In videotaped remarks for a meeting of international economists this morning, Federal Reserve Chairman Ben Bernanke argued that economic measurement “must encompass measures of well-being and its determinants,” as well as the aggregate data such as gross domestic product and personal consumption expenditures that most of us are familiar with. Aggregate data, Bernanke said, “can sometimes mask important information.”
Bernanke also said that “life satisfaction” includes:
[A] strong sense of support from belonging to a family or core group and a broader community, a sense of control over one’s life, a feeling of confidence or optimism about the future, and an ability to adapt to changing circumstances. Indeed, an interesting finding in the literature is that the overwhelming majority of people in the United States and in many other countries report being very happy or pretty happy on a daily basis–a finding that researchers link to people’s intrinsic abilities to adapt and find satisfaction in their lives even in very difficult circumstances.
He encourages more investigation into “economic indicators that bear on the quality of life,” including:
[C]hanges in the distribution of income, wealth, or consumption; the degree of upward mobility in material measures of well-being; indications of job security and confidence about future employment prospects; and households’ liquidity buffers or other measures of their ability to absorb financial shocks.
Bernanke’s apparent wish is to get these indicators and others like them into academic economic models. Does this mean that markets are no longer rational?
The full text of Bernanke’s remarks are available here.