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New approaches to measuring welfare

Author

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  • Kristen Cooper
  • Mark Fabian
  • Christian Krekel
Abstract
Economics has traditionally understood ‘welfare’ (what makes a life go well) as the satisfaction of preference. This conceptualisation of welfare is typically measured using revealed preferences, proxied through income and prices or stated in willingness‐to‐pay surveys. Recent decades have seen growing challenges to this paradigm. The climate crisis, among other phenomena, has called into question whether income and price data effectively proxy preferences, and willingness‐to‐pay surveys continue to struggle with accurately pricing important items such as biodiversity, digital goods, privacy and social connections. Preference satisfaction as a welfare criterion has also been challenged conceptually by psychologists and scholars working in the development space, among others. In this article, we review recent innovations in alternate ways of conceptualising and measuring welfare for the purposes of economic welfare analysis. We focus on using stated preferences over aspects of well‐being, life‐satisfaction scales and the WELLBY approach, and well‐being frameworks such as Bhutan's Gross National Happiness Index. While not without weaknesses, these approaches also have marked strengths relative to the traditional approach.

Suggested Citation

  • Kristen Cooper & Mark Fabian & Christian Krekel, 2023. "New approaches to measuring welfare," Fiscal Studies, John Wiley & Sons, vol. 44(2), pages 123-135, June.
    • Handle: RePEc:wly:fistud:v:44:y:2023:i:2:p:123-135
    DOI: 10.1111/1475-5890.12333
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    1. Diane Coyle & Mark Fabian & Eric Beinhocker & Tim Besley & Margaret Stevens, 2023. "Is it time to reboot welfare economics? Overview," Fiscal Studies, John Wiley & Sons, vol. 44(2), pages 109-121, June.
    2. Samuel Bowles, 2023. "Moral economics," Fiscal Studies, John Wiley & Sons, vol. 44(2), pages 151-160, June.

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    More about this item

    JEL classification:

    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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