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OECD looks to measure the ‘better life’

It is time to move beyond gross domestic product when measuring the success of societies, the Organisation for Economic Co-operation and Development, has concluded in a change of mission for the international organisation.

By Chris Giles in Paris
Published: May 24 2011 09:05 | Last updated: May 24 2011 09:05

Known for most of its 50 years as an establishment of orthodox economics, promoting structural reforms to boost GDP growth, it launched a “better life initiative” on Tuesday to measure the quality of life in the Organisation’s 34 member countries.

The OECD’s new Better Life Index, an amalgam of 11 indicators, including income and jobs, but also life satisfaction and safety, aims to capture the diversity of life and priorities in advanced economies.

Unlike existing composite indicators – such as the UN human development index – users of the new OECD index can give each of the 11 indicators a different weight according to their own preferences and see how such changes alter the league table of countries.

Angel Gurría, the OECD’s secretary-general, said the new index, “has the potential to find out what people want and need and what government is giving them”.
On GDP per person, Luxembourg scores the highest by quite some margin among OECD countries, but when equal weight is given to the other indicators, the country just scrapes into the top 10.

Some results are well known, such as the success of the South Korean education system, while other indicators of society’s progress – at 2.5 rooms per person, Canada has the best housing of advanced economies – are much more obscure.
Mexico, which scores relatively poorly because of its relatively low level of development and high inequality, nevertheless is a country where the population is happy. On a measure of life satisfaction, Mexicans rank higher than Poles, Italians and the Portuguese.

Persistently near the top of the rankings on almost all measures are Nordic countries and smaller Anglo-Saxon nations. Canada ranks higher than others on most indicators, with Australia, Denmark and Sweden all taking very high spots in the rankings.
Larger economies, such as the US, generally fall short in one or more areas. The US scores poorly in safety and in work-life balance, while life-satisfaction in Japan ranks towards the bottom of the OECD league.
The OECD hopes its new tools – which in may respects represent a better way of presenting comparative data it already collects – will redefine progress and well-being this century. The initiative fits with concerns expressed in many capitals that national accounts and GDP are inadequate and have set up exercises in more complex measures of happiness.
Much of the OECD’s work will, however, still focus on GDP and efforts to boost prosperity through structural reforms, an essential pre-requisite for access to quality education, healthcare and housing.
The index acknowledged: “While money may not buy happiness, it is an important means to achieving higher living standards and thus greater well-being”.