Cameron's revived happiness index promises green economy boost

In a move that could have a major impact on the UK's emerging low-carbon economy, the government is reportedly preparing to commission work to develop a national happiness index.

According to reports in The Guardian, Downing Street is to revive proposals first put forward by David Cameron when he was opposition leader to develop a sophisticated alternative to conventional economic metrics that attempts to measure the population's psychological and environmental wellbeing.

While acknowledging "nervousness" about the project, given recent protests against the coalition's spending cuts, sources told the paper that the government will on 25 November ask independent national statistician Jil Matheson to devise new questions that could be added to the existing household survey as early as next spring

"The aim is to produce a fresh set of data, some of it new, some of it using existing datasets currently not very well used, to be published – at a frequency to be decided – that assesses the psychological and physical wellbeing of people around the UK," a source told The Guardian. "So that's objective measurements of, for instance, how much recycling gets done around the UK, alongside more subjective measures of psychology and attitudes."

The government is yet to decide whether to report the new metrics separately or combine them into a central happiness index that could provide an alternative to GDP.

The concept of a measure that takes into account psychological and environmental factors as well as purely economic metrics was pioneered by Nobel economists Joseph Stiglitz and Amartya Sen who argued that more sophisticated measures of wellbeing are required to ensure economies are managed in a sustainable fashion.

A number of economists have expressed support for the concept, acknowledging that GDP measures all production, regardless of whether it is in the national interest. For example, as Conservative MP Zac Goldsmith pointed out in his recent book, The Constant Economy, US GDP rose in the wake of the Exxon Valdez oil spill as a result of the money spent on clean-up operations and lawyers' fees.

Cameron also expressed support for the idea during his early days as leader of the opposition, stating in 2006 that the development of a measure for wellbeing represents one of the "central political issues of our time".

Downing Street has reportedly been working on the project for two months and has already consulted with both Sen and the French government, which announced last year that it was to integrate measures of wellbeing with its economic data.

If formally adopted, a happiness index could have a huge impact on the cost-benefit analysis for environmental and low-carbon projects, making them relatively more attractive to politicians and investors. The government is already required to assess the likely carbon impact of policy decisions, but critics have often claimed that Whitehall fails to adequately assess the environmental implications of its decisions, something that would change if economic metrics were directly impacted.

In related news, the Cabinet Office has reportedly put together a "behavioural insight team" that is expected to explore the potential effectiveness of the nudge theory espoused by US economists Richard Thaler and Cass Sunstein.

The team is expected to look at how simple incentives could be used to "nudge" or encourage people to change their behaviour. Again, the project could have a major impact on green businesses with many of the actions the government is keen to encourage, such as increased recycling rates, incorporating an environmental element.