Defining and Measuring Well-Being
In 2012, The Boston Consulting Group proposed the SEDA as a new way to measure well-being. SEDA is primarily an objective measure (combining data on outcomes, such as in health and education, with quasi-objective data, such as governance assessments). It is also a relative measure that assesses how a country performs in comparison to either the entire universe of countries or to individual peers or groups. SEDA offers a current snapshot as well as a measure of progress over time, and it complements purely economic indicators like GDP.
SEDA does not include purely subjective measures. Other metrics based on subjective measures—such as the ones used in the World Happiness Report—offer valuable complementary, but separate, insights. In fact, we have found a strong overall positive correlation between the scores from the World Happiness Report and SEDA scores.
Using indicators from publicly available sources, we assess country performance for each dimension. The assessment relies on a total of 40 indicators based on the most recently available data. (For our 2019 analysis, this is generally 2017 data—it is worth noting that very recent developments will not be reflected in the analysis.) Each indicator’s measure is normalized on a scale of 0 (the lowest score among the 143 countries) to 100 (the highest). Based on those normalized indicators, a score is calculated for each of the ten dimensions. We can use these scores to look at well-being in three ways:
We aggregate the scores for the ten SEDA dimensions to provide an overall score for each country. This score can be used to compare a country with any other country or group of countries. In general, wealthier countries tend to have higher scores than less wealthy countries. SEDA’s ten dimensions also provide an organizing structure for reviewing priorities for remedial action, since a country’s performance relative to the rest of the world or a group of peers can highlight critical strengths and weaknesses. Armed with such insights, governments can begin to identify strategies for addressing the most pressing issues.
With 12 years of data of comparable SEDA scores, we can track the change in SEDA score over that period. We can also track changes in each dimension of the SEDA score.
On the basis of their SEDA scores, we can examine how well countries are able to convert their wealth (as reflected in income per capita) into well-being. We do this using a measure called the wealth to well-being coefficient. This coefficient compares a country’s SEDA score with the score that would be expected given the country’s GNI (gross national income) per capita. The coefficient thus provides a relative indicator of how well a country has converted its wealth into the well-being of its population. Countries with a coefficient of 1.0 are generating well-being in line with what would be expected given their income levels. Countries that have a coefficient greater than 1.0 deliver higher levels of well-being than would be expected given their GNI levels, while those below 1.0 deliver lower levels of well-being than would be expected.
More details about SEDA can be found in Measure Well-Being to Improve It: The 2019 Sustainable Economic Development Assessment, BCG report, July 2019.
Indicators used to calculate scores for SEDA’s ten dimensions come from these sources: DataBank and Worldwide Governance Indicators (The World Bank); Environmental Performance Index (Yale University and Columbia University in collaboration with the World Economic Forum); Global Competitiveness reports (World Economic Forum); Global Health Observatory (World Health Organization); Index of Economic Freedom (Heritage Foundation); Indices of Social Development (International Institute of Social Studies); Programme for International Student Assessment (OECD); United Nations; World Economic Outlook database (International Monetary Fund).