WASHINGTON — The list of go-to metrics economists rely upon to make their judgments of how Americans — and the economy — are faring sometimes only captures one part of the picture.
But Federal Reserve Board Chairman Ben Bernanke said Monday that new research shows there are a variety of other indicators like social ties and a sense of community or job security and prospects of upward mobility that should also be evaluated by economists in ascertaining an individual's level of happiness or life satisfaction, in other words, one's well-being.
After all, "the ultimate purpose of economics, of course, is to understand and promote the enhancement of well-being. Economic measurement accordingly must encompass measures of well-being and its determinants," said Bernanke, in a speech before the International Association for Research in Income and Wealth on Monday.
In a speech given two years ago on the "Economics of Happiness" Bernanke defined "happiness" as a "short-term stage of awareness that depends on a person's perception of one's immediate reality, as well as on immediate external circumstances and outcomes. By 'life satisfaction' I mean a longer-term state of contentment and well-being that results from a person's experience over time."
Statistics like gross domestic product, consumer spending, disposable income, household net worth — while pertinent in monitoring individual's ability to meet their needs and reflect changes in the economy — don't necessarily capture the entirety of any one person's full life experience.
Rather, what's left over is a variety of factors that ultimately contribute to an individuals' well-being, like belonging to a family, confidence about the future, and ability to adapt to changing circumstances.
Based on those measures, according to Bernanke, an overwhelming majority of Americans report being "very happy" or "pretty happy" on a daily basis. Researchers attribute that to an individual's ability to adapt and find satisfaction in their lives even during difficult circumstances.
As a result of this kind of research, there are now alternative measures of well-being being considered by economists, like psychological wellness, education, physical health and safety, strength of family ties and time spent in leisure activities that economists can look to.
"These measures have begun to inform official statistics and have started to be discussed in policy debates," said Bernanke.
For example, in the Kingdom of Bhutan, the government in 1972 abandoned tracking gross national product in favor of a Gross National Happiness index based on a survey that incorporates many of these kinds of indicators.
The Organization for Economic Co-operation and Development created a "better life index" that provides a side-by-side comparison of countries according to various quality-of-life indicators that could be followed over time.
Other economic indicators could be used as well, Bernanke said. For example, changes in the distribution of income, wealth, or consumption, confidence about future employment prospects, or a households' liquidity buffer.
"All of these indicators could be useful in measuring economic progress or setbacks as well as in explaining economic decision making or projecting future economic outcomes," said Bernanke.
