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Wellbeing Economics: The Capabilities Approach To Prosperity Paul Dalziel Full Digital Chapters

The document discusses 'Wellbeing Economics: The Capabilities Approach to Prosperity' by Paul Dalziel, which emphasizes the importance of measuring and promoting wellbeing over traditional economic growth metrics. It outlines a framework consisting of 24 propositions aimed at enhancing individual and collective wellbeing through various levels of choice-making. The book is part of the 'Wellbeing in Politics and Policy' series and incorporates interdisciplinary insights to address contemporary issues related to wellbeing.

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WELLBEING IN POLITICS
AND POLICY
Series Editors: Ian Bache, Karen Scott
and Paul Allin

WELLBEING
ECONOMICS
The Capabilities
Approach to Prosperity

Paul Dalziel,
Caroline Saunders
and Joe Saunders
Wellbeing in Politics and Policy

Series Editors
Ian Bache
Department of Politics
University of Sheffield
Sheffield, UK

Karen Scott
Cornwall Campus
Exeter University
Penryn, Cornwall, UK

Paul Allin
Department of Mathematics
Imperial College London
London, UK
Wellbeing in Politics and Policy will bring new lenses through which to under-
stand the significance of the dramatic rise of interest in wellbeing as a goal of
public policy. While a number of academic disciplines have been influential in
both shaping and seeking to explain developments, the Politics discipline has
been relatively silent, leaving important theoretical and empirical insights largely
absent from debates: insights that have increasing significance as political inter-
est grows. This series will provide a distinctive addition to the field that puts
politics and policy at the centre, while embracing interdisciplinary contribu-
tions. Contributions will be encouraged from various subfields of the discipline
(e.g., political theory, comparative politics, governance and public policy, inter-
national relations) and from those located in other disciplines that speak to core
political themes (e.g., accountability, gender, inequality, legitimacy and power).
The series will seek to explore these themes through policy studies in a range of
settings – international, national and local. Comparative studies – either of dif-
ferent policy areas and/or across different settings – will be particularly encour-
aged. The series will incorporate a wide range of perspectives from critical to
problem-solving approaches, drawing on a variety of epistemologies and meth-
odologies. The series welcomes Pivots, edited collections and monographs.

More information about this series at


http://www.palgrave.com/gp/series/15247
Paul Dalziel • Caroline Saunders
Joe Saunders

Wellbeing Economics
The Capabilities Approach to Prosperity
Paul Dalziel Caroline Saunders
Agribusiness and Economics Research Unit Agribusiness and Economics Research Unit
Lincoln University Lincoln University
Lincoln, New Zealand Lincoln, New Zealand

Joe Saunders
Inter-Disciplinary Ethics Applied Centre
University of Leeds
Leeds, UK

Wellbeing in Politics and Policy


ISBN 978-3-319-93193-7    ISBN 978-3-319-93194-4 (eBook)
https://doi.org/10.1007/978-3-319-93194-4

Library of Congress Control Number: 2018946238

© The Editor(s) (if applicable) and The Author(s) 2018 This book is an open access publication
Open Access This book is licensed under the terms of the Creative Commons Attribution 4.0 International License
(http://creativecommons.org/licenses/by/4.0/), which permits use, sharing, adaptation, distribution and reproduction
in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link
to the Creative Commons license and indicate if changes were made.
The images or other third party material in this book are included in the book’s Creative Commons license, unless
indicated otherwise in a credit line to the material. If material is not included in the book’s Creative Commons license
and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain
permission directly from the copyright holder.
The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not
imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regu-
lations and therefore free for general use.
The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed
to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty,
express or implied, with respect to the material contained herein or for any errors or omissions that may have been made.
The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Cover pattern © Melisa Hasan

This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG
The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland
Preface

Wellbeing is a word that has entered the vocabulary of almost everyone con-
cerned with current economic and social trends, with good reason. Many fami-
lies and communities struggle with issues of wellbeing (including various forms
of depression, addiction and self-harm). Obtaining paid employment is no lon-
ger sufficient for a person to be confident of earning enough resources to sup-
port wellbeing; instead, the market economy is creating large numbers of jobs
that pay less than the living wage, reinforced by new forms of work such as
zero-hour contracts and the gig economy. Measures of objective and subjective
wellbeing indicate that rising prosperity is not shared by everyone, and some
groups of people are falling further behind.
Observations such as these have stimulated global attention to wellbeing. A
major impulse was the 2009 Report by the Commission on the Measurement of
Economic Performance and Social Progress, headed by Joseph Stiglitz, Amartya
Sen and Jean-Paul Fitoussi. The report concluded as its main theme that “the
time is ripe for our measurement system to shift emphasis from measuring eco-
nomic production to measuring people’s well-being”. This shift is taking place
around the world, including in the United Kingdom, where the Measuring
National Wellbeing Programme was initiated in November 2010 by the then
Prime Minister, David Cameron.
International organisations are implementing programmes to measure and
promote wellbeing. Important examples include the wellbeing conceptual
framework of the Organisation for Economic Co-operation and Development
(OECD), the quality of life framework of the European Union, the indicators

v
vi Preface

of global development maintained by the World Bank and the 2030 Agenda for
Sustainable Development created by the United Nations.
Despite this renewed focus on wellbeing, the priority of regional and national
decision-makers typically remains tied to economic growth. David Cameron,
for example, emphasised this priority at the launch of the United Kingdom’s
Measuring National Wellbeing Programme: “Now, let me be very, very clear,” he
said, “growth is the essential foundation of all our aspirations.” Even as scientific
evidence shows with increasing clarity that current patterns of economic pro-
duction are causing dangerous climate change, the political impetus for higher
growth in gross domestic product remains unabated.
There have been counter voices. A courageous example was Tim Jackson’s
report for the UK Sustainable Development Commission, published in March
2009. Entitled Prosperity without Growth, it set out in a compelling manner how
a genuine focus on wellbeing will require a different approach to economics.
This book responds to Jackson’s challenge. It does not claim to develop a new
economics; rather it seeks to recover insights from the economics tradition on
how persons can create wellbeing through personal effort and through collabo-
ration with others at different levels of choice-­making. Thus, the reader will find
the text is peppered with references to scholars recognised as giants in the field,
from Adam Smith writing in the eighteenth century to recent recipients of the
Nobel Prize in Economics. We draw on key elements in their work, supple-
mented by the published findings of other researchers, to create a synthesis that
we call the wellbeing economics framework.
The framework is developed in this book as a series of 24 propositions, begin-
ning with the proposition that the primary purpose of economics is to contrib-
ute to enhanced wellbeing of persons. Subsequent analysis then explains how
this purpose can be achieved. Public policy is important in this analysis, but it is
not the sole, or even the first, focus of the book. Instead, the framework recog-
nises that wellbeing is supported by capabilities at several different levels of
choice-making, with successive chapters focusing on persons, households and
families, civil society, the market economy, local government, the Nation State
and the global community.
We received considerable assistance as we prepared this book. Our thanks
begin with colleagues, students, clients and partners of the Agribusiness and
Economics Research Unit at Lincoln University and of the Inter-Disciplinary
Ethics Applied Centre at the University of Leeds. The strong collegiality and
engagement at both institutes contributed to the development of our ideas and
analysis expressed in this book.
Preface
   vii

This book builds on an earlier text on wellbeing economics, published for a


general audience in New Zealand by Bridget Williams Books. The new book
goes well beyond that text, but we remain grateful to Bridget Williams and to
Tom Rennie for supporting our initial efforts to synthesise a wellbeing econom-
ics framework.
In April 2016, we were approached by Laura Pacey at Palgrave Macmillan.
Laura introduced us to the Wellbeing in Politics and Policy series, edited by Ian
Bache, Karen Scott and Paul Allin, and invited us to submit a formal proposal
for the series. Our plans for this book were further developed after two insightful
reviews by anonymous referees. We are grateful to Laura, to the two referees and
to the three editors, for their support for this project.
Parts of the book were written while Paul Dalziel was a Visitor at the Leeds
University Business School and at the Victoria University of Wellington School
of Government. We are grateful to Giuseppe Fontana and to Girol Karacaoglu
for their hospitality in arranging these visits. We also gratefully acknowledge
insightful comments from participants in seminars Paul presented during both
visits, as well as from participants in conference sessions hosted by the Regional
Studies Association, the Australia and New Zealand Regional Science Association
International and the New Zealand Association of Economists.
Paul Dalziel enjoyed an opportunity to talk about the book with Tim Jackson,
during the latter’s visit to New Zealand as the 2016 Hillary Laureate. This pref-
ace has already acknowledged the importance of Jackson’s book Prosperity with-
out Growth for our research; all three authors are grateful to him for his
encouragement of this project.
Early drafts of the manuscript for the book were read by Paul Allin, Allan
Brent, Arthur Grimes and Karen Scott, each of whom provided written feed-
back. We are grateful to all four readers for their generosity, their clarity and
their insightfulness, which greatly improved the final analysis and presentation.
Of course, responsibility for the final text lies with us.
Finally, we thank the team at Palgrave Macmillan for translating our manu-
script into its published form. We particularly thank Laura Pacey and Clara
Heathcock, who worked hard to produce the book to Palgrave Macmillan’s high
standards.

Lincoln, New Zealand Paul Dalziel


Lincoln, New Zealand  Caroline Saunders
Leeds, UK  Joe Saunders
April 2018
Contents

1 From Economic Growth to Wellbeing Economics   1

2 Persons and Human Capital  23

3 Households, Families and Cultural Capital  45

4 Civil Society and Social Capital  67

5 Market Participation and Economic Capital  89

6 Local Government and Natural Capital 109

7 The Nation State and Knowledge Capital 129

8 The Global Community and Diplomatic Capital 149

9 The Wellbeing Economics Framework 169

Index 191

ix
About the Authors

Paul Dalziel has been Professor of Economics at Lincoln University since 2002. His
research concentrates on regional and national economic policies, particularly the way in
which they affect the wellbeing of persons. He has served on the Council of the Regional
Science Association International, 2011–2013, and is Executive Officer of its Australia
and New Zealand branch. He is Ambassador in New Zealand for the Regional Studies
Association.
Caroline Saunders has been Director of the Agribusiness and Economics Research
Unit at Lincoln University since 2002. Her research focuses on sustainable wellbeing.
She received the NZIER Economics Award in 2007 and was made an Officer of the New
Zealand Order of Merit in 2009 for contributions to agricultural research. She is the
2019–2020 President of the Agricultural Economic Society.
Joe Saunders was a teaching fellow in the Inter-Disciplinary Ethics Applied Centre at
the University of Leeds during the writing of this book, and is now Assistant Professor in
Post-Kantian Philosophy at the University of Durham. In 2015, he was awarded the
Robert Papazian Annual Essay Prize on Themes from Ethics and Political Philosophy.

xi
List of Figures

Fig. 1.1 Levels of human choice in the wellbeing economics framework 12


Fig. 2.1 The wellbeing value from time-use choices 28
Fig. 2.2 Personal skills as the integration of discovered, disciplined and dis-
played abilities. (Source: Adapted from Dalziel (2015, 2017)) 30
Fig. 2.3 The OECD wellbeing conceptual framework. (Source: OECD (2013,
Fig. 1.2, p. 21)) 34
Fig. 3.1 Number of people usually resident in the United Kingdom by house-
hold type, 27 March 2011. (Source: ONS (2015, Tables 53a and 57a)) 46
Fig. 3.2 Average daily minutes of total active childcare provided while youngest
child living in same household is preschool age or primary school age,
by gender of parent, United Kingdom, 2000 and 2015. (Source:
Adapted from ONS (2016b, Fig. 2, p. 6)) 52
Fig. 3.3 Prevalence of intimate violence since the age of 16 among adults aged
16 to 59, by category, England and Wales, year ending March 2016.
(Source: ONS (2017, Appendix Table 4.01), reporting data from the
Crime Survey for England and Wales) 54
Fig. 3.4 Real per capita gross domestic product and absolute poverty status of
population by age group, United States, 1966 to 2015. (Source: World
Bank (2017, Indicator NY.GDP.PCAP.KD) and United States Census
Bureau (2016, Table 3)) 55
Fig. 3.5 Real per capita gross domestic product and relative poverty status of
children, United Kingdom, 1994–1995 to 2015–2016. (Notes: Data
are for Great Britain prior to 2002–2003. AHC is After Housing
Costs. BHC is Before Housing Costs. Source: World Bank (2017,

xiii
xiv List of Figures

Indicator NY.GDP.PCAP.KD) and Department for Work and Pensions


(2017a, Table 4.1tr and 5.1tr)) 57
Fig. 4.1 Gross value added of frequent formal volunteering measured in 2014
prices, United Kingdom, 2005–2014. (Note: The impact of inflation
has been removed using the GDP Deflator at Market Prices. Source:
ONS (2016, Fig. 8.2, p. 41) and HM Treasury (2017)) 71
Fig. 5.1 Firm capabilities as the integration of human, knowledge and other
capitals96
Fig. 5.2 Estimated percentage of jobs paying less than the voluntary living
wage, by employee age, England, Scotland and Wales, 2017. (Source:
IHS Markit (2017, Table 3.6.1, p. 11)) 99
Fig. 5.3 Annual gross fixed capital formation, excluding cultivated assets and
intellectual property products, United Kingdom, 2001 to 2016. (Note:
The series is the chained volume measure (CVM), which removes the
impact of price changes; the values are presented at 2015 prices.
Source: Calculated from ONS (2017a)) 101
Fig. 6.1 Transfers from central government to local government, per capita,
England, 1997–1998 to 2016–2017. (Note: Transfers include govern-
ment grants and non-domestic rates; the values are presented at 2017
GDP Deflator prices and have been divided by mid-year population
for England in the previous calendar year. Source: Calculated from
DCLG (2014, Table 3.2e) and DCLG (2017, Table 3.2a) using ONS
estimates for the GDP Deflator and mid-year population) 114
Fig. 7.1 Number of people employed in the public sector by industry, season-
ally adjusted, United Kingdom, September 2017. (Source: ONS 2017,
Table 2)140
Fig. 7.2 Number of people employed in the civil service, full-time equivalent
seasonally adjusted, quarterly, United Kingdom, 1999(1)–2017(3).
(Source: ONS 2017, Table 1) 140
Fig. 8.1 Percentage distribution of active international non-governmental
organisations by sector, 1988. (Source: Boli and Thomas (1997, Fig. 2,
using UIA (1988) data, p. 183)) 152
Fig. 9.1 Levels of human choice in the wellbeing economics framework.
(Source: Fig. 1.1 in Chap. 1)171
Fig. 9.2 Wellbeing fabric of capital stocks and outcomes for wellbeing. (Source:
Constructed from OECD (2013, Fig. 1.2, p. 21, reproduced in
Fig. 2.3 of this book) and from Table 1.1) 175
Fig. 9.3 Trade union membership, percentage of employed and working-age
populations, United Kingdom, 1960–2014. (Source: Department for
Business, Energy & Industrial Strategy, Trade Union Statistics, and
OECD, Employment and Labour Market Statistics) 179
List of Figures
   xv

Fig. 9.4 Framework for local government action. (Source: Developed from
Saunders and Dalziel (2004, Fig. 1, p. 364)) 181
Fig. 9.5 Personal skills and firm capabilities. (Source: Figs. 2.2 and 5.1) 183
Fig. 9.6 Integration of personal skills and firm capabilities. (Source: Integration
of the two diagrams in Fig. 9.5) 184
List of Tables

Table 1.1 Types of capital in the wellbeing economics framework 10


Table 2.1 Examples of survey questions to elicit three different types of subjec-
tive assessments of wellbeing 32
Table 4.1 Number of civil society incorporated organisations by organisation
type, United Kingdom, 2013–2014 69
Table 4.2 Number of voluntary organisations registered as charities by area of
activity, United Kingdom, 2014–2015 70
Table 5.1 Statutory national minimum wage, statutory national living wage,
and voluntary or real living wage, United Kingdom, April 2017 98

xvii
1
From Economic Growth to Wellbeing
Economics

Abstract The primary purpose of economics is to contribute to enhanced well-


being of persons. Economists have often assumed this is best achieved through
high economic growth. Nevertheless, experience shows that the pursuit of
growth for its own sake can result in policies that harm the wellbeing of large
numbers of people. Threats of global climate change, as well as other environ-
mental and social damage caused by current patterns of economic growth,
intensify this concern. This first chapter argues for a new framework—wellbeing
economics—to guide private and public sector efforts for expanding the capa-
bilities of persons to lead the kinds of lives they value and have reason to value.
The wellbeing economics framework focuses on seven types of capital invest-
ment at seven levels of human choice. This typology provides the structure for
the book’s remaining chapters.

Keywords Wellbeing • Austerity • Economic growth • Climate change •


Capabilities

On 25 November 2010, then Prime Minister David Cameron launched the


United Kingdom’s Measuring National Wellbeing Programme: “From April
next year,” he said, “we’ll start measuring our progress as a country, not just by

© The Author(s) 2018 1


P. Dalziel et al., Wellbeing Economics, Wellbeing in Politics and Policy,
https://doi.org/10.1007/978-3-319-93194-4_1
2 P. Dalziel et al.

how our economy is growing, but by how our lives are improving; not just by
our standard of living, but by our quality of life” (Cameron 2010, par. 1; see
Allin and Hand 2017, for an explanation of the programme and its background).
That initiative reflected a wider global trend. Six years earlier, the Australian
Treasury had published a wellbeing framework for analysis and policy advice
(Treasury 2004; Gorecki and Kelly 2012). In 2008, French President Nicholas
Sarkozy had set up the Commission on the Measurement of Economic
Performance and Social Progress, headed by Joseph Stiglitz, Amartya Sen and
Jean Paul Fitoussi. The unifying theme of its report was: “the time is ripe for our
measurement system to shift emphasis from measuring economic production to
measuring people’s well-being” (Stiglitz et al. 2009, p. 12). In 2010, Italy simi-
larly launched BES (benessere equo e sostenibile), involving multi-­dimensional
measures of equitable and sustainable wellbeing (CNEL and ISTAT 2010).
At the supranational level, the Organisation for Economic Co-operation and
Development has created a wellbeing framework with three pillars: quality of
life, material living conditions and sustainability (OECD 2011, 2013, 2015,
2017a). The statistical system of the European Union similarly offers a quality of
life framework organised into eight themes of objective wellbeing indicators
plus a ninth theme for subjective or self-­evaluated measures (Eurostat 2015).
The World Bank (2016) has compiled 1300 data series as indicators of global
development and the quality of people’s lives in more than 200 countries. The
2030 Agenda for Sustainable Development includes a vision of a world where
physical, mental and social wellbeing are assured (United Nations 2015, par. 7).
These developments are consistent with a long tradition in economics that
aims to promote the wellbeing of people. Consider, for example, the critique of
mercantilism in Adam Smith’s Wealth of Nations, the book that founded modern
economics (Smith 1776, Volume 2, p. 179):

Consumption is the sole end and purpose of all production; and the interest of the
producer ought to be attended to, only so far as it may be necessary for promoting
that of the consumer. The maxim is so perfectly self-evident, that it would be
absurd to attempt to prove it. But in the mercantile system the interest of the con-
sumer is almost constantly sacrificed to that of the producer; and it seems to con-
sider production, and not consumption, as the ultimate end and object of all
industry and commerce.

Another prominent example was the Cambridge professor, Alfred Marshall,


who removed economics from the Moral Sciences and History Tripos to make it
an independent discipline (Groenewegen 1995, Chap. 15). As quoted by Keynes
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