REF: 2021

Impact case study

Understanding and improving subjective wellbeing


The appraisal of social value, also known as public value, is based on the principles and ideas of welfare economics and concerns overall social welfare efficiency, not simply economic market efficiency.

UK Treasury Green Book (2018)

Professor Paul  Dolan

Research by

Professor Paul Dolan

Department of Psychological and Behavioural Science

Professor Lord Richard Layard

Research by

Professor Lord Richard Layard

Centre for Economic Performance

LSE research has significantly contributed to promoting subjective wellbeing as a central objective of public policy, and provided new tools to support its measurement. 

What was the problem? 

As societies get richer, they don’t necessarily get happier. However, frameworks to assess how well a country, population, or individual is doing often focus on financial measures, such as income or GDP, to measure social progress. These metrics omit the crucial element of human wellbeing, or happiness, as a policy goal.   

The implication of this insight is that governments should consider wellbeing when designing and implementing public policy. Wellbeing is arguably the most important aspect of the human condition, hence it is integral to designing any type of policy measured by any existing metric. To incorporate it into policymaking, a rigorous conceptual framework for understanding subjective wellbeing is needed, along with robust methods for measuring it and analysing the effects of policy change on individuals’ and society’s wellbeing. The design of practical, cost-effective policies to improve wellbeing can then follow. 

What did we do? 

Both separately and in collaboration at LSE, professors Richard Layard and Paul Dolan have been at the forefront of research on wellbeing and the new “science of happiness”. Their multidisciplinary work formulates a theoretical framework for measuring subjective wellbeing and for understanding how and why it should be prioritised as a policy objective.   

Professor Layard was one of the first economists to work on happiness. His influential 2005 book Happiness: Lessons From a New Science drew on economics, psychology, sociology, and neuroscience to reach new conclusions about the sources and causes of human happiness. Layard argued for the central importance of happiness as a policy goal and proposed that “the progress of national happiness should be measured and analysed as closely as the growth of GDP”. 

In 2018, Layard and colleagues published The Origins of Happiness, which draws on unique survey data on over 100,000 individuals in Australia, Germany, the UK, and the USA. It showed that wellbeing not income constitutes the fundamental inequality between people, with human misery more down to failed relationships and physical and mental illness than economic factors. These findings build on Layard and colleagues’ influential cost-benefit analysis of cognitive behavioural therapy, published in 2007, which showed that wider provision of psychological therapy services would have massive benefits – at zero net cost to the UK Treasury.  

Professor Dolan’s research at LSE has focused particularly on producing a richer conceptualisation and more nuanced measurement of subjective wellbeing. This is grounded in a twin focus on experiences of pleasure and purpose over time, as detailed in his 2014 book Happiness by Design. Dolan additionally proposed that happiness is contingent not just on “inputs” (income, work, marital status, age, and so on), but on the allocation of attention (a finite resource) to those stimuli.  

In policy terms, focusing on wellbeing requires empirical evidence to inform its design, and to evaluate interventions intended to improve people’s lives. In 2008, the UK Office for National Statistics (ONS) commissioned Layard and Dolan, with Professor Robert Metcalfe (Oxford), to advise on its national measurement of wellbeing project. The researchers set out a conceptual case for incorporating four headline wellbeing indicators into the ONS’s population surveys, categorised by three broad measures: evaluation, experience, and “eudemonic” (reports of purpose and meaning in life). Subsequently, the ONS’s Annual Population Survey included four new questions – now known as “the ONS4” – that test these measures: life satisfaction (“evaluation”); happiness and anxiety (together “experience”); and how worthwhile people considered their life to be (“eudemonic”).  

Dolan has since analysed the data generated by these ONS survey questions, for example by exploring the subjective wellbeing impacts of the 2012 Olympic Games.  

What happened? 

Layard and Dolan’s high-profile work has been pivotal in advancing subjective wellbeing as a measure of national wellbeing in public policy in the UK and internationally. It has shaped the way that economists measure individual utility and social welfare. Through high-profile publications and media work, they have also raised public awareness of – and engagement with – the science of wellbeing and happiness.  

Layard’s Happiness has been reprinted in more than 20 languages and sold well in excess of 150,000 copies. Dolan’s best-selling Happiness by Design has sold approximately 135,000 copies in the UK, and been published in over a dozen countries (its 2019 follow-up Happy Ever After has sold 45,000 copies in the UK). Each has generated significant press acclaim and public discussion. This body of work has helped many people to understand and improve their own wellbeing, and supported citizens’ efforts to actively improve levels of happiness, including via the Action for Happiness movement, co-founded by Layard in 2011.  

Increasing provision for mental health services has been a long-term focus for LSE’s Wellbeing Programme. By demonstrating the benefits and cost-effectiveness of extending cognitive behavioural therapy, Layard’s research has underpinned the UK’s Improving Access to Psychological Therapies (IAPT) programme, initiated in 2008. Around 1.25 million people participate in it annually, making this the largest publicly funded evidence‐based psychological care programme in the world, with NHS England committed to additional funding and the programme’s expansion (Layard contributed to its 2015 spending review).  

In 2015, the UK government also committed to investing GB £118 million by 2018/19 on the roll-out of an equivalent psychological therapies programme for children and young people. In 2016, Layard proposed a further programme for schools and colleges, in a paper co-authored with Professor Stephen Scott (King’s College London). It was read by then-Health Secretary, Jeremy Hunt, and informed the 2017 Green Paper for transforming children and young people’s mental health, with its key proposal for local teams launched in the first areas in 2018.  

One of the principal barriers to using social wellbeing in policy had been a lack of robust quantitative evidence. The inclusion of wellbeing questions in the ONS’s populations survey greatly contributed to changing this, and since September 2014 the questions have been fully approved as the standard across government for measuring subjective wellbeing. The questions now appear in more than 30 surveys and evaluations used to inform government policy, and they have been adopted in international efforts to measure wellbeing, including the OECD’s 2013 Guidelines on Measuring Subjective Well-being, which applies and cites some of the work developed by Layard and Dolan.  

As a member of the House of Lords, Professor Layard is Vice Chair of the All-Party Parliamentary Group on Wellbeing Economics (APPGWE), which in 2014 recommended that: “new policy should be routinely assessed for its impacts on wellbeing”. The most significant government application of this has been in the Treasury’s 2018 edition of its Green Book, which provides guidance on how to appraise and evaluate all central government programmes. Earlier versions had referred to wellbeing data in cost-benefit analysis, but the 2018 revision was the first to state explicitly that wellbeing should be the primary aim of appraisal. This represents a step-change in how the UK government evaluates its objectives, informed by this research on wellbeing and happiness. More recently, the Green Book has been revised with a Supplement, strongly influenced by academic research on wellbeing and policymaking, explaining how cost-effectiveness can be done with wellbeing as the measure of benefit.