An Economics of Wellbeing: What Would Economics Look Like if it were Focused on Human Wellbeing?

Abstract

The Poverty and Inequality research cluster, part of the Vulnerability and Poverty Reduction team at IDS, produces research on poverty, inequality and wellbeing. Our research challenges orthodox views on the nature of poverty, how poverty is understood and how policy can best accelerate poverty reduction. Our work focuses on poverty and wellbeing through the lens of equity and inequality. Poverty is not only about 'poor' people but also about the social and economic inequalities that compound and reproduce poverty. Email: poverty@ids.ac.uk Web: www.ids.ac.uk/research-teams/vulnerability-and-poverty-reduction-team/researchthemes/poverty-inequality-and-wellbeing PI WP7The Vulnerability and Poverty Reduction (VPR) Team aims to construct dynamic and multidimensional perspectives on vulnerability and poverty in order to transform thinking, policy and practice.The VPR team produces working papers on social protection; conflict, violence and development; and poverty and inequality. Follow this link to view a full list of publications: www.ids.ac.uk/research-teams/vulnerability-and-poverty-reduction-team/publications/vpr-workingpaper-series This publication is copyright, but may be reproduced by any method without fee for teaching or nonprofit purposes, but not for resale. Formal permission is required for all such uses, but normally will be granted immediately. For copying in any other circumstances, or for re-use in other publications, or for translation or adaptation, prior written permission must be obtained from the publisher and a fee may be payable. SummaryThis paper makes a number of fundamental proposals to reconsider economics by putting human wellbeing at the centre. It emerges from a pluralist perspective in economics and the ontological, conceptual, axiomatic and methodological propositions that are made lead to the construction of what we call an inclusive economy matrix (IEM). In particular, the paper draws on heterodox economics to redefine the scope of economics, economic agency, rational behaviour and put emphasis on wellbeing rather than welfare. Furthermore, from the acknowledgement of human wellbeing as a three-dimensional concept, the economic aggregation problem is reconsidered and the methodological implications discussed. The IEM is proposed as a comprehensive and robust analytical framework that gives space to bring social equity and sustainable development considerations forward as a priori concerns for economic development. As such, the IEM can serve as a point of departure for formulating new research questions, exploring new relationships between human wellbeing and economic development, and building economic models that bring us closer to people's realities on the ground.

Sustainable development goals and inclusive development

“…Meier 2001;Thorbecke 2006;Easterly 2007;Sen 1999;Gupta and Thomson 2010) and has been expressed in the Millennium Development Goals (Collier 2007 (Sachs 2004a); legal reasons call for the protection of the dignity and human rights of people; economic reasons aim to promote social well-being and participation of the poor in labour and consumption markets (Pouw and McGregor 2014); national security reasons justify meeting the needs of humans (e.g. UNDP 1994); democratic and communist discourses require sharing the results of prosperity with all; public health reasons require investing in the conditions in which the poor live to prevent the spread of poverty related diseases such as cholera, typhoid and others; and international reasons to ensure sustainable societies both within and across borders (where investing in crises affected countries, not only ensures sustainable societies in situ, but can also pre-empt the mass exodus of refugees for ex situ rehabilitation).…”

“…For example, when states make trade-offs between economic growth for all (i.e. collective well-being) and individual well-being, this can lead to marginalization of the latter (Pouw and McGregor 2014) and adverse inclusion. This calls for the downward accountability of institutions (Narayan 2002).…”

Towards an Elaborated Theory of Inclusive Development

“…Inclusive Development as countervailing idea We argue that inclusiveness is justified for six reasons (Gupta, 2014): normative considerations of concern for the poorest and marginalized in society (Sachs, 2004a, b;Dag Hammarskjöld Foundation, 2012); legal reasons arising from human rights; economic reasons of ensuring economic production by future generations and for strengthening the economic agency of people (Pouw and McGregor, 2014); security arguments of enabling the poor to have access to legal means of survival and live in safety (Murshed, 2006); democratic reasons for engaging all in decision-making (procedural justice) and in sharing resources and prosperity (distributive justice) (Fraser, 2001;Oosthoek and Gillis, 2013); and relational arguments that see poverty as resulting from the actions of others (Harriss-White, 2006;Mosse, 2010).…”

“…Inclusive growth reflects a welfare approach to development, and refers to creating jobs for the poor to increase their incomes, assets and other social goods, and stimulating competition and aggregate growth in the economy (CGD, 2008;ADB, 2012;Abosede and Onakoya, 2013). It emphasizes individual wealth accumulation over collective well-being, and short-term gains over long-term sustainability (Pouw and McGregor, 2014). Its indicators are GDP/capita growth, the percentage of the population living below the national poverty line and Rodrik's (2006) growth diagnostics.…”

“…It includes the capability approach emphasizing people's autonomy and dignity as part of this process (Sen, 1999(Sen, , 2010, and focuses discussion on the quality of growth and sustainability and equality issues as complementary evaluations of economic performance (Pouw and McGregor, 2014). Inclusive economics brings the inclusiveness debate closer to the multidisciplinary notion of inclusive development proposed below.…”