The problem with Wellbeing Valuation
As part of our Measuring Wellbeing series, we give space to thought leaders from different sectors to share insights, new perspectives and fresh ideas on how we understand, measure and improve wellbeing. In today’s guest blog from our Board member Dan Corry, CEO of New Philanthropy Capital, questions whether adding a price tag to wellbeing risks overselling and misunderstanding its true value.
The growing popularity of the lens of wellbeing when it comes to policy making, and the way we see the world, is a major advance. We have always known that understanding the usefulness of a policy or new initiative, purely on the extent it adds to Gross Domestic Product (GDP) or wages misses out far too much. The aim of policy – of life even – is surely to thrive – and we want to judge our ideas against this sort of thing.
So it is a great thing that a whole new area of study is erupting. It’s something that I am pleased to play some small role in via my board membership of the What Works Centre for Wellbeing. The attempt to bring better metrics into it is vital so that we can:
- improve our understanding of what works,
- for who and under what conditions,
- in a way that is measurable, comparable and transparent.
These advances are arguably making most progress with the use of subjective measures of wellbeing – where we track data on how people report their own wellbeing, usually using the four dimensions that the ONS now ask about. Of course it has limitations – even the concept of subjective wellbeing and people’s ability to say something meaningful about it is queried. But it gives us some handle on things that we may have missed before.
Up to now I am enthusiastic about this revolution in thinking.
Going beyond a wellbeing lens: Wellbeing Valuation
But some push on further. They try to monetise the improvements in wellbeing that are generated. So they work out how much they feel wellbeing has increased – as a consequence of a new programme, or as a result of going to the theatre or visiting a park – and then turn it into pounds. That is why you can now read about estimates that claim that the value of National Civil Service is at least four times the costs involved , the total value of parks is £34.2bn. The value to person of participating in the arts is about £1,500 per year and the national value of volunteering, to volunteers, to be in the order of about £70bn.
How do they do this? Essentially this Wellbeing Valuation method estimates the relationship between money and an increase in wellbeing on the one hand and then uses that estimate to work out how much money we would have to receive to achieve the same boost to our wellbeing that we obtain from any particular activity. One can understand the logic, admire the ambition, even praise the attempt to be rigorous methodologically.
However, my fear is not only that this is asking too much of the data but that if we have too much of it, it will start to undermine the very idea of wellbeing – as it is used by those doing slightly intangible things to argue for their own areas with the estimates getting bigger and bigger (and often unbelievable).
These methods are closely related to all kinds of cost-benefit analysis (and compensating surpluses) and even to some of the social return on investment literature. And while these are all good mechanisms for trying to get a handle broadly on the worthwhileness of certain activities so that we can allocate resources better, they all crumble when pushed too far.
I spent some of my working life in the Treasury where lobby group after lobby group presented estimates (often done by supposedly respectable academics or consultants) arguing that their sector contributed £Xbn to GDP, the sums in aggregate massively exceeding the whole of GDP: so we discounted most of them. I fear wellbeing could go the same way.
Being cautious about over-claiming
In the case of the wellbeing methodology, we are taking estimates of wellbeing we know to have many flaws and pushing it very hard indeed. The usual problems of the additionality of the effects are of course present here: what would have happened anyway. If, for example, I don’t go to the theatre I may do something else that gives me wellbeing nearly as high; and should always caution us about saying too much.
The problem of causality
We also have no idea whether the going to the theatre was what caused wellbeing to rise, or in fact doing any activity with other people would have had a similar impact: the policy implications are different depending on the answer to that question.
Causality, quality and context
There is also a major danger that we confuse averages with the impact of particular things. For instance, we are starting to see estimates made of the value of going to a youth club – or the theatre, or a park – bandied around, when in fact it must depend on the actual experience and context (and quality provided) at the youth club, theatre or park and the situation of the person who attends . It cannot imply that anyone doing these things gains the same amount of wellbeing. Yet organisations that produce theatre visits of youth club places are now tempted to multiply up by that number.
Such individual estimates could, in theory, be used to help judge where, for example, a funder should put their money. But it is hard to suggest that estimates that are vague but that produce comparable numbers should then be used to make specific spending decisions, for instance between spending more on arts or library engagement as opposed to sports participation (see eg here page 9).
There are also issues to do with the estimates of how many pounds a unit of wellbeing is worth – the relationship between income and wellbeing is a complex issue in itself.
However, one result of all this is that the monetising wellbeing approach ends up with extraordinarily high values for public and non-market goods. Will Davis argues that the methodology here is to blame as it is in effect looking at the amount of money we would need to be compensated if we weren’t allowed to have a certain non-market good – like going to the theatre once a month. He argues that because money is such a weak correlate of happiness when compared to social and public goods it often takes extraordinarily large ‘hypothetical’ monthly payments to compensate us for the non-market goods we enjoy.
In aggregate would someone really feel their wellbeing was the same if I took £Xk away from them, but said they could go to the theatre once a month? To be fair to the literature, they are often keen to point out somewhere that “value derived using Wellbeing Valuation should not be seen as actual amounts that people would be willing to pay”. And arguably the methodology is useful in allowing us to do some broad rankings of the impact on happiness of different things. But this is not how the estimates are treated in practice and in public discourse.
Of course, our methodologies may, in the end, crack these sorts of problems. Or, we may believe that it never can. None of this means we should stop pushing wellbeing much more into our thinking – as the Treasury have done with the very welcome addition of wellbeing to the most recent version of the Green Book, the ‘bible’ on how to do policy appraisal and investment analysis. But it does warn us to steer clear of those pushing too far. We don’t need to monetise to get a long way – and we stay in the realms of believability.
This blog is part of our Measuring Wellbeing series to provide a space to start a discussion on how we understand, measure and improve wellbeing. Add your perspective by tweeting us.