Saturday, July 19, 2008


Talk to Hunter Valley Research Foundation Wellbeing Watch
June 19, 2008

I’m very pleased to be back in my home town to support the HVRF and the presentation of the Wellbeing Watch report for 2008. I think the last time I was in this building it was to receive my commerce degree in 1970. By then I’d moved to Sydney to work and I’ve lived there ever since. All my formal education in economics was gained in this town, at Boys High and then the University of Newcastle. Trouble was, at the time I had my heart set on becoming an accountant. I resented all the economics I was forced to study, couldn’t see the point of it and promptly forgot most of it as soon as I’d passed the exam - which I had trouble doing. It wasn’t until I’d passed my last exam to become qualified as a chartered accountant that I realised this great goal I’d been working towards since high school wasn’t very satisfying and wasn’t what I wanted to do with my life. I soon stumbled into journalism at the Herald - the Sydney Herald - which was what I wanted to do with my life - and was pressed into service as an economic journalist. I’ve been writing about economics and the economy ever since and this month I’ve clocked up 30 years as the Herald’s Economics Editor. I’ve spent most of that time desperately trying to remember what I was supposed to have learnt back in Waratah, Tighes Hill and Shortland all those years ago. Callahan. Three-pointed star steel rods used for fencing.

The economy - the economic dimension of our lives; the bit concerned with working, earning and spending - is very important. I’ve found working out how the economy works - how best to make it work smoothly without too much inflation or too much unemployment, how to make it grow and make ourselves more prosperous - is a subject of great importance and infinite fascination. As I’ve gained an understanding of these things, however, and perhaps as I’ve got older and wiser, I’ve come to realise that there’s a lot more to life than economics. And that’s what we’re here today to discuss.

Economics is concerned with the material aspect of life, with the production and consumption of goods and services. When we pursue economic growth - measured by a faster increase in GDP - as economists, politicians and business people almost universally say we should, we’re trying to raise our material standard of living. Now, the material is very important. Only a fool - or an aesthete - would deny it. But, equally, only a fool would believe that the material aspect of life was all that mattered. Almost everyone agrees that the quality of our relationships with family and friends is more important than how much money we make. Our trouble is the practical one of making sure we actually practice what we know to be true, because we all have a tendency to regard our material concerns as more urgent and pressing than our relationships with spouses, children and parents. Similarly, most people agree that good health is more important than money. It’s very important to us to have a sense of purpose in our lives, to gain satisfaction (not just money) from our jobs and to have a sense that we belong to a community. For many people the cultural side of their lives is important, as is the spiritual dimension.

The dominant measure of the country’s progress from month to month and year to year is the growth in GDP. It measures the economy’s production of goods and services during a period. It’s also a good measure of the growth in our incomes. When you take the growth in the nation’s income per person you have the standard measure of the increase in our material standard of living (though this tells us nothing about how that increase was shared between rich and poor). But there’s a difference between our standard of living and our quality of life. Our quality of life takes in the other, non-material dimensions of life we’ve just agreed are so important. But all of those things are excluded from GDP. So GDP is a good measure of income - of the material side of life - but is far too one-dimensional to adequately measure our broader wellbeing. And, in fact, was never designed to measure our wellbeing.

For that we have to look beyond GDP and inflation and unemployment, which is just what’s been done for the Hunter in the Wellbeing Watch we’re here to discuss. What is wellbeing? Well, it goes by lots of other names: happiness, utility, satisfaction. It’s a subjective measure - not what we’ve got, but how we feel about what we’ve got. It’s about whether people are happy with their lives, whether they feel their life has meaning, how valued by others we feel we are, how satisfied we are with our standard of living, how optimistic we are about the future, and how satisfied we are with our lives as a whole.

Subjective wellbeing is an issue psychologists, economists and others have been studying closely in recent years. They’ve found that most people in developed countries rate themselves pretty high on a scale of one to five. But they’ve also found that, though people on higher incomes generally rate themselves more highly than do people on low incomes at any point in time, the significant increase in all our real incomes over time - the past 40 or 50 years - has produced no increase in our subjective wellbeing. And when you look at partial measures of objective wellbeing - such as rates of depression, illegal drug-taking, and the rate of crime - you find they’ve worsened. It’s generally only in the early stages of a country’s economic development that you can see subjective wellbeing increasing in line with rising real income per person.

So we can’t assume that because the Hunter regional economy has grown strongly in recent years, the people of the region are doing well. Whether or not they’ve been doing well is, of course, an important question for community leaders and the rest of us to have answered. But it can’t be answered from the usual economic measures. It has to be measured in other ways and that’s what we’re here to hear about today.