Happiness Quotent

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Happiness is one of the hottest areas of economic research. But simply asking people how happy they are is inadequate, says Dr Terry Flynn. Understanding how people choose between competing versions of their lives is a far more accurate way of delving into their psyches.It ought to go without saying that the aim of social policy and government regulation is to increase society’s general level of well being. Good policy has positive impacts, reaching much further than its immediate consequences. A well-planned and well-delivered health policy that supports the families of patients suffering from terminal illness leads to greater aggregate quality of life and more community happiness. Bad policy does the opposite.

For this and other reasons, happiness has become a growth area of research in economics and the social sciences over the past few years. Suddenly, everyone wants to know what lies behind human contentment, and how to measure and improve it. Happiness scales have risen to dizzying heights of popularity of late; however, their aim – to reflect general sentiment and well being – can be easily lost through the use of numeric scales to elicit responses and collate data.

Happiness research usually asks respondents to choose a number between zero and 10 to indicate how happy they are with their life at that moment. The way people measure their levels of happiness, however, can give very different pictures.

Personal point of view

Each respondent will have a different personal frame of reference in giving his or her response, and such personal reasons are often lost in interpreting the data. For example, survivors of traumas such as war may put on a brave face, measuring their personal levels of happiness in peacetime using a different frame of reference than people who have never experienced war. Evidence suggests that simply reaching old age tends to make people rate their happiness highly.

Cultural cues

People may assign meanings and superstitions to numbers – for example, the number eight is significant in Buddhist and Chinese cultures – and decisions to choose or avoid these numbers affect survey results.


Happiness scales have no theory behind them. If a person scores seven out of 10, what does that mean? What are the statistical properties of numbers on the scale? Happiness scales offer limited choice to respondents to express what’s important to them. For the respondent scoring seven, what explains the missing three out of 10? Happiness scores don’t tell us what a person values. Not knowing what’s missing from the person’s life, it is impossible to know what improvements might make that person happier.

The scores don’t allowus to predict future demands, trends, or ways to make product and service delivery more efficient and relevant.


Often, happiness scales lead to ‘ecological fallacies’. Differences in scores between, for example, married and divorced people are meaningful only at high levels of aggregation, typically at an entire-population level. It is an ecological fallacy, therefore, to infer that such differences are relevant to me or my peer group. I want to know what the differences in scores are among people like myself, not for the ‘average’ Australian.

So what is happiness?

Buddhist monk Matthieu Ricard defines a happy person as ‘anyone who enjoys inner peace’. Such a person ‘is no more broken by failure than he is inflated by success’, because he ‘understands that experiences are ephemeral and that it is useless to cling to them’. – Matthieu Ricard, Happiness: A Guide to Developing Life’s Most Important Skill

What’s that got to do with good policy and innovation? British psychologist and author of Affluenza, Oliver James, rejects happiness as a policy goal for other reasons. High average happiness scores have been observed in those countries with the greatest inequality and highest rates of depression. Instead, he advocates policies that improve four aspects of life:

  • connectedness to people: good relationships and feeling part of a community;
  • autonomy: being independent and in control of your own life;
  • experience: feeling you can make a difference and that there is value in what you do; and
  • security: material and emotional.

Just like the trend to ‘think positive’, happiness scales leave out important ingredients of life. They allow people to focus overly on material gain or hedonistic enjoyment, ignoring the other three key sources of durable wellbeing in a population.

Qualitative and quantitative choice modelling offers a solution to the limitations of happiness scales. Choice modelling empowers people to say what they want and how much they’re willing to contribute, personally and financially, to making it happen. ‘ICEPOP’ and ‘ICECAP’ might sound like they’d be more at home in Antarctica than in Australia (see box copy, next page), but they are revolutionary instruments being employed by policymakers and innovators alike. ICECAP instruments expand on happiness-rating scales to get a much more intimate measure of a respondent’s quality of life. They give a more realistic cross-section of community sentiment and allow us to hone in, with a person-by-person, topic-by-topic degree of accuracy, on what people like and dislike, what they do and don’t find important to their wellbeing.

Results from ICECAP instruments are based on a well-tested theory of decision-making and cannot be manipulated. With the ICEPOP team, I’ve developed both ICECAP instruments over the past decade, building on the choice-experiment and capability-approach work of Nobel Prize for Economics laureates Daniel McFadden (2000) and Professor Amartya Sen (1998).

Working from the vantage point of measuring respondents’ perceptions of their quality of life, ICECAP instruments help us explore how to maintain and improve services into the future. At CenSoC, we have been developing new instruments for measuring Australians’ perceptions of their quality of life.

Our aim is to first develop a picture of survey-respondent types. The holy grail is a robust, longitudinal set of data that allows us to measure how different types of Australians perceive their quality of life, and how their values and norms change over time. This data will allow us to advise governments on how to plan for the future based on what people value.

Companies will also benefit from data about what people want most. We have developed a specialised measurement and valuation instrument that will allow us to build up individual scales for respondents, based on discrete answers designed to give a true sense of their lives. In our current research, we are presenting people with 16 different lives and asking them to imagine living in each and decide which aspects of each life would be best and worst to live with.

Our survey of 2,400 randomly selected Sydney residents, commissioned by the Independent Public Inquiry, Long-Term Public Transport Plan for Sydney (2010), reflected an overwhelming preference for public-transport solutions to the city’s congestion crisis. Almost two-thirds of respondents expressed a willingness to pay more for better public transport and to consider congestion charges to improve it, but were opposed to paying more for the existing public transport, which received a resounding vote of dissatisfaction.

Already, our work at CenSoC is attracting national media attention and being tested in the following public-policy areas:

  • comparing quality of life, nationally and internationally;
  • eliciting preferences for public-transportation systems;
  • valuing patient and citizen preferences for health-care reform;
  • valuing water supplies;
  • measuring quality of life for young people; and
  • developing personality and compatibility scales.

Ultimately, at CenSoC, we’d like to have a personalised scale to help us understand the differences in the norms of quality of life among Australians. Our research aims to yield a longitudinal and quality measure of wellbeing for the nation, to inform policymakers and innovators about where real differences are in the community. Choice modelling can seed new approaches to service delivery for the best quality-of-life outcomes, letting us have our cake and eat it too.

ICEPOP and ICECAP: not frozen treats

The ICECAP measures we use in our happiness research are conceptually linked to Amartya Sen’s capability approach, which defines wellbeing in terms of an individual’s ability to do and be the things that are important in life.

Investigating Choice Experiments for Preferences of Older People (ICEPOP-O)

In the ICEPOP team at the University of Bristol, UK, between 2001 and 2009, I used choice experiments to elicit the preferences of older people in various studies. For the main study, we developed a quality of life instrument: the ICEpop CAPability instrument for Older people (ICECAP-O). It focused on general quality of life since older people typically received a mix of social and health-care interventions.

In our research, we tried to distill the essence of people’s responses, developing five dimensions from which to measure the data:

  • attachment (love and friendship);
  • security;
  • enjoyment;
  • role (doing things that make one feel valued); and
  • control (independence).

The quantitative work for the ICECAP instruments uses a model that effectively measures how often people choose one of these quality of life dimensions over another.

ICEpop CAPability instrument for All adults (ICECAP-A) We repeated the original study to construct an instrument for adults of any age. The quality of life research we are doing at CenSoC is at the world forefront of what’s going on in this area. Sen stressed that it is a person’s capability to achieve key aspects of life, such as being independent, having relationships, that is important, rather than the amount they might choose to engage in those aspects.

In developing ICECAP-A, five key aspects of life were identified from qualitative work with people, which were similar to those in ICECAP-O:

  • Can respondents have close relationships?
  • Can they have their independence?
  • Can they achieve and progress in life?
  • Can they feel secure in life?
  • Can they have enjoyment in life?

We then get each person to indicate how much of each dimension they can have and assess them against their scale to score and value their quality of life. Our approach will offer a completely new way for politicians and medical decision-makers to measure how people are coping on a day-to-day basis.

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