OECD Better Life Initiative

What are the goals of the initiative?

Durand: The Better Life initiative has three main goals:

The first is to collate a wide range of internationally comparable indicators of well-being that can inform policy in a number of ways. This includes assessing how countries perform in the many areas that shape people’s lives, and how this performance evolves over time. These indicators can also help evaluate the impact of policies on specific aspects of well-being. Second, we aim to develop better ways to measure current and future well-being, notably by taking stock of available data, evaluating its quality, and recommending the actions needed to make lasting improvements. Finally, we want to initiate a dialog about well-being with citizens to measure public perceptions and understand what matters most in people’s lives.

Apart from measuring well-being today, the OECD has also identified four factors that can shape well-being in the future. What are these factors?

Durand: Our framework looks at future well-being by considering resources that persist over time, and that can be thought of as “capital” — i.e. resources that are capable of storing value, and that can generate a stream of benefits for people and society over time. We have identified four types of capital:

Economic capital refers to both produced capital, e.g. man-made tangible assets, and financial capital, that is money in the bank, or shares in a company. Natural capital refers to aspects of the natural environment. It can include specific assets, like energy resources, as well as broader ecosystems — i.e. the joint functioning of, or interactions between, different environmental assets. Human capital can be defined in several different ways, but typically refers to aspects such as people’s knowledge, skills, competencies, and health. Social capital refers to the social norms, trust, and values that foster cooperation within or among different groups in society.

How would you evaluate their current state?

Durand: Each type of capital includes many different assets and resources. Some of these are well measured, while others lack robust internationally comparable measures. For example, having clean air to breathe is an important aspect of our natural environment. While the average level of air pollution has been falling in many OECD countries in the last ten years, this is not universally true. There are big differences in exposure to pollution, depending on where people live.

For many people living in large cities around the world, air quality is a critical issue for health and well-being, and will continue to be in the future. We can also assess trends in levels of education, for example, which gives us some insight into the development of human capital. Over the last 15 years, we have seen a steady increase in the educational levels of working-age people across most OECD countries. But countries are developing the skills and knowledge of their populations at different rates.

What are the main challenges of monitoring and measuring the types of capital that determine well-being over time?

Durand: There are many challenges. One of them is getting definitions right from the start. Social capital, for instance, is hard to define because its scope is less clear than those of other types of capital. For this reason, it has been conceptualized in many different ways. Our solution to this has been to find the common ground among the various approaches. For example, we are very interested in aspects of trust, both in other people and in institutions, as a form of “social capital” that helps to foster well-being through better and more efficient cooperation between different people in society.

Another typical challenge is finding accurate indicators, even when the concept is well defined. For instance, economic capital is the best-defined of all capitals, as it relies on a long-standing tradition of economic thought, which is also reflected in well-established measurement frameworks such as the System of National Accounts. However, even for economic capital, we lack ways of measuring relatively basic concepts such as household wealth beyond simply financial wealth — which does not include home or land ownership, for example.

You’ve already pointed out the challenge of defining resources like social capital. With regard to that, how would you value and measure asset changes?

Durand: Most indicators of social capital are based on surveys about trust in others or toward institutions, social norms, people’s attitudes toward different groups, or beliefs about the helpfulness of others. Assessing changes to these assets over time boils down to looking at how self-reporting of trust and other norms varies from one period to another. This helps for instance in understanding whether events, such as the Great Recession, led to a significant depletion of social capital. However, it is harder to understand what type of investment would be needed to restore trust to pre-crisis levels. We have just launched a project on trust at the OECD to try and address this issue.

Within the dashboard of the Better Life Initiative, the eleven life domains for current well-being are evaluated on a per country basis. Would that approach also apply to the four capital stocks for sustainable well-being?

Durand: Yes, there is a strong rationale for expressing the four capital stocks by country, as many policies that address managing resources over time are mandated within national boundaries. Other levels of measurement are also important, however. For example, some types of natural assets are shared global resources, such as the health of the atmosphere or the world’s oceans. These cannot be monitored only on a country-by-country basis; and often the actions of one country can have wider implications for well-being elsewhere. The distribution of resources between different people or sectors within countries can matter, too. Regional differences in exposure to air pollution might be one example. Others include the distribution of economic wealth across different institutional sectors, or human capital across different groups within society.

The OECD shows clear numbers and statistics with regard to current well-being. With the approach as you’ve explained it — are there currently plans to develop and publish similar statistics on sustainable well-being over time?

Durand: We are currently working on developing new measures of capital stocks in collaboration with national statistics offices. For example, as part of our new initiative on trust, we have a project underway to develop better measures of trust in institutions. Under the OECD’s Green Growth initiative, we are developing measures of natural assets and of how efficiently they are used. Furthermore, the OECD is working to help implement the new UN System of Environmental and Economic Accounting (SEEA), which provides a framework for capturing information about environmental assets within national accounting systems.

What role do companies like Robert Bosch GmbH play in increasing economic, environmental, human, and social capital?

Durand: Companies can play a vital role in ensuring the sustainability of well-being over time. They do this through careful environmental management, for instance, as well as by reducing emissions and adopting sustainable production processes. All of this is critical for preserving stocks of natural capital over time. By creating wealth and investing in new technology and innovation, companies help develop the economic capital that future generations will rely on. As major employers, companies also have a role in developing human capital and social capital, both formally through education and training, and by providing for the health and well-being of their staff, and fostering strong local communities.

(Interview with Martine Durand in March 2015)