28 January 2019

Orkney, GDP and the trouble with quantifying the good life


The annual Halifax quality of life survey tells us that Orkney is the best place to live in the UK. This is something of a puzzling conclusion, as only those 22,000 people living on the remote islands seem to agree.

The confusion increases when we consider that the bank goes on to say that it used to be the south of England which contained all the places people liked to live in, while Orkney has only recently risen to that coveted top spot.

If Orkney is really such a desirable place to settle down, why don’t more people live there?

There is only one possible answer to this, which is that what the Halifax describes as an optimal quality of life isn’t the one the rest of us use – bar those 22,000 Orkney residents. So far, so trivial and perhaps just a bit of “tee hee” mischievous pedantry – but there’s an important point about measuring progress lurking underneath this.

One way governments and statisticians try to take the economic temperature of a nation is Gross National Product. Even the man who invented the concept, Simon Kuznets, agreed there were gaping holes in the concept and calculation of GNP. Certainly it’s not in itself a goal we should be aiming for, only an imperfect proxy at best. It’s entirely possible, even potentially desirable, that we therefore move on to something rather better as a measure of how well we’re doing.

Yet for all its flaws, GDP has one glorious feature: it’s objective. All of the varied alternatives bring in entirely subjective measures. And subjectivity has that problem which is that, well, it’s subjective. What you or I desire or would use as a measure of progress might not be what the people defining progress use to define it. We might say this would be an imposition of the values of others upon our lives or, if we were being kinder, simply a misidentification of what people think the good life is.

Take the Genuine Progress Indicator (GPI), just one of the attempts to provide an alternative. In its definition, income inequality is taken to mean a place is getting poorer. That is clearly a value judgment and not one necessarily shared by us all. GPI also assumes that the loss of primary forest is a cost to us all – again, that’s the imposition of a particular value we might not share upon us all. It assumes that higher education always has a positive value, not an assumption necessarily shared by all recent graduates.

Then there’s the Gross National Happiness index, as pioneered by Bhutan’s royal family. Like GPI, this lauds equitable development, as well as cultural diversity. Down Under they have the Measures Of Australia’s Progress, which also talks of fair outcomes – measured as a fall in inequality.

Now, it’s certainly possible that a more equal society is what everyone wants, as is ever more cultural diversity and vibrancy. But even if that is true, those are still inherently subjective measures. It’s also rather likely that they are not what everyone does want, even if the people putting together these indices think they ought to.

Therein lies the problem with all these varied alternatives is. By moving away from simple counting and sums into attempts to define what the good life is, we risk smuggling in prejudiced definitions of what makes for a happy existence.

After all, we would not all move to Orkney even if it were true that it’s the best place to live – a big influx of people would cost the place much of its tranquillity, for a start. But the fact there is a net outflow of people from the place suggests there is something amiss with the Halifax’s definition of an optimal place to live.

This is also the problem with all those other attempts to construct a kind of “good life index” – every individual’s idea of what it comprises is different. Some people love the hustle and bustle of a big city, others find the noise and hurly burly unbearable. Some of us can think of nothing better than a sea view on a peaceful Scottish island, others are bored rigid by the mere thought of it.

The same is true of the kind of factors these indices try to measure. Could anyone say with authority, for example, what the optimal level of inequality in a society is? Attempts at these kind of measures at happiness are therefore always hamstrung by the subjectivity of what they are measuring. And we certainly shouldn’t try to start imposing some well-meaning statistician’s idea of what the good life is on to the rest of us. That would be most sub-optimal.

Tim Worstall works for the Continental Telegraph and the Adam Smith Institute.