In 2010, Ben Bernanke gave a commencement address in which he described the “the ultimate purpose of economics”:
[It] is to understand and promote the enhancement of well-being. Economic measurement accordingly must encompass measures of well-being and its determinants…Interestingly, income and wealth do contribute to self-reported happiness, but the relationship is more complex and context-dependent than standard utility theory would suggest. Other important contributors to individuals’ life satisfaction are a strong sense of support from belonging to a family or core group and a broader community, a sense of control over one’s life, a feeling of confidence or optimism about the future, and an ability to adapt to changing circumstances…. Psychological wellness, the level of education, physical health and safety, community vitality and the strength of family and social ties, and time spent in leisure activities.
That is a pretty large list of things that determine your well-being. You will recognize some from traditional economics, while others are from this new view on economics. We can put them in a list to make them a little clearer:
Determinants of Well-Being
- Gross domestic product per capita
- Personal consumption expenditures
- Household income
- Household wealth
- Changes in the distribution of income, wealth, or consumption
- Degree of upward mobility in material measures of well-being
- Indications of job security and confidence about future employment prospects
- Households’ liquidity buffers or other measures of their ability to absorb financial shocks
- A strong sense of support from belonging to a family or core group and a broader community
- A sense of control over one’s life
- A feeling of confidence or optimism about the future
- An ability to adapt to changing circumstances
- Psychological wellness
- The level of education
- Physical health and safety
- Community vitality and the strength of family and social ties
- Time spent in leisure activities
Additionally, the Organization of Economic Cooperation and Development (an association composed of developed nations) has created a Better Life Index comprised of elements that increase well-being.
OECD Better Life Index
- Housing
- Income
- Jobs
- Community
- Education
- Environment
- Civic Engagement
- Health
- Life Satisfaction
- Safety
- Work-Life Balance