The development of national accounts arose from the need to understand the state of the economy during the Great Depression. Today, questions about patterns of development, including the current rate at which we use the Earth's resources, are raising concerns which are driving demand for additional measures to better understand and inform policy to promote wellbeing and sustainable development. As with the national accounts in the 1930s, what we require are indicators better suited to helping measure and address the challenges of today. An increased focus on progress has led to an abundance of measures. The demand for better indicators of wellbeing and the sustainability of wellbeing are arguably precursors to the next phase in the development of our modern statistical systems.
For public policy to be effective, a common understanding of wellbeing and sustainability is important. In the words of Schumacher, 'everything in this world has to have a structure, otherwise it is chaos' (Schumacher, 1973, p.50). Structure is all the more relevant when attempting to develop meaningful statistics or indicators on something as complex as wellbeing. Mapping the conceptual territory that is to be measured is one of the first steps in producing meaningful statistics. Measuring wellbeing essentially involves mapping the whole of life, considering each life event or social context that has the potential to affect the quality of individual lives, or the cohesion of society (ABS 2001). This is no easy task, which is why numerous frameworks have been developed to assist in identifying the key issues and to focus on which goals ought to be pursued.
Once the conceptual groundwork has been completed, metrics can be employed to evaluate outcomes and inform policy development and design. Yet, different measures provide different assessments. This is necessarily so as different measures focus on different aspects of progress - some on material aspects, some on socio-economic aspects, while others are more environmentally orientated. Further adding to the potential differences is that some measures focus on current levels while others focus on whether we can maintain or enhance current levels through time, that is sustainability.
In addition, whilst wellbeing and sustainability are closely intertwined, they are distinct concepts, and sustainability itself is not well understood. Beyond the basic idea of sustainability there is no common understanding of what sustainability actually entails in practice, resulting in a large number of alternate measurement approaches. However, most concerning is the potential for this confusion to lead to the pursuit of policies that are inconsistent with sustainable development.
1.1 Wellbeing according to the Australian Treasury
The Australian Treasury developed a wellbeing framework about a decade ago to provide some guidance about its mission, which is to improve the wellbeing of the Australian people.1 It also identifies elements that need to be considered in providing thorough analysis, and are particularly relevant to our work. The framework is descriptive, providing a context for public policy analysis and advice that encourages a broad assessment of the costs and benefits of policy proposals.
It acknowledges that in addition to income and (material) consumption, a policy relevant assessment of wellbeing, both at the individual and social level, depends on health, education, social relationships, and a myriad of other aspects of life that people have reason to value.
From an institutional perspective, the process of developing the framework was important in itself, as it required Treasury to think carefully about what people value, and how this relates to policy analysis and advice. It was intended that the framework facilitate an iterative learning process for the Department through an ongoing examination of each of the dimensions. Since late 2010, the Treasury has been reviewing the framework, talking to staff on their experiences with the framework and considering what updating, if any, is required.
It is important to note that the Treasury's interest in the issues, concepts and dimensions of wellbeing goes back a long way.2 Treasury's association with wellbeing could be characterised as being evolutionary rather than revolutionary. Following the consultations, the next evolution of Treasury's association with wellbeing occurred, with some changes being made to the framework.3
In undertaking its mission Treasury takes a broad view of wellbeing as primarily reflecting a person's substantive freedom to lead a life they have reason to value.
This perspective recognises that the wellbeing of Australians encompasses more than is directly captured by commonly used measures of economic activity. It gives prominence to respecting the informed preferences of individuals, while allowing scope for broader social actions and choices. It is open to both subjective and objective notions of wellbeing, and to concerns for outcomes and consequences as well as for rights and liberties.
Treasury brings a whole-of-economy approach to providing advice to government based on an objective and thorough analysis of options. To facilitate that analysis, we have identified five dimensions that directly or indirectly have important implications for wellbeing and are particularly relevant to Treasury. These dimensions are:
- The set of opportunities available to people. This includes not only the level of goods and services that can be consumed, but good health and environmental amenity, leisure and intangibles such as personal and social activities, community participation and political rights and freedoms.
- The distribution of opportunities across the Australian people. In particular, that all Australians have the opportunity to lead a fulfilling life and participate meaningfully in society.
- The sustainability of opportunities available over time. In particular, consideration of whether the productive base needed to generate opportunities (the total stock of society's capital, including human, physical, social and natural assets) is maintained or enhanced for current and future generations.
- The overall level and allocation of risk borne by individuals and, in aggregate, the community. This includes a concern for the ability, and inability, of individuals to manage the level and nature of the risks they face.
- The complexity of the choices facing people and the community. Of concern is not only the costs of dealing with unwanted complexity, but also transparency of government and the ability of individuals and the community to make choices and trade-offs that better match their preferences.
These dimensions reinforce our conviction that trade-offs matter deeply, both between and within dimensions. The dimensions do not provide a simple checklist: rather their consideration provides the broad
context for the use of the best available economic and other analytical frameworks, evidence and measures.
Having established a common understanding of wellbeing, at least for the purposes of the Australian Treasury, the logical next step would be to measure it. However, conceptualising and measuring wellbeing are distinct endeavours and, in this regard, Treasury's goal has been modest: merely seeking an identification of the things that are important in the formulation of public policy advice. Treasury is a potential user of different measures of progress, but does not have a primary role in developing better measures. However, it does have a role in thinking about what measures may assist in policy development and in achieving its objectives.
1 Treasury's mission is to improve the wellbeing of the Australian people by providing sound and timely advice to the Government, based on objective and thorough analysis of options, and by assisting Treasury Ministers in the administration of their responsibilities and the implementation of Government decisions.
2 Two particular references are noteworthy. The November 1964 Supplement to the Treasury Information Bulletin, entitled The Meaning and Measurement of Economic Growth explored the nature of economic growth and its connection to wellbeing. Among other things, the supplement highlighted the importance of those aspects of wellbeing that were not reflected in the statistics of economic growth. The Treasury Economic Paper, Economic Growth: Is it worth Having?, published in June 1973, also explored the broader wellbeing impacts of policy. The paper, written partly in response to the apocalyptic claims of the Limits to Growth study sponsored by the Club of Rome, examined the costs and benefits of economic growth with a focus on non-pecuniary outcomes, such as those in the natural environment. Precursors to Treasury's current wellbeing framework can be glimpsed throughout the paper.