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Well-being defined

How would you define well-being? Do you think the definition varies between individuals depending on culture, values and traditions?

Generally it does, and it is quite a broad concept. Yet, when we carry out economic, social or political analysis, it is important to have some commonly accepted definition of well-being that can eventually also lead to a quantitative measurement.

So, how do we define well-being in this context?

At first sight, one might be tempted to identify well-being with wealth (economic or financial). In fact, wealth does provide individuals with an opportunity to purchase goods and services that make life more comfortable. However, it is too restrictive and also incomplete to only look at money. The quality of everyone’s life depends on many other factors, including health, access to education and social inclusion.

Taking these factors into consideration, I favour a definition of well-being that focuses on people’s choices or people’s capability to make choices to live life in the way that they think has value. Of course, human choices vary so greatly it is impossible to consider them all, so the definition needs to be narrowed down. This exercise has been successfully undertaken by the United Nations Development Programme (UNDP) through its Human Development Index.

Human Development Index

Of the many choices individuals can make, three essential ones are for people to “lead a long and healthy life, to acquire knowledge and to have access to resources needed for a decent standard of living” (quoted from The Human Development Index – what it is and what it is not).

It then follows that a simple way to measure human development (and well-being) is to look at:

  1. their level of wealth,
  2. their life expectancy, and
  3. their ability to access knowledge (e.g. formal schooling).

Accordingly, the Human Development Index (HDI) has been created using the following four indicators to measure the above points:

  • life expectancy at birth
  • the average number of years of schooling for adults aged 25 or more
  • expected number of years of schooling for children
  • the Gross National Income per-capita.

This index is calculated by UNDP for most countries in the world every year. Therefore, the HDI provides a “macro” (i.e. aggregate) picture of monetary and non-monetary well-being in a country. The index ranges from a minimum of 0.35 (Central African Republic) to a maximum of 0.95 (Norway). Higher values indicate better living conditions.

While the index is useful for many analytical purposes, it will be important to keep in mind that:

  • HDI is not the only possible measure of development or well-being. In particular, there are aspects of human life that HDI does not fully capture. For instance, environmental sustainability is not included in the index. Similarly, institutional development (e.g. the extent to which individuals live in democratic countries, or the degree of protection and enforcement of certain rights and freedoms) is not accounted for.

  • HDI represents the average level of human development in a country. As such, HDI does not say much around the differences between individuals within the same country. In fact, UNDP does provide an inequality-adjusted HDI. This is obtained by reducing the original HDI in proportion to the observed differences in life expectancy, wealth, and education across individuals within any given country.

Your task

Select the links below to take a look at all the countries worldwide listed by the UNDP to compare the Human Development Index. Post your thoughts in the comment section below.

Human Development Index - by country

Inequality-Adjusted HDI

References

Jahan, S. (2016). The Human Development Index – what it is and what it is not. Retrieved from http://www.hdr.undp.org/en/hdi-what-it-is

United Nations. (2016). Human development index (HDI). Human development reports. Retrieved from http://www.hdr.undp.org/en/content/human-development-index-hdi


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This article is from the free online course:

Exploring Economics: Will the Next Generation Be Worse Off?

Griffith University