Subjective wellbeing valuation is a relatively new methodological approach. It differs from other methods that can be used to value non-traded market goods, as the values are based on how these goods affect self-reported measures of wellbeing, such as life satisfaction. In the Open Social Value Bank, we use the Subjective Wellbeing Valuation approach to value wellbeing. In doing so, we lean on the UK Treasury's Green Book[1], as well as Frijters & Krekels [2]. A fundamental assumption of this approach is that measures of life satisfaction (and other subjective wellbeing measures used) serve as good approximations of individuals' underlying utility.
The starting point for Open's Social Value Bank is thus in line with the OECD's focus on subjective well-being and a well-established research literature that points to a strong correlation between social parameters and well-being expressed through life satisfaction. When we focus on social valuation from this perspective, we basically work with two steps.
Step 1: derive a robust (and causal) relationship between specific social parameters and subjective well-being.
Step 2: monetizing subjective well-being by establishing willingness to pay for identified well-being effects
Figure: From social change to well-being and from well-being to monetary value
[1] H. Treasury, Wellbeing Guidance for Appraisal: Supplementary Green Book Guidance. 2021 [Online].
[2] P. Frijters and C. Krekel, A handbook for wellbeing policy-making: history, theory, measurement, implementation, and examples, First edition. Oxford, United Kingdom ; New York, NY: Oxford University Press, 2021.
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