How do we determine the degree of prosperity in a society? Only based on material factors such as GDP? Or do intangible factors such as health and happiness also play a role? After all, these aspects are just as important to our quality of life. Professor Frank van Oort, Professor of Urban and Regional Economics at the Erasmus School of Economics, advocates a broad definition of the complex concept of prosperity.
What do you mean by broad prosperity?
“When we talk about prosperous people or countries, we usually mean: rich countries or people. From an economic point of view, we traditionally view prosperity as a material phenomenon. Is there enough work, how high is the gross domestic product, the economic growth? Criteria that can be expressed in hard figures and usually also in money. There is nothing wrong with that, it allows us to compare people and areas. But our happiness does not only depend on money. Intangibles such as health, safety and clean air also contribute to the quality of life. In my opinion, we need to identify all these factors and include them in prosperity measurements. To return to the question: you could define broad prosperity as the quality of life, in the here and now but also in relation to future generations and people elsewhere.”
Is happiness measurable?
“Of course, it is a subjective phenomenon. When do you feel happy? That is different for everyone and often a snapshot in time. Are you healthy, or just divorced? Even good weather or a victory of FC Feyenoord can - at the moment you ask the question - play a role. Nevertheless, subjective factors can be examined. Our scientific institute EHERO [Erasmus Happiness Economics Research Organisation, ed.] defines the phenomenon of happiness as the subjective enjoyment of one's life as a whole. EHERO unravels and measures the factors that influence it. If we conduct research into people's well-being, we take the personal characteristics into account. Suppose that people from the south of Rotterdam are less happy on average, what are the main causes? Is this mainly because many poorly educated people live there, who are less healthy? Or is it the context, i.e., the neighbourhood, that causes the problematic score? If we know that, the government can pursue a much more focused policy.”
Can you give an example?
“For a long time, the European Union took the view that all Member States should be able to grow their economies. It even earned the EU the Nobel Peace Prize. Well intended, but was it the right choice? And how to go about it? The EU chose to focus on strengthening higher education in a country like Bulgaria. But the result was that the new educated people left en masse for countries like Germany to earn money. And brain drain in low-wage countries is exactly what you do not want. So, the EU should have done something about local employment as well, to make Bulgaria more independent, prosperous, and promising. With good research and a broader scope, perhaps better choices would have been made at the outset.”
You focus mainly on subjective factors of well-being?
"I use all the relevant data I can find. Secondary sources such as Statistics Netherlands (CBS) provide a lot of data, as does our own research. If we want to measure more personal factors, we often do this through qualitative research such as interviews. But the discussion remains: traditional economists prefer to express everything in terms of money and use the narrow definition of prosperity. I say, along with others, let's focus on finding indicators for well-being, even if we cannot express them in money. Subjective appreciation can be very decisive, especially if a situation is structurally negative. Look at the Brexit, where the vote was more emotional than rational. The poorer regions that are most dependent on Europe voted against the EU. Economically very unwise, but purely out of dissatisfaction. So, you see that subjective, emotional perception can have major material consequences. It is therefore wise to measure these characteristics and take them into account when making policy."
What does the future hold?
"I recently spoke to Mariana Mazzucato, one of the great thinkers in my field, about the challenges of our time, such as international security, climate and inequality. Mazzucato argues that Europe and America need to name out loud what missions we are pursuing. Let a cost-benefit analysis be carried out and above all: take the reins as government. Act as a market player, otherwise we will not solve the problems. Money is not the problem, political will is often lacking. During the corona crisis, there suddenly was extra money for healthcare. Now that Russia is a threat, we are investing more in security again. Why do we always need a shock and not opt for a structural approach? This also applies to the Netherlands. We have an ambitious coalition agreement; we want to reduce CO2 and particulate matter. But the business world isn’t simply going to take care of this. So, if we want to make the port of Rotterdam more sustainable, the government must dare to take the first steps. Do we help the largest refineries, the waste incinerators and the coal-fired power stations to move towards a more sustainable model? Or do we continue to opt primarily for employment and productivity? With which we actually apply the narrow definition of prosperity."
And what is your mission?
"I would like to see, say, ten years from now, that we are able to properly measure which factors, in specific situations, determine our well-being. That this knowledge is used as input for socio-economic policy. And that we evaluate this policy properly, so that we can measure why certain actions were successful or unsuccessful. In this way, we as a university contribute to the well-being of larger groups of people in society. After all, my field, economics, is about the distribution of what is valuable."