The article by Katharina Lima de Miranda and Dennis J. Snower proposes an ambitious rethink of the way that public policy is evaluated and a nice conceptual tool kit for thinking about socioeconomic problems of the present age. Lima de Miranda and Snower’s work is motivated by a number of related phenomena. One is a sense of widespread dissatisfaction with the status quo in Western democracies that is not picked up in conventional measures of well-being. There has been a stream of research tying this dissatisfaction to recent political events, most notably Brexit in the United Kingdom and the election of Donald Trump in the United States. There is, furthermore, consensus that solving the problems of the twenty-first century will require new approaches and new ways of measuring success in terms of human flourishing.
Lima de Miranda and Snower highlight that most of the present measures of human well-being are concerned with our material circumstances. Gross domestic product (GDP) tells us about our capacity for producing goods and services that might be directly valuable for our welfare, as well as instrumental in solving challenges. For example, people value their health, and greater prosperity is associated with building hospitals, researching cures for diseases, and so on. GDP is a useful measure insomuch as it captures these material prerequisites of well-being. Since we also want to take a long-term view, environmental sustainability measures are useful to ensure that material prosperity is sustainable and available to future generations—GDP measuring only contemporaneous material plenty.
These measures, however, miss many of the psychological foundations of human well-being. Lima de Miranda and Snower’s agenda is to bring two broad sources of psychological well-being into the policy evaluation framework, alongside the aforementioned metrics of material welfare: namely, empowerment and solidarity. Empowerment encompasses people’s need to have an impact on their circumstances, their autonomy, and their drive to achieve personal goals. Solidarity encompasses people’s need for connection with others, their social identity, sense of belonging, and feeling of common purpose.
The authors propose indices for these two sources of well-being and demonstrate in a panel of countries that they move distinctly from either GDP or measures of environmental sustainability. They furthermore argue that in recent years, these measures of empowerment and solidarity have become increasingly decoupled from measures of material prosperity in rich countries. Middle-income countries, on the other hand, have seen each of these dimensions of human flourishing increase, on average. This evidence is suggestive, then, that the political dissatisfaction afflicting Western democracies may have an origin in this “decoupling.” A theoretical model is proposed that explains this phenomenon.
The article is a useful contribution to the literature seeking to understand the political economy of the present age, and it raises a number of important questions deserving of further study. It also should not be the last word in conceptualizing and measuring social prosperity nor in examining the relationship between economic and social prosperity.
One question begged by this article is why economic and social prosperity have become decoupled in rich Western countries but not in middle-income countries like China and India. The theoretical model presented in section 3 remains silent on this. The driving force behind the decoupling process in the model is that people’s decision utility treats the social and material sources of well-being as perfect substitutes whereas their experience utility treats them as perfect complements.1 Any trade-offs people make in their decisions between economic production and social participation arise solely from the production functions of material and social output. When the marginal productivity of the former rises, they necessarily neglect the latter, which has negative consequences for experienced welfare. In order to relate the model to the empirics, we need to know the political and cultural origins of this process and their cross-country variation. What causes this disconnection between decision and experience? A connection to the literature on cultural values2 and the relative importance placed on the material versus the spiritual, autonomy versus community, tradition versus innovation, et cetera, seems a productive avenue for further research.
The authors’ conception of and measurement of empowerment could gain additional clarification especially by relating it to the sources of inequality. Lima de Miranda and Snower are right to point out that the source of inequality and not necessarily its magnitude may generate feelings of disempowerment. It is unfortunate, then, that there is nothing that tries to incorporate such a measure of unfair advantage into the empowerment index. We should not want to classify a society with zero social mobility as highly empowering of its citizens even if it has a generous welfare state to cushion against unemployment.
Measures of socioeconomic mobility are available across countries—a frequently used metric is the correlation between income quantiles of parents and children. Such a measure might also explain why inequality is indeed implicated in political dissatisfaction (see, e.g., Han 2016 or Fetzer 2019). The “Great Gatsby Curve” (Krueger 2012) highlights that high inequality tends to hamper socioeconomic mobility. The conceptual model in Lima de Miranda and Snower’s article treats them as independent, however. The implication is that policies aimed at increasing the return to human or physical capital, while desirable, should be accompanied by policies that counteract the ways in which the rich can advantage their children.
Any refinements in the accounting of social progress should, of course, be driven by these indexes’ predictive power. This should be next on the agenda for recoupling economic and social progress. A number of open questions remain: Do empowerment and solidarity predict life satisfaction within and across countries? What are the relative contributions of GDP, environmental performance, empowerment, and solidarity to life satisfaction, and do the weights differ across countries? Do these indexes predict political events? I am excited to learn the answers to these questions, and I share the authors’ hope that economic and social progress can be reconciled.
Steven's research uses microeconomic theory and controlled laboratory experiments to investigate how context, motivation and the social environment influence human cooperation. His published work has specifically examined how uncertainty about intentions can frustrate coordinated shifts to better practices, how the distribution of prosocial dispositions in society hinges on the prevalence of environments in which people are forced to compete, and how to think about the consequences of social fragmentation on wellbeing. Before joining the University of Reading in 2017, Steven was a postdoctoral researcher at the Institute for the World Economy in Kiel, Germany. Steven earned his PhD from the University of Pittsburgh in 2013.
That is, the decision utility is linear whereas the experience utility is Leontief.