’t find a bar-chart showing which country is the ‘most sustainable’. What it does include is a proposal for how the OECD could monitor the resources which help to sustain well-being over time in the future.
It can be helpful to think about the sustainability of well-being in terms of risk-management, where measurement means identifying and regularly auditing risks. In several cases, we are already know something about where to look: you can read about the risks of climate change and financial meltdown in the newspapers almost every day. But some risks, such as those concerning social ties and trust, are less tangible. Getting good quality and internationally comparable data on each of these risks is harder still. Yet building an international picture is vital, because the sustainability of well-being is undoubtedly a global issue, with risks that require international cooperation if they are to be managed effectively. 

To gain a fuller understanding of risks, we need to start by mapping out what helps to sustain well-being over time. A recent UNECE/ Eurostat/ OECD Task Force for Measuring Sustainable Development identified four key types of resources that can be measured today, and that are likely to help shape the well-being of future generations: economic, natural, human, and social capital.  These resources are described as “capital” because they reflect the assets and liabilities that we carry forwards over time. For many people, capital means things like money and machines – and while these are important, they are certainly not the only resources that matter for well-being. So this notion of “capital” for well-being is very broad, and doesn’t necessarily mean measuring everything in terms of money. We know, for example, that there is often a difference between something’s price tag and its well-being value, and in many cases we are far from being able to estimate the size of that gap accurately.  

Click on image to enlarge

For several types of capital, the measurement effort is well underway. How’s Life? 2013 already includes some information about household wealth, education, levels of trust, and the environment. National accounts include information about economic capital; OECD’s Green Growth indicators and Environmental Outlook to 2050 (among others) describe several important types of natural capital; OECD’s skills surveys, health and labour statistics can help to inform estimates of human capital; and Statistics Directorate have recently set out a measurement agenda for social capital

For How’s Life? the next step will be to bring together a concise set of indicators that can capture resource stocks on a human scale, including where possible their evolution over time and their distribution across society. “Trans-boundary impacts” (i.e. the impacts that countries have on one another) and “flow” measures (such as investment, depletion and degradation) will also be important indicators – particularly where these highlight significant risk factors, such as in the case of carbon emissions. Measures also need to reflect the latest evidence on the thresholds or tipping points beyond which stocks of resources might be considered dangerously low or imbalanced. 

Stocks of resources or capital are not the only determinants of well-being over time, but they offer a practical way to examine links between the present and the future: through the accumulation or depletion of resource stocks, the choices made by one generation can influence the opportunities available to the next. It’s important to start measuring the sustainability of well-being alongside current well-being outcomes – the future is, after all, where we’re going to spend the rest of our lives.

- Carrie Exton

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