We’re happier than most - now let’s get smart

She’s happy… but we still understand little about how people make their choices. AFP PHOTO/ASP/HO /KIRSTIN SCHOLTZ

The release of surveys such as the Gallup Global Well-Being Index produce vast column inches of what are fun but largely meaningless articles on how Australians are happier than New Zealanders (they are, apparently!).

This is a pity.

The roller-coaster nature of the global economy in recent years shows how little we understand about why people make particular choices.

Yet, despite this increased complexity, the economic slowdown highlights the need to get the most impact out of the lowest policy-dollar spend, increasing the demand for strong evidence.

The costs of wellbeing

The real power of having great data on wellbeing is in exploring the welfare (and exchequer) costs of policy decisions.

For example while unemployment ‘scarring’ has been a conceptual element of economics research for decades, we are only now getting to measure these issues at an individual level.

The Australian policy environment is, in many ways, ahead of the pack. The excellent work of the Productivity Commission in advocating the use of policy experimentation and defining the concept of what constitutes evidence, sets the tone for this.

Equally the Australian Bureau of Statistics has shown considerable leadership in promoting new approaches to data collection, particularly in linking survey and census data to administrative records.

Key measures should be mainstreamed as part of national data infrastructures like the Census. Wellbeing is an obvious candidate.

But we now have the means to measure critical items such as risk and other behavioural concepts. These will be vital for smart policy thinking in the future.

Short term rewards

We now know, for example, that individuals tend to strongly favour short-term rewards over potentially larger long-term benefits.

This type of ‘irrational’ behavior create policy conundrums. Individuals should, but don’t, trade short-term (low) costs for long-term (large) returns.

For instance, individuals plan to quit smoking but don’t, or often reach retirement age without sufficient savings.

Investment in longitudinal data, which tracks the same individuals over time, has already been made through surveys like HILDA, led by the Melbourne Institute.

Commit to linking

Government should give a commitment to linking these key survey datasets to administrative sources like welfare, health and education records.

This particularly transforms our ability to examine policy innovation for key marginalised groups.

Australia should also consider following the path of countries like the Netherlands and implement a national, web-based, survey infrastructure.

This allows data to be gathered practically in real time - even during a particular policy episode. This could perhaps be achieved off the back of the NBN rollout.

Mainstreaming data

Finally, revisiting the call from the Productivity Commission, government agencies should mainstream the use of policy experimentation.

This is the supply side. The demand side is as important.

Graduate programs in economics/public policy will need to train students to create new data - something existing training has largely ignored.

And, aligned to a greater investment in generating data, investment in research capacity in applied microeconomics is essential.

These innovations are of critical importance only if they can connect with policy debates.

The political establishment needs to support the improvements of the evidence base for economic decision-making and policy framing.

Australia could and should lead global thinking on how we gather and analyse the evidence base for policy choices.