How do you mathematically express future well-being and how does current preference relate to future preference, asked Associate Finance Minister and Minister for Statistics James Shaw, outlining the challenges of creating so-called “sustainable development indicators” and using them to guide policy.

Shaw, who spoke at the Third International Conference on Wellbeing & Public Policy, reiterated the government’s vision to be a “compassionate government” that measures itself by how well it improves the wellbeing of people, underscoring “while the fiscals will remain an important marker of economic activity, used in isolation they miss important elements of why we work for better outcomes: to improve wellbeing.” 

Earlier this week, Finance Minister Grant Robertson opened the conference noting the future of work, climate change and inequality are the “defining economic and social issues” for the Labour-led government but the wellbeing focus it brings to those challenges remains a work in progress.

According to Shaw, New Zealand has an “incredible opportunity to be one of the first countries in the world to transition to a truly sustainable economy and to show the rest of the world how it’s done.”

He said things like GDP statistics measure current economic activity in terms of throughput. But they ignore wealth variation, international income flows, household production of services, destruction of the natural environment, and many other determinants of wellbeing.

The Treasury is currently working with Statistics New Zealand to build a broad framework to measure wellbeing, called Indicators Aotearoa New Zealand, or Ngā Tūtohu Aotearoa.

Regarding the relationship between that and Treasury’s Living Standards Framework – also under development – Shaw said “the way that I think of it is Indicators Aotearoa is data and the Living Standards framework is information.” 

The Living Standards Framework will be translated into a “Living Standards Dashboard” that will indicate the current wellbeing of New Zealanders, the distribution of wellbeing across the population, and direction of future wellbeing through indicators around the “four capitals”, which are human, social, financial and natural capital. 

 According to Shaw, Stats NZ will provide a pool of data from which Treasury and others make their analysis and interpretations and turn it into information.

The government’s aims to incorporate the Living Standards Framework into the 2019 budget and the first detailed demonstration of how will emerge in December, when the government would produce its 2019 Budget Policy Statement.

Key, however, is to establish the system and the indicators for that pool. They will be selected after public consultation, a series of workshops and a technical data event in December that brings together the findings of the public consultation and the data workshops.

The aim of the event is to agree on a suite of approximately 100 economic, social, cultural and environmental indicators.

“All this work is partly about using more data and evidence to inform policy. Monitoring and reporting (and Budget-level prioritisation of resources) needs to be complemented with a wide-ranging shift in the way that agencies operate in order to focus on wellbeing,” he said. 

“My read is that academics have thought deeply about the conceptual issues of wellbeing, but less so about how to apply these issues to guide policy,” said Shaw.

He said being serious about wellbeing will require a commitment to evaluation. Testing, such as through randomised control trials, and committing to use evaluation to inform ongoing political mandates, is required for this to work, he said.

He noted, however, it is a “brave minister who commits to a process that might expose their great policy idea as having failed. But we need to face up to this risk if we’re going to improve the quality and services government delivers.”

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