The WELLBY: a new measure of social value and progress

The wellbeing of citizens, employees, and customers is a recognized goal for various entities. The World Happiness Report, for instance, tracks governmental progress in improving citizen wellbeing, primarily measured by self-reported life evaluation. Employers have long used job satisfaction measures, while some businesses aim for a 'wellbeing economy' encompassing fairness, participation, dignity, purpose, and nature. This paper introduces the WELLBY (Wellbeing-Year) to assess progress toward economic wellbeing and guide resource allocation for maximum wellbeing impact. Defined as one point of self-reported life satisfaction (0-10 scale) for one individual for one year, WELLBYs allow for quick calculations in large, complex policy initiatives. The total WELLBYs in a population combine quality and length of life. They can be monetized for cost-benefit analyses or used independently in cost-effectiveness analyses. WELLBYs, offering an alternative to GDP, help measure a nation's 'wellbeing wealth'. The WELLBY's anthropocentric nature places importance on future human wellbeing, influenced by the social discount rate. The discounted WELLBYs of the human population serve as a metric for present and future wellbeing, considering environmental impacts. The term WELLBY, coined by Frijters et al. (2020), is now adopted by UK and New Zealand Treasuries. Social value banks (lists of policy effects) are developing in several countries, using best-available evidence to inform future appraisals. WELLBY's simplicity ensures easy understanding, transparent calculations, and a vast research base on life satisfaction determinants. Governments and businesses benefit from adopting a WELLBY orientation because wellbeing is a stronger predictor of voting for the incumbent than economic factors and is also associated with firm profitability.

The paper draws upon a substantial body of existing research on subjective well-being, including the work of the World Happiness Report, studies on job satisfaction and its correlation with productivity, and research on the determinants of life satisfaction. The authors specifically reference studies that link life satisfaction to objective outcomes like health, longevity, productivity, voting patterns, and other behavioral phenomena. The literature also supports the use of life satisfaction as a robust and reliable measure of well-being, despite acknowledging limitations like intra-personal variability and susceptibility to contextual factors. The authors mention existing work on the monetary valuation of Quality-Adjusted Life-Years (QALYs) and their relevance to the WELLBY framework. Finally, they refer to research on the value of time spent in daily activities, using momentary happiness data as an alternative measurement approach to complement WELLBYs.

The WELLBY is defined as one point of self-reported life satisfaction (0-10 Likert scale) per individual per year. The use of self-reported life satisfaction offers several advantages: it's democratic, aligns with individual perceptions of key life outcomes, and correlates with objective outcomes. Data is readily available from various national and international surveys. The authors discuss the psychometric properties of life satisfaction measures, including reliability, validity, sensitivity, and discriminant validity. While acknowledging limitations such as intra-personal variability, item-ordering effects, and susceptibility to survey design and framing effects, they emphasize the robust nature of life satisfaction as a measure. The WELLBY can be used in two main analytical frameworks: Cost-Effectiveness Analysis (CEA) and Cost-Benefit Analysis (CBA). In CEA (Equation 1), the social unit cost (SUC) is calculated as the ratio of discounted WELLBY gains to discounted net public costs. The equation incorporates a financial discount rate and a WELLBY discount rate, allowing for consideration of future generations and sustainability. A social planner aiming to maximize wellbeing would rank policies by SUC and implement them until budget constraints are reached. In CBA (Equation 2), the net present social value (NPSV) is calculated as the discounted difference between monetized benefits (including WELLBYs and other monetary benefits) and costs. The paper provides a practical example of a youth traineeship program, applying both CEA and CBA. They calculate the SUC and NPSV, demonstrating the methodology and making a recommendation based on cost-effectiveness relative to a monetary value assigned to 1.0 WELLBYs. The value of 1.0 WELLBY is discussed, with a range of GBP 10,000 to GBP 16,000 in 2019 prices suggested, anchored to the value of a QALY. The analysis shows how to incorporate WELLBYs into policy appraisal, considering various factors such as resource availability, implementation costs, and inequality. The paper further describes the development of social value banks in several countries (UK, Denmark, Canada, and US), emphasizing their role in collecting and disseminating WELLBY coefficients for policy analysis. Finally, they operationalize WELLBYs as an alternative to GDP by calculating expected lifetime WELLBYs (Equation 3) for different countries, using data on life satisfaction and life expectancy, to assess social progress.

The paper's key findings revolve around the introduction and application of the WELLBY as a new measure of social value and progress. The authors demonstrate the feasibility and practicality of using WELLBYs in policy analysis, both ex-ante and ex-post. Figure 1 displays the cost-per-WELLBY for 15 diverse policy initiatives globally, highlighting cost-effectiveness variations. A practical example of a youth traineeship program shows how to evaluate its cost-effectiveness using WELLBYs, demonstrating that incorporating wellbeing benefits alongside income significantly changes the assessment compared to traditional willingness-to-pay methods. The paper details the methodology for conducting both Cost-Effectiveness Analysis (CEA) and Cost-Benefit Analysis (CBA) with WELLBYs. The SUC calculation (Equation 1) is shown to incorporate discounting to account for the time value of money and the WELLBYs of future generations. The paper assigns a monetary value to a WELLBY (ranging from GBP 10,000 to GBP 16,000 in 2019 prices in the UK), which is used in CBA calculations. The introduction of social value banks in different countries (UK, Denmark, Canada, and US) is a significant finding. These banks systematically collect and disseminate WELLBY coefficients, enhancing policymaking by providing a robust evidence base. Finally, the paper introduces the expected lifetime WELLBYs (Equation 3) as an alternative to GDP to measure social progress across countries. Table 3 presents expected lifetime WELLBYs for selected countries, revealing variations in wellbeing across nations. Table 4 compares the percentage growth rates of World GDP with those of weighted expected lifetime WELLBYs, life satisfaction, life expectancy, and population level, demonstrating the independent contributions of economic activity and wellbeing to social progress. The analysis reveals that economic growth and wellbeing growth are not always perfectly correlated; periods of high GDP growth can coincide with stagnant or even declining WELLBY growth, underscoring the limitations of using GDP alone as a measure of social progress.

The findings show that the WELLBY offers a valuable alternative to traditional economic measures like GDP in assessing social progress and informing policy decisions. By incorporating self-reported life satisfaction, it provides a more comprehensive and inclusive measure of well-being that goes beyond monetary indicators. The paper successfully demonstrates the practical applicability of the WELLBY framework in both ex-ante and ex-post policy evaluations, as well as its potential in measuring social progress at a national and international level. The development of social value banks further strengthens the framework by creating a structured and accessible evidence base for policy analysis. The comparative analysis of GDP growth and WELLBY growth highlights the limitations of GDP as a sole indicator of societal progress and advocates for a more holistic approach that considers wellbeing alongside economic indicators. The paper also successfully integrates wellbeing into conventional economic analytical tools like CEA and CBA, making it accessible to policymakers who are already familiar with these methods.

The WELLBY offers a valuable new metric for evaluating social value and progress. Its simplicity and integration into established frameworks (CEA and CBA) make it readily applicable. The development of social value banks globally strengthens its practical use. While not without limitations, the WELLBY provides a more comprehensive measure than GDP, accounting for both quality and length of life and highlighting the independent contributions of economic activity and well-being to social progress. Future research should focus on further refining the methodology, expanding the evidence base beyond WEIRD countries, and addressing the challenges of incorporating the WELLBY into mainstream policy discourse.

The WELLBY, while offering a comprehensive measure, has limitations. Intra-personal variability in life satisfaction requires large datasets for accurate estimates. The measure is susceptible to survey design effects, and there's a need for longitudinal data and consideration of context-dependency (culture, age). Furthermore, the WELLBY may be too coarse to capture smaller, short-term activities. The current evidence base predominantly comes from WEIRD countries, requiring further research for broader applicability. The reliance on self-reported data introduces inherent biases and limitations in accurately reflecting the reality of an individual’s life experiences. Finally, while the authors address aspects of sustainability, the anthropocentric nature of the WELLBY requires further development to fully encompass environmental concerns.