Social valuation is a relatively new approach that falls under wellbeing economics. Wellbeing economics is a field that has been developing over a number of decades, particularly with a basis in positive psychology. Researchers such as Diener and Seligman[1] have argued for an economics of wellbeing that takes into account factors beyond financial wealth. In particular, they have emphasized the need to include subjective well-being measures and non-financial aspects in economic analyses. Around the same time, Kahneman et al. [2] argued that national well-being indicators should be developed as a complement to economic indicators and that this was essential to assess the progress of a society. Researchers have long argued for monitoring wellbeing across countries and over time, and that wellbeing should be considered rather than GDP as the sole measure (Jones and Klenow [3]; Dalziel et al. [4]). More recently, Frijters and Krekel [5] published a handbook presenting a methodology for working with wellbeing economics in practice. These works have contributed to the development of wellbeing economics by highlighting the importance of incorporating wellbeing measures into economic analysis, policies and strategies. The increased focus on wellbeing economics has led to wellbeing being prioritized politically in a number of national and international settings.
Bhutan was the first country in the world to implement a policy framework based on Gross National Happiness, which includes nine key areas such as well-being, community and environmental conservation. Later on, New Zealand was one of the first countries to take significant steps towards implementing a wellbeing economy through the introduction of wellbeing budgeting. This budget placed wellbeing at the center of government budget decisions and included a wider range of indicators beyond GDP. Scotland has also made progress in wellbeing economics through the release of a framework for delivering national outcomes. This framework aims to improve the wellbeing of the population in Scotland. Recently, the UK followed suit with the release of guidance for using wellbeing in economic assessments. This supplementary guidance provides a framework for considering the implications for wellbeing in policy assessments and decision-making processes. In the European Union (EU), there has also been more focus on the field with the release of Council conclusions on wellbeing economics. These conclusions emphasize the importance of prioritizing wellbeing in policies and decision-making processes at the EU level. Similarly, the OECD has issued publications advocating the use of social valuation in economic evaluations and cost-benefit analysis. Finland, in particular, has taken steps to integrate the economics of wellbeing into decision-making processes and sustainability assessments. The country has developed an action plan to ensure that well-being considerations are integrated into policy decisions and sustainability assessments.
Thus, there has been a rapid development of implementation policies with a focus on well-being in several different countries and internationally, but this development is lacking in Denmark. OSVB wants to address this gap. Overall, wellbeing economics is a new and growing field that seeks to understand the economic value of promoting wellbeing and inform policy decisions and interventions to achieve this goal. Wellbeing economics is, among other things, about examining the economic aspects of wellbeing and establishing methods to estimate economic (social) values for improving wellbeing or quality of life across the population or in specific population groups.
Social benefits have so far not been valued. There's a good reason for this. It's not easy to put a value on social goods that are not bought and sold on the market. Social goods play a fundamental role in life, but they are not produced in a factory and cannot be imported or exported. Rather, they are products of human conditions, relationships and interactions. Nevertheless, there is both supply and demand for social goods, and in general, a society cannot function without social goods. However, as there are no established market values for social goods, this means that they have so far been valued qualitatively - without monetary linkage. The lack of monetary linkage can, among other things lead to 1) social initiatives, efforts and interventions being underprioritized or underfunded, 2) investments being made in social initiatives, efforts and interventions without knowing the value of the well-being they generate, and decisions being based on a feeling or gut feeling, rather than an informed basis, 3) that you don't know the cost-benefit ratio for a given social initiative or intervention, which can lead to waste, and 4) that you can't compare social initiatives, efforts and interventions, and therefore can't assess where you get the most benefit in relation to the investment. Social valuation is all about placing values on social goods that do not normally have a market value. Social valuation is therefore needed to address these problems.
As mentioned, many goods and services that we value and that create wellbeing in society do not have a market price. For example, the beauty of nature, time spent with friends or family, or a sense of purpose in life. Ironically, it's often the things we value the most that don't have values, such as the value of feeling like you can contribute to the society around you.
Social valuation gives us a way to identify the things we value that don't usually have an economic value. In other words: Open Social Value Bank seeks to value what we value.
In traditional cost-benefit analyses, usually only the budget-related costs and savings are taken into account, but the value of well-being is set to 0. This is a huge limitation, as we know from decades of research that people with better wellbeing have a wide range of health benefits, and also cost society and workplaces far less in annual sickness costs and production losses. This means that traditional cost-benefit analyses that don't take wellbeing value into account can result in underestimating the true socio-economic outcome. This is a serious challenge, as it means that social interventions and policies that lead to social improvements will not be prioritized, as the "true" or rather "full" value is not known.
In practical terms, social valuation can help to make better economic calculations of the value of social improvements. Social valuation can therefore help inform policy decisions and help ensure that the things that create wellbeing are also taken into account financially. This has implications for how resources are allocated and new policy initiatives are created. For example, if we know that a certain policy will have negative effects on people's wellbeing, we can weigh these costs against the benefits and make a more informed decision. Overall, social valuation allows us to take a more holistic approach to decision-making, one that considers not only economic factors but also the wellbeing of people and society as a whole.
[1] E. Diener and M. E. P. Seligman, "Beyond Money: Toward an Economy of Well-Being," Psychol. Sci. Public Interest, vol. 5, no. 1, pp. 1-31, Jul. 2004, doi: 10.1111/j.0963-7214.2004.00501001.x.
[2] D. Kahneman, A. B. Krueger, D. Schkade, N. Schwarz, and A. Stone, "Toward National Well-Being Accounts," Am. Econ. Rev. 94, no. 2, pp. 429-434, 2004.
[3] C. I. Jones and P. J. Klenow, "Beyond GDP? Welfare across Countries and Time," Am. Econ. Rev. vol. 106, no. 9, pp. 2426-2457, Sep. 2016, doi: 10.1257/aer.20110236.
[4] P. Dalziel, C. Saunders, and J. Saunders, "From Economic Growth to Wellbeing Economics," in Wellbeing Economics, Cham: Springer International Publishing, 2018, pp. 1-21. doi: 10.1007/978-3-319-93194-4_1.
[5] 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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