Toward National Well-Being Accounts

Economists have traditionally eschewed direct measures of well-being on methodological grounds: the private nature of experience and the discomfort of making interpersonal comparisons. Instead, income is often used as a proxy for opportunities and well-being. If people are not fully rational, however, their choices will not necessarily maximize their experienced utility, and increasing their opportunities will not necessarily make them better off (Kahneman, 1994; Cass R. Sunstein and Richard Thaler, 2004). Direct measures of experienced utility become particularly relevant in a context of bounded rationality. Furthermore, advances in psychology and neuroscience suggest that experienced utility and well-being can be measured with some accuracy (Kahneman et al., 1999). Robust and interpersonally consistent relationships have been observed between subjective measures of experience and both specific measures of brain function and health outcomes. In part because of these findings, economic research using subjective indicators of happiness and life satisfaction has proliferated in recent years (see Bruno Frey and Alois Stutzer [2002] for a survey). Most work on well-being uses a question on overall life satisfaction or happiness. We suggest an alternative route based on time budgets and affective ratings of experiences.