Friday, March 18, 2011

Jim Clifton - New Metrics for a New Era (RSA)

Cool article - this is about (mostly) British politics, but the ideas here are important. We are socially embedded beings - our consciousness is dependent in part on our embeddedness (in other works, environment is crucial to our state of mind).

RSA Comment

New Metrics for a New Era

An individual’s state of mind – good or bad – is contagious and, through an inevitable chain of events, affects classic economic outcomes argues Jim Clifton. People should be glad that the government is taking happiness seriously.

The British government, like most governments around the world, collects a tremendous amount of economic data every year. Leaders use this information to plan for, and react to, economic threats and opportunities. But most leaders overlook a key fact: every action that citizens take is in direct response to their state of mind and has a direct effect on their economic behaviour. Very few leaders, however, have data on their citizens’ states of mind.

To use Mathew Taylor’s metaphor for human behaviour – of an elephant being ridden through a cultivated jungle, in which the rider is our conscious thought, the elephant our automatic systems and the jungle our social context – governments have traditionally solely focused on the jungle.

One of the most profound and yet simplest discoveries we have ever made at Gallup is that lousy managers make employees miserable. Misery is a very powerful state of mind because it’s contagious: miserable employees make customers miserable, which lowers sales, profits, and ultimately stock price.

The same holds true with leaders of cities and countries. Lousy leadership and miserable citizens create the wrong economic outcomes. They also create low levels of wellbeing, the metrics of which are often referred to as behavioural economics. These behavioural economic metrics are invaluable because they are instructive insights into the states of mind that people are in before they make good or bad decisions.

Behavioural economics is usually defined as the science of choice or the intersection of economics and psychology. Gallup has been collecting and analysing the world’s largest body of behavioural economic data ever, and as a result we broadly define it as “the mathematical description of the role human nature plays in everything.” This is a vital distinction, because human nature plays a role in everything.

For example, annually, Gallup asks people in 150 countries a simple question: “Do you feel safe walking in your neighbourhood at night?” This is a significant question. Women in sub-Saharan Africa are afraid to walk a few hundred meters from their homes, as they fear being raped or beaten to death. Because of this fear they will not walk into town to sell a basket or buy some grain. So the local GDP of that village goes down.

My wife and I live in Georgetown. A couple of years ago, our neighbourhood suffered from a significant crime spree. For a period of time, we, like many others here, stopped walking after dark to go shopping or to restaurants. Our local GDP suffered in Georgetown because of fear, until the state of fear was reduced. Just as it does in Africa, a state of mind controlled the Georgetown economy.

Another subset of wellbeing is satisfaction with where you live. For instance, 33% of adults in Britain tell Gallup they intend to leave their country permanently. Not just for a while, but permanently. Their unhappiness about the future, their compromised wellbeing, not only makes it nearly impossible for British leaders to lead but also creates deadly brain drain. Their behavioural economic metrics of happiness or wellbeing have changed their relationship and engagement with their country.

But fear and future orientation are just two of many domains within wellbeing that locally alter GDP around the world. What most policy makers don’t know is that a wide variety of states of mind occur before the transactions of life that, in total, create an economic system. They are running their regressions and algorithms on after-the-fact data. Way to the right side of the behaviour curve. The wrong side.

I think it is very smart for Prime Minister Cameron to ask for a new institution of wellbeing and behavioural economic data to help run England. Because fear, misery, hopelessness, anger, extremism, confidence in the future, lack of money for food and shelter, feelings of corruption and so on eventually all lead to the societal hell of less citizen engagement, less workplace energy, less innovation, less entrepreneurship, less competitiveness . . . and finally a failing GNP.

As Matthew stated in his 21st Century Enlightenment paper, to adhere to humanist principles we should organise the world according to what is best for human beings. Happiness, wellbeing, behavioural economics – whatever term you prefer – are deadly serious metrics for all world and city leaders.

The RSA is hosting an event on these issues – New Metrics for a New Era: The Gallup-Healthways UK Wellbeing Index – on Tuesday 14 April at 9.30am. Join in the debate.

Jim Clifton has served as CEO of Gallup since 1988. His most recent innovation, the Gallup World Poll, is designed to give the world’s 6 billion citizens a voice in virtually all key global issues. Mr. Clifton has pledged to continue this effort to collect world opinion for 100 years in 150 countries.

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