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A general model of the innovation - subjective well-being nexus

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Abstract

A model of the innovation – subjective well-being (SWB) nexus is needed to advance our understanding of the welfare implications of innovation. Building on an earlier contribution by Swann (G. M. Peter Swann, 2009, The Economics of Innovation, Edward Elgar, Cheltenham, UK), I first assemble the major building blocks of such a model and then discuss some of the many potential linkages between them. A central feature is the inclusion of multiple SWB impacts of processes as well as of outcomes. Some general issues that would have to be addressed in any empirical application are also discussed. SWB impacts are to be used as an additional indicator in the assessment of innovation, not as something to be maximised. By taking SWB into account, new insights might emerge that could result in either strengthening or modifying existing innovation policies, or in novel policies.

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Notes

  1. They include John Stuart Mill, Karl Marx, Ernst Friedrich Schumacher (see Swann 2009), as well as Richard Layard (2005), Diane Coyle (2011), among others.

  2. See Schubert (2012a, p. 586, footnote 2) for references to other evolutionary economists who have written on normative issues. Also see Dolfsma (2008, chapter 8), who aims to develop a dynamic Schumpeterian welfare perspective which focuses on long-term effects. However, he still equates social welfare with total output.

  3. The term happiness research is somewhat unfortunate because of its hedonistic connotations. In the economics literature it is synonymous with SWB research. I use it in that broad sense.

  4. Elsewhere I have highlighted the lack of links between the literature on policies for KBEs and that on policy implications of happiness research (see Engelbrecht 2007, 2012).

  5. Some of their examples of policy uses of SWB measures are relevant in the context of the innovation-SWB nexus, e.g. the discussion of unemployment and well-being in the workplace (Diener et al. 2009, chapter 10). The closest they come to commenting on innovation is a brief mention of the lack of knowledge of SWB impacts of technological change (ibid., p. 117).

  6. For example challenge 1 ‘from visible innovation to ‘dark innovation”, challenge 6 ‘from innovation for economic productivity to innovation for sustainability (‘green innovation’)’, challenge 7 ‘from risky innovation to socially responsible innovation’ and challenge 8 ‘from innovation for wealth creation to innovation for well-being (or from ‘more is better‘ to ‘enough is enough’)’.

  7. Ruskinian wealth is named after John Ruskin, the British philosopher and art historian.

  8. For example, the optimal level of SWB might be less than the highest level possible, it might vary between life domains and individuals, and there might be acceptable trade-offs between SWB and other objectives (Oishi et al. 2007). There is a large literature on the issue of whether policies should, or should not, maximise happiness. Hirata (2011) provides a good overview of the debate.

  9. Binder (2013, p. 568) argues that this view can be termed the constitutional or institutional approach to happiness politics, whereas SWB maximisation can be termed the welfare economic approach. Although I broadly agree with the constitutional view, Binder’s view of policy seems to be more hands-off then mine, aiming only at creating institutional frameworks that allow individuals to pursue SWB. I would argue that the model of the innovation-SWB nexus might also be used to identify discretionary policy interventions that aim at supporting SWB without trying to maximise it.

  10. 10 It also hints at the issue of how to combine different SWB impacts, i.e. in this case overall SWB versus SWB in the workplace, an issue commented on further in Section 3.2.

  11. Schumpeter firmly associated entrepreneurship with innovation. For a brief introduction to theories of creativity and entrepreneurship see, e.g., Swann (2009, chapters 9, 10).

  12. For a brief introduction to the issues, see Swann (2009, chapter 18).

  13. TW is conceptualised as the present value of (sustainable) consumption over a generation. Major TW subcategories are natural, produced and intangible capital. Measurement of natural capital is improving quickly, but it is still incomplete, excluding important resources like water and fisheries. Numerous assumptions have to be made when calculating natural and produced capital. They can and have been critisized (see, e.g., Perman et al. 2011). By far the largest component of TW is intangible capital. Due to lack of adequate data for many countries it is simply measured as a residual in World Bank (2011). The alternative approach of estimating all capital stocks directly and adding them up to obtain TW, plus correcting for a number of other issues associated with ‘wealth accounting’, has been advocated by Dasgupta (2010) and Arrow et al. (2010).

  14. Such as the Happy Planet Index (New Economics Foundation 2009) that combines happy life years (life satisfaction × life expectancy) and an adjusted ecological footprint; or Ng’s (2008) environmentally responsible happy nation index.

  15. A detailed discussion of different SWB measures is beyond the scope of this paper. For further discussion see, e.g., Diener et al. (2009) and Helliwell et al. (2012).

  16. For example, happiness seems to satiate with high income, whereas LSF does not. Earlier, Inglehart et al. (2008) reported that a society’s level of LSF is more closely related to economic conditions than is happiness.

  17. The multitude of potential SWB measures, even when the same general definition of SWB is used, indicates the need for some standardization, which will hopefully take the form of integrated national systems of SWB accounts.

  18. Personal communication, 30 April 2013.

  19. This resonates with Schumpeter’s view of the complexity of any normative analysis of creative destruction that led him to abandon any attempt at it (Schumpeter 1947, p. 155, footnote 12, reported in Schubert 2013, p. 228).

  20. For an introduction to the Easterlin Paradox controversy see Clark et al. (2008) and Easterlin et al. (2010). If it is accepted that economic growth in advanced KBEs is mostly due to productivity growth (which itself is mostly due to innovation), the literature on the Easterlin Paradox is highly relevant to the analysis of the innovation-SWB nexus.

  21. One example is Dolan and Metcalfe (2012). Using a representative survey of the British population and new primary data, they find a strong link between innovation (proxied alternatively by being original and having imagination) and SWB (in the workplace and in life generally). They point out that more research is needed to determine causation. Their explanatory variables mostly capture personal attributes, some of which can be mapped into the model of the innovation-SWB nexus, but many potentially important factors are not included.

  22. For an introduction to the literature on consumer resistance to innovation adoption see Kleijnen et al. (2009).

  23. Frey et al. (2004, p. 385/6) argue, e.g., that “hierarchy constitutes a procedural disutility because it interferes with innate needs of self-determination”.

  24. For example, Kavetsos and Koutroumpis (2011) find positive correlations for some products and argue this might have implications for public policy, e.g. for recognising internet access as a fundamental human right.

  25. See, e.g., Uhlaner and Thurik (2007) for findings derived from macro-level cross-country data, and Block and Koellinger (2009) and Carree and Verheul (2012) for findings obtained using micro-level data.

  26. Binder (2013) wants to impose more structure on the SWB analysis of innovations by restricting analysis to “life domains which impact on subjective well-being regardless of context and culture” (ibid., p. 572). He calls this his ‘life domain evaluation principle’. However, he is not very specific about what domains to include. There are potentially some similarities to several of the elements included in my general model, but his formulation seems overly restrictive.

  27. See Dopfer et al. (2004) on the importance of the meso in evolutionary economics. They argue meso change is central for understanding evolutionary dynamics.

  28. I do not assume preferences are unchanging over time. However, I do not explicitly comment on the issue of endogenous preferences in this paper, an issue which is central to Schubert’s (2012a, b, 2013) work. The relationship between preference learning and SWB is a complex one that should be explored further.

  29. See, e.g., Hirata (2011, pp. 59–63).

  30. Binder (2013) proposes a second normative evaluation rule, i.e. the ‘welfare dynamics principle’, that is aimed at imposing structure on the SWB analyses of innovation over the medium and long run. It focuses exclusively on hedonic adaptation dynamics. While undoubtedly ambitious and challenging, it leaves out other dynamic relationships of the innovation-SWB nexus.

  31. While Schubert argues there needs to be novelty (and therefore uncertainty) so that people can learn new preferences, he does not highlight the potential impacts of uncertainty on SWB. Not only is it unclear how his approach can be implemented empirically, I would also argue that preference learning is not the same as welfare or well-being. It has its own SWB impacts, which are part of the dynamic relationships of the innovation-SWB nexus.

  32. Lundvall (2011), e.g., acknowledges links between the quality of work, learning opportunities and innovation, and job satisfaction.

  33. This would also apply to other types of innovation systems, e.g. regional, sectoral, or technological.

  34. On wisdom-based knowledge policies see, e.g., Rooney and McKenna (2005) and Rooney et al. (2010). The need to move from an information and KBE to a wisdom economy has also been pointed out by others, e.g. by Daly (1996), one of the founders of ecological economics.

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    Hans-Jürgen Engelbrecht

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Engelbrecht, HJ. A general model of the innovation - subjective well-being nexus. J Evol Econ 24, 377–397 (2014). https://doi.org/10.1007/s00191-014-0343-y

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