Updated: Jul 27, 2021
It was with great excitement to read that the Harvard Center for Health & Happiness tweeted about our research on the Economics of Mental Well-being published in the European Journal of Health Economics.
Why do we need to talk about the Economics of Mental Well-being?
For decades, monetary value served as the ultimate yardstick to measure a nation’s success. GDP was the prevailing gauge of a countries economic development and well-being. Already Robert F. Kennedy noted during a campaign trail in 1968 that ‘...Yet the gross national product does not allow for the health of our children, the quality of their education, or the joy of their play’.
In recent years, the interest among academics and policy makers in the economics of well-being and mental health has risen substantially. A shift from output-prone indicators such as Gross Domestic Product (GDP) to indexes accounting for collective happiness and well-being of the population enhanced the interest in understanding what determines well-being. It has doomed politicians and economists that GDP and other output prone indices have certain shortcomings to depict well-being and growth. As basic needs in societies are fulfilled, individuals shift their attention to the ’good life’. Evidence suggests that with societies becoming wealthier, people rank happiness or well-being higher than money. Furthermore, mental well-being is really what makes a life worth living. Research suggests that mental well-being is not only is it protective against physical illnesses and linked to greater productivity, but the mental wellbeing of a population is essential for a country’s sustainability, long-term growth and development
We could start to ask ourselves: Should we use alternative indices that measure happiness or mental well-being as gauges for a countries status? New indexes - may it be to measure societal, business or economic growth need to be representable of what they try to measure (ie. general, hedonic, eudaimonic, and social well-being) . They need to have excellent psychometric properties (i.e., internal consistency, a single-factor structure, and convergent and incremental validity) and should be validated on a population level.
If such indices are to represent growth, it is helpful if such measures show a certain correlation with economic outcomes such as healthcare expenditure and business outcomes such as productivity or engagement.
Remember. Money isn’t everything. Many things of value in life cannot be fully captured by GDP, but they can be measured by metrics of well-being, education, political freedom, and the like. That is why it is about time to start rethinking our perception of economic well-being and explore alternative measures for well-being.
There are many reasons why mental wellbeing is important. Not only is it protective against physical illnesses and linked to greater productivity, but the mental wellbeing of a population is essential for a country’s sustainability, long-term growth and development
What was this study about?
The focus of this study was to ascertain the economic impact of different levels of mental well-being by exploring the link between mental wellbeing and government expenditure.
We linked a survey on mental-wellbeing with 3,508 participants (2016) using the Warwick-Edinburgh Mental Well-Being Scale (WEMWBS) to Danish National Registers to estimate the healthcare expenditure (ie.money spent on general practitioners or specialists, hospitalisations, outpatient services, prescription medicines).
Our results showed that for each increase in mental well-being was associated with lower health ($− 42.5) per person in the following year. As the main author of the study points out:
This may not sound like much. But let’s say the inhabitants of a town with a population of 50,000 were to each experience a single point increase in mental wellbeing. According to our estimates, the collective improvement in mental wellbeing would be associated with about $2m (£1.4m) less in healthcare costs, and about $1m (£700k) less in sickness benefit transfers over the following year for this town.
What's the main take away?
As everyone in business knows, you manage what you measure. So although the replacing-GDP discussion may seem a little airy, its growing credibility in important circles could give it a real impact on economic policy. In this study we show that:
Mental Well-being measured by WEMWBS is a useful index to depict population well-being
The study shows that higher levels of mental well-being are associated with lower governmental expenditure (healthcare and non-healthcare costs)
Maximising everyone's mental well-being would yield governmental savings
As such, I personally hope that this study fosters a discussion on using alternative well-being measures to depict a country’s status.
LINK to article https://link.springer.com/article/10.1007/s10198-021-01305-0 References https://theconversation.com/mental-wellbeing-is-not-just-beneficial-for-you-it-can-also-lead-to-lower-healthcare-costs-159595