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Home Features Thought Leadership Nicholas Gruen: hacking wellbeing for the biggest returns
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TAGS Welfare, wellbeing, investment approach
There are some commonsense ‘hacks’ government could use to improve Australians’ wellbeing, argues economist Nicholas Gruen.
This is part two of a four-part essay series about failures of policy to translate into outcomes. Read part one, on wellbeing frameworks, here.
There’s a remarkable contrast between New Zealand’s ‘living standards framework’ — discussed in the first part of this essay series — and something which, as we’ll see, is related to wellbeing: New Zealand’s ‘investment approach’ to welfare. It is regarded by many (pdf) as a world leading approach and emerged from a “NZ Government established … Welfare Working Group in 2010 … charged … with responsibility for finding new ways to reduce long-term benefit dependency in NZ.” The investment approach proposed by the group was that welfare payments be thought of and managed as a ‘long tail’ exposure of governments. Appearing on the government’s dashboard as a capital liability puts things in the right frame because governments then get to see how much they have to gain from tackling the problem.
Is that it? I’m afraid so.
At this stage, more curious readers, observing that this is no more than the simplest commonsense, might be wondering how other systems all round the world have been protected from this insight. No doubt the insight has turned up in the past, at least as an official observation by some senior politician or bureaucrat, no doubt in Australia and many other places in the past.1 And it’s hard to believe that the idea hasn’t been alive and well as a principle for making decisions in other areas of government, perhaps in other countries (Scandinavia, the NHS?) either implicitly or explicitly, but I’ve not investigated it.
Note how consequential this idea is in policy making and administration. And note further that it came from a question – or at least from purposive activity. In this case, the purpose wasn’t to establish a ‘framework’ with putatively strategic intent. It was seeking to solve a perceived problem. And you can call this investment approach a new ‘framework’ if you like, but it’s just a change in perspective on a single question which has widespread consequences. I call it a ‘hack’ – a commonsensically better way of framing an issue,2 so we can get on with dealing with it. It’s not that the idea doesn’t have wider implications – there are lots of them. Or that it can’t do with refinement. It can. But in this case, the gains from getting going are so self-evident that one can do just that and refine as one goes.
It’s not hard to think of several kinds of refinement, each radiating out from very practical questions about how to perform the first ‘hack’. Thus, some argue that under the sway of its new investment approach, the New Zealand government has focused unduly on reducing future liabilities by tightening up welfare eligibility, rather than by getting people off welfare and back on their own feet (it’s the latter effect that those touting the investment approach have tended to highlight). There will also be knock on issues. Some will be very practical ones. In New Zealand they’re now keen to develop or buy in interventions that work in repairing social capital.
There will also be conceptual refinements. Some ideas from the ‘hack’ can be extended fairly straightforwardly. For instance, as various critics rightly point out, the approach is excessively narrow in focusing only on liabilities and only on welfare. There are wider government assets/liabilities to consider – most obviously tax receipts – which further crank up the size of the stakes. And the same hack should apply in other areas of government involvement that can be added to the balance sheet – in education, health and corrective services. Indeed, since launching its ‘investment approach’ to welfare, the New Zealand government has duplicated a similar ‘social investment approach‘ more widely.3
In principle they should all be included, though there are always practical arguments about how accurately we can estimate these things, particularly into the distant future and what kinds of hurdle rates of return on investment to seek. Then we can ask whether to include economic externalities. Getting parents into work will very likely have beneficial economic impacts on the whole family (though it’s likely to be a more complex judgement in the case of a single parent family) and community.
Finally there’s the non-economic wellbeing of both the welfare recipient around whom these metrics are being constructed, and more widely. Well what do you know, we’re back at wellbeing, the topic of the first part of this essay series. Who would have thought? But now there’s a difference. We’re back at thinking about welfare with some reason for doing so, some purpose which prompts that series of questions that the philosopher RG Collingwood referred to as integral to insightful and productive thinking. We’re trying to improve the cost effectiveness of policy. And it’s immediately obvious where this might be taken, and taken relatively quickly with additional conceptual work being thrown up by the process of seeking to act on our new insights.
Thus, under the scenario I’ve sketched, wellbeing becomes a new priority for policy. We don’t need to spend a decade spinning out some new wellbeing universe according to a new framework about which we have endless contentions. We simply say that we’re now wanting to introduce wellbeing into our consideration of the issues and, pretty obviously, we want to start introducing this in a practical way to our priorities by identifying ‘low hanging fruit’ – areas in which wellbeing gains are:
As I argue in the next section, that defines a large and promising domain of action and human betterment – one which, despite over a decade of wellbeing frameworks, we’ve barely touched as part of that agenda.
Perhaps the highest priority is to do what I’ve proposed previously, which is develop the knowledge to start envisaging and proving up cost curves a little like the one below on greenhouse gas abatement, only here the cost curves would be the most economically cost effective ways of increasing wellbeing.4
The first iteration of such a curve might simply ask, ‘what do we know about areas in which we could improve wellbeing and what would be its immediate cost?’ Then one could ask whether such things generate positive economic benefits. Many do. The most considered example of this was the PC’s proposal for the National Disability Insurance Scheme which, though it cost a bomb, the PC modelled as a ‘no regrets’ measure if not for government, then for the economy as a whole, because of the increased economic activity it would underpin.
We can also trawl through the cohorts of people we know have low self-reported wellbeing. I have little doubt that, properly considered, there are a host of no regrets measures here – ie measures that would pay for themselves economically as well as directly boosting wellbeing. A good candidate would be the Commonwealth Home Support Programme, which grew from an Australian policy innovation that sought to delay people’s admission to nursing homes by giving them help in their homes. As I understand it, it reduced net outlays by reducing nursing home entry. And it increased wellbeing markedly (it certainly did for my late mum). I expect initiatives like Weavers would do the same – at even lower cost than home and community care. Could one do the same in mental illness? I have little doubt that in some areas the answer is yes, and that in other areas it’s much less likely. One would imagine there’d be a fair bit of low hanging fruit for wellbeing in those areas most susceptible to drug treatments and peer support programs. And where we can make progress at lowish cost, the benefits from dealing with mental illness in terms of lower absenteeism and higher productivity look high.
There’s a big dividend in improving the quality of management and the experience of our employees. There’s a well-known and commonly observed correlation between high productivity and self-reported employee wellbeing and ‘engagement’ with company goals – a relationship companies honour by making employee engagement an important internal metric. More recently work associated with Andrew Oswald has shown firstly (pdf) that more competent bosses tend to have happier workers (and that the relationship appears to be causal) and that likewise the link between higher levels of happiness and higher productivity is also causal (pdf). I’ve proposed one very low cost, low risk way of drawing into the public arena many firms’ internal employee engagement data, thus empowering employees and investors to choose firms with better employee metrics and so improve the market in management for worker engagement and wellbeing.
There’s also multi-generational disadvantage. Something like a half of all people who have their children removed for abuse or neglect were removed from their own parents for the same reason. It seems we have moderately successful means of intervening to stop the intergenerational cycle 5 and while they’re not cheap, the wellbeing benefits would be very large in addition to the economic benefits which, if accounted for over any substantial period, would dwarf the cost of such programs.
Here are some other areas off the top of my head. As I understand it, around 10% of the student population has some degree of dyslexia. Some of those people, particularly the milder cases, can be helped very substantially just by schools paying more attention to teaching for different cognitive styles (and I suspect a peer-to-peer mentoring program could also be devised to great effect). The loneliness agenda also looks promising, particularly but not exclusively regarding the elderly. It’s easy to imagine one could make substantial inroads into the problem at very modest cost with community and peer support programs and that this would produce myriad social and economic benefits.
Carbon abatement cost curve focused on energy initiatives.
The same search for worthwhile action I’ve modelled above with a society/economy-wide gaze could be replicated within selected portfolios or programs. In the same way that the cost curve illustrated to the right is from a sub-set of possible greenhouse abatement options, so in principle many programs could benefit from having an eye to ways in which they could improve wellbeing as an explicit objective where it could reinforce other program objectives.
There has been over a decade of policy frameworks, and nothing much to show for it in new policy. As we’ll see in the next essay, something very similar can be said of approaches to wellbeing involving the academy and wider civil society ‘stakeholders’.
My stressing the importance of purposiveness in all this and the reference to Francis Bacon’s attack on scholasticism reflects my own view of how to make intellectual progress. But there’s a much more mundane, and perhaps useful organisational perspective. I wonder how much we can liken the fancy intellectual footwork that goes into frameworks as a kind of organisational procrastination. Refining frameworks with the inevitable diagrams delays taking action which has its own surreptitious organisational advantages. The strategy peeps putting together the framework can continue to impress us with their erudite gleanings from the academic literature and their diagrams. Meanwhile we won’t do anything different until everything’s sorted and everyone’s comfortable. Certainly we’ll see that pattern of procrastination in the Australian National Development Index project I’ll discuss in the next essay.
How about we go easy on the intellectual white-out of frameworks and start making our investigations the product of clear policy purposes. If we do that, chances are we can begin both intellectual and policy progress with some ‘hacks’ – simple, no-regrets actions that take advantage of new ways of looking at things, but which also reinforce existing standards of good policy to get the new approach ticking over. The time for something more considered will come when we find ourselves seeking to make a choice or ask a question which that further thinking through will assist with. If we hold off on our framework building until then, not only will our framework building then be purposeful and clear eyed, but we’ll also have had some experience of policy making in pursuit of enhanced wellbeing, which again will make our framework building so much better informed and useful.
1. The NDIS was being set up in Australia at around the same time to apply an ‘insurance or investment approach’ to disability.↩
2. The Urban Dictionary defines one use of the word hack as “a clever solution to a tricky problem”.↩
3. Note, at least to my summary eye, there doesn’t seem to be the same kind of clear institutional focus on explicating the upshot of these ideas for the government’s balance sheet and using it to drive change. It reads more like talking points, but I may be wrong.↩
4. Of course such cost curves themselves are a huge simplification, and improving wellbeing is a more context-dependent undertaking than reducing carbon emissions, but you get the idea.↩
5. Programs like Family by Family and Newpin both look pretty successful.↩
Nicholas Gruen is CEO of Lateral Economics. He's an economist, a consultant, a commentator and a former adviser to the federal government.
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