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Measuring wellbeing in theory and practice

Working Paper 2011-02

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There has been a recent resurgence of interest in the concept of progress and how it is measured. This paper explores the role that concepts of wellbeing and sustainability play in informing a framework for public policy analysis with a particular focus on the Australian Treasury. Treasury’s policy objective, set out in its mission statement, is to improve the wellbeing of the Australian people. As such, sustainable social progress or improving wellbeing, and how it is measured, are of central concern to the work of the Treasury.

Wellbeing relates to the aspects of life that people and societies value. It is a multi-dimensional concept incorporating notions of individual freedoms, opportunities and capabilities. However, wellbeing should not be considered in isolation. Sustainability and intergenerational effects are important as the wellbeing of a particular generation is determined by the stock of resources inherited from previous generations, in addition to the choices that generation makes, and what they leave behind for future generations.

Improving the measures of wellbeing, and sustainability, is a complex task. For policy choices and decisions to have a reasonable prospect of improving wellbeing and sustainability, we need to base them on reason, as well as empirical evidence. Theory and practice need to work together. If we focus on the wrong metrics, or use them without acknowledging their limitations, they can lead us down the wrong path.