Quality of Life and the Distribution of Wealth and Resources

Enhancing and sustaining the quality of human life is a primary goal of environmental, economic, and social policy. But how do we define and measure quality of life (QOL)? How is QOL distributed among people in the current generation and among the current and future generations? How do we model the dependence of QOL on the full range of environmental, economic, and social variables? Answering these questions is fundamental to understanding and solving environmental problems in the 21st century. 1. How is Quality of Life (QOL) defined? If we are to assess the impact of distribution of wealth and resources on QOL, we must have some clear idea of what QOL actually is. Is it synonymous with satisfaction? With happiness? With human well-being? With consumption? A quick perusal of the literature shows that QOL is a topic of research in a broad range of disciplines. In fields as disparate as advertising, economics, engineering, industry, medicine, politics, psychology, and sociology, improving QOL is often claimed as a primary goal. However, real paradoxes in interpretations of QOL exist. For example, a substantial motivation behind the environmental movement is to improve human QOL, and the same motivation can be argued for the industries (e.g., logging, mining, auto) that are so often its foes. Farquhar (1995, cited in Haas, 1999) claims that the term may be one of the most multidisciplinary in common use, yet even within a discipline there seems to be little consensus regarding its actual definition. In fact, a common criticism against the phrase ‘Quality of Life’ is that “the concept lacks specificity; it has as many meanings as life has aspects” (Schuessler and Fisher, 1985). It seems that improving human QOL should be the dominant policy objective of any government (Schuessler and Fisher, 1985), yet over the past 50 years Understanding and Solving Environmental Problems in the 21st Century Edited by R. Costanza and S.E. Jørgensen © 2002 Elsevier Science Ltd. All rights reserved 222 R. Costanza et al. this priority has been given to increasing the production of goods and services for consumption (Ekins and Max-Neef, 1992). It would seem to follow that policymakers implicitly assume that consumption is a suitable proxy for QOL. How far is this from the truth in modern consumerist society? Consumerism has been defined as a cultural orientation that holds that “the possession and use of an increasing number and variety of goods and services is the principal cultural aspiration and the surest perceived route to personal happiness, social status and national success” (Ekins, 1991). In 1990, nearly three-quarters of entering college students in the USA believed that being ‘very well off financially’ was ‘essential’, presumably for their QOL (Durning, 1992). Bloom et al. (2000) assert that “few statements in the development literature command as much universal assent as the claim that higher incomes lead to higher human development”, where ‘human development’ implies QOL. Some believe that our economy depends on consumption to the extent that we must make it the vehicle by which we improve our QOL, if it is not already. In the words of retailing analyst Victor Lebow, “our enormously productive economy . . . demands that we make consumption our way of life, that we seek our spiritual satisfaction, our ego satisfaction, in consumption . . . We need things consumed, burned up, worn out, replaced and discarded at an ever increasing rate” (quoted in Durning, 1992, p. 22). However, the term QOL first came into common usage in the 1960s to address the issue of increasing crime and violence in the midst of growing material prosperity (Haas, 1999), explicitly distinguishing QOL from consumption. The American Heritage Dictionary defines QOL as “the degree of emotional, intellectual, or cultural satisfaction in a person’s everyday life as distinct from the degree of material comfort” (The American Heritage Dictionary of the English Language, 1992; emphasis added). In addition, while people may believe that greater consumption would increase their QOL, psychology studies find little correlation between consumption and happiness (Durning, 1992). The definition of QOL has evolved through time since the phrase first became widely used in the early 1960s. Early researchers often sought objective definitions (e.g., Mishan, 1967). However, empirical studies generally find poor correlation between objectively measured and subjectively assessed QOL. Hence, since the late 1970s, there has been a growing consensus that QOL is not an objective condition at all, but is rather a subjective one, concerned with people’s own estimations of their individual welfare. Evidence suggests that individuals subjectively interpret their own QOL relative to an ideal standard or to a reference group (Haas, 1999). Thus, communities with low standards of living are sometimes found to rate their QOL as the same or even better than communities with higher standards of living, presumably because they aspire to less or compare themselves to others of similarly modest circumstances (Schuessler and Fisher, 1985). Encompassing these various considerations, Haas (1999) defines QOL as “a multidimensional evaluation of an individual’s current life circumstances in final proof, Understanding and Solving ..., p. 222 Ch. 11: Quality of Life and the Distribution of Wealth and Resources 223 the context of the culture in which they live and the values they hold. QOL is primarily a subjective sense of well-being encompassing physical, psychological, social, and spiritual dimensions. In some circumstances, objective indicators may supplement or, in the case of individuals unable to subjectively perceive, serve as a proxy assessment of QOL”. There are four noteworthy elements in Haas’s definition of QOL. First, while much of the literature emphasizes the subjective nature of QOL, this definition allows for objective indicators. Two goals of this and the following chapter will be to suggest policies for improving QOL, and to suggest objective indicators for determining the success of such policies. While QOL may be primarily subjective, it is easier to advance and assess the success of policies that have measurable objective goals rather than subjective ones. Second, the emphasis on the subjective nature of QOL opens the door to policies designed to influence people’s perceptions of their own QOL. Third, in this definition, the physical dimension of QOL (i.e., wealth and resources) is only one element of many and is the only one that has physical limits. Since the concern of this chapter is the relationship among wealth, resources, distribution, and QOL, these latter two elements of Haas’s definition open up the possibility that we can distribute wealth and resources more equitably without compromising the QOL of those who currently possess the lion’s share. The fourth element of interest in Haas’s definition is that QOL is determined in the context of culture and values. Many economists argue that preferences are fixed and given. The economist’s goal is simply to determine how those preferences can most efficiently be satisfied, and the policymakers’ goal is to create the conditions to facilitate this. However, since cultures and values can change, it follows that the specific determinants of QOL can as well. If the second and last elements of Haas’s definition are correct, they suggest that a society could increase the QOL of its citizens by purposefully changing their preferences. The idea of purposefully changing people’s preferences may seem patronizing and against the liberal view that it is the inalienable right of the individual to have sovereign preferences. However, the reality is that one person’s actions do have impacts on others’ well-being, and the advertising industry is actively devoted to changing our preferences every day. If we are concerned with the QOL of the entire world and of future generations, then it seems reasonable to argue that we are justified in changing preferences in such a way that maintaining or enhancing the QOL of one country or generation does not compromise that of others. Since wealth and resources are the only components of QOL that can be physically depleted, they are the only components whose excessive consumption (and dissipation into waste) can threaten the QOL of others. The laws of thermodynamics ensure that the ultimate source of wealth and resources, and the ultimate recipient of the waste products from their use, is our environment (fig. 1). Therefore, we must closely examine the relationship final proof, Understanding and Solving ..., p. 223 224 R. Costanza et al. Fig. 1. Conceptual model of the dual threat (increased stress and reduced response/resistance that human population growth and activity pose to ecosystem and human health. Adapted from Collados and Duane (1999). between QOL and the natural environment. Collados and Duane (1999) provide an appropriate framework. The natural environment (whose resource stocks and the services they generate will hereafter be referred to as natural capital) generates numerous environmental goods and services that enhance QOL in three ways. First, they provide the materials used by the human economy to produce all human-made products. Second, they directly provide humans with benefits of a type that cannot be imported from elsewhere. Third, they are essential for the reproduction of additional environmental goods and services. Of the human-made products produced from natural capital, some are essential for human life (though ‘essentiality’ may be culture-specific) while all others are non-essential. Natural capital can be divided into four classifications according to its ability to produce environmental services. First, natural capital required to make essential human capital is itself essential. Second, natural capital required for the reproduction of final proof, Understanding and Solving ..., p. 224 Ch. 11: Quality of Life and the Distribution of Wealth and Resources 225 itself is life supporting. Third, natural capital for which no human-made substitutes exist is non-substitutable, and fourth, that which cannot be regenerated once it is destroyed is non-reconstitutable. Specific stocks of natural capital may exhibit none, any, or all of these properties. Clearly then, the relationship between QOL and the natural environment is critical. In summary, QOL is a complex, multi-dimensional concept that may be largely subjective but whose enhancement is probably facilitated by certain objective factors. Policy goals for improving or maintaining QOL can seek to create the objective conditions associated with a superior QOL, or attempt to change people’s subjective assessment of conditions in a way that improves their QOL. As the only element of QOL that can be physically depleted, the use of wealth and resources by some countries or generations can affect the QOL of others. Further, the depletion of wealth and resources can threaten natural life-support functions without which human life itself is threatened. The appropriate distribution of wealth and resources is therefore a critical element in any effort to sustain and improve the QOL we now enjoy. If we are to pursue policies towards this end, however, we must first be able to measure the outcomes of these policies, a topic to which we now turn. 2. How has Quality of Life been measured? 2.1. Economic income, economic welfare, and human welfare If improving QOL is indeed the goal of social policies and programs, it follows that appropriate national aggregate accounting systems should attempt to measure the extent to which policies actually improve QOL, and this is arguably a fair statement of what they are intended to do. Although QOL is largely a subjective assessment, in practice, it must be measured with objective proxies. The number of existing and proposed aggregate accounting systems reflects considerable disagreement over what are the most suitable proxies, and the requirements for different systems differ depending on what proxies are used. Such proxies include (1) the level and pattern of economic activity, (2) sustainable economic income – the amount that can be consumed without depleting capital stocks (Hicks, 1946), (3) economic welfare – the net economic component of total welfare (Daly and Cobb, 1989), and (4) human welfare – the degree to which human needs are fulfilled (Max-Neef, 1992). This range of proxies is arrayed in fig. 2 and table 1. 2.2. Level and pattern of economic activity: gross national product The simplest objective for an aggregate accounting system is to develop an indicator of the production of goods and services in the economy for comparisons either across space or time. In order to avoid double counting, one can focus only on “final” goods and services (i.e., those which attain their final point of use during the accounting period, and are not intermediate in the sense of being destined for final proof, Understanding and Solving ..., p. 225 226 R. Costanza et al.