Balneus

Australian Lefty on Politics, Governance, Science and Info Management

Should Reserve Bank count smiles?

Posted by Dave Bath on 2008-01-08


Most "serious" economists thought it a bit of a giggle when Bhutan introducted Gross National Happiness back in 1972 to influence policy (rather than having policy dictated by the moderately misleading GDP), but now, there are serious western commentators suggesting there is some value in central banks looking at emotions.

In the abstract for "Happiness, Contentment and Other Emotions for Central Banks" at Harvard Business School (full paper available for purchase here), there are indications that mainstream economists and managers are waking up to the fact that the GNH concept is essential.

Contentment is, at a minimum, one of the important emotions that central banks should focus on. More ambitiously, contentment might be considered one of the components of utility. The results may help central banks understand the tradeoffs that the public is willing to accept in terms of unemployment for inflation, at least in terms of keeping the average level of one particular emotion (contentment) constant. An alternative use of these data is to study the particular channels through which macroeconomics affects emotions.

It’s time we got the ABS at least publishing some metrics on emotional status of our population, including breakdowns by income ranges.

Fat chance… the metrics would give politicians even less capability for outrageous statements like Howard’s "Australians have never had it so good", and I can just imagine the objections from various business councils.

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3 Responses to “Should Reserve Bank count smiles?”

  1. outrageous statements like Howard’s “Australians have never had it so good”

    Dave, keeping in context that it was referring primarily to the economic situation and loosely to quality of life, what’s outrageous about this?

  2. Guy said

    I don’t think this sort of thing is best measured or analysed by central banks. It’s probably worth measuring, but the information that is retrieved through associated surveys and so on can be quite subjective.

  3. Dave Bath said

    Mick,
    Being a pedantic so-and-so, “Australians” refers to persons, and was intended to be taken as such by the audience.

    Besides, the Australian economy has been, if you look at the bottom lines (national accounts), has never been so bad. National debt is WAY the highest as a proportion of GDP, longest running current account deficit despite record terms of trade? To say “the economy has never had it so good” is like saying a family has never had it so good because they are running up debts on the credit card at a record rate, while losing income.

    Guy,
    I agree that the RBA shouldn’t collect the stats, but that the ABS should define the metrics and collect them (with the RBA considering the results). Currently, contentment figures are rubbery because of loose definitions and collection by market research organizations.

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