Many things affect a person’s welfare
(Introduction to Economics, Lesson 4)
One of the reasons Economics is not just about money, is that there are many things that affect how well-off someone is — and money is only one of them. Indeed, the relationship between how rich people are and such things as how happy, contented or fulfilled they are, is far from clear.
To look at how well-off someone is, you may indeed consider their monetary income and their wealth, but you would also want to consider such things as their health and the access they have to high-quality healthcare. You’d look at how well-educated they are and at how pleasant and psychologically rewarding their job is. You’d look at whether they have family and friends to support them, at how much leisure time they have and at whether they have interests and hobbies. You’d look at the environment they live in and the sort of climate they enjoy — or have to put up with!
It is clearly very possible for someone who has very little money to still be very well off indeed. Even if they have little material wealth, they can still be very well provided for. They might eat healthily. They might live near to fantastic countryside or other free leisure facilities. They might have lots of friends — or, more likely, just a few very good ones. They may not own many books, but they can borrow as many books from the library — or from friends and family — as they will ever need or want.
And it is equally possible for someone who has lots of money to be very badly off. They might be very unhealthy, very lonely, very isolated, poorly educated, bored, selfish, unkind and unloved.
If we’re talking about a person’s general wellbeing — beyond just how much money they have — we may refer to their ‘welfare.’
It is true that there probably aren’t any entirely satisfactory ways of measuring a person’s welfare. It can be difficult to define exactly what a person’s or a country’s ‘welfare’ refers to exactly. The point is, however, that a person’s general welfare is about far, far more than how much money they have, how much income they receive or how much material wealth they command.
On many occasions, for example, surveys have attempted to find out how happy and contented people around the world are. Again, happiness is not an easy thing to measure scientifically and we often have to rely a lot on people’s self-perceptions. Nevertheless, the results of these surveys often seem to suggest that some of the world’s poorest people are actually amongst the world’s happiest and most contented people.
A proper economist is far more concerned with people’s welfare than he is with their incomes. Monetary income is only a fraction of what is important when considering a person’s welfare. Similarly, a community or society can be ‘rich’ in many ways that don’t have much to do with the movements of small green/blue/pink pieces of paper.
When referring to a person’s welfare, economists often refer to the concept of ‘utility.’ A person’s ‘utility’ is a measure of how well-off they are — although it isn’t really anything you can actually measure as such using any sort of widely-recognised units. We might say, however, that one situation would provide a person with greater utility than would another situation. We might say that a particular decision would lead to an improvement in a person’s utility.
There have been many arguments amongst economists over how useful or otherwise the concept of utility is. It does remind us, however, that a person’s welfare may not have a straightforward and linear relationship with their income or wealth.
Consider this: If you are a person on a fairly low to average wage, then it could make an amazing difference to you if you won a million pounds (or even dollars!) on the lottery. You could buy a nice house, a nice car and you need never really worry about money again.
Winning another million pounds would still be wonderful and could bring you significant additional benefits, but it wouldn’t make anywhere near as spectacular a difference to your life as the first million. The luxurious sports car you already own is more than adequate to get you to the golf club each day. You could buy a more expensive car or a second sports car, just for variety, but it won’t really make a great difference to your life. If you’re lucky enough to win a third lot of a million pounds, that might make only a very marginal difference. A fourth million might barely make a noticeable difference at all.
The point is that your second million doesn’t provide anywhere near as much benefit as your first million may have brought you. Not every pound (or dollar) is worth the same — at least, in terms of the difference it makes to your overall wellbeing — and economists should take care to remember that.
Furthermore; happiness, contentment and fulfilment are also intimately connected to life’s difficulties and challenges. There is much more satisfaction and fulfilment to be gained from meeting challenges and overcoming difficulties than can ever be gained simply by spending money.
