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What is a “wellbeing economy”? 

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Following last month’s Cabinet appointments, Scotland now has a Cabinet Secretary for Wellbeing Economy, Fair Work and Energy. “Wellbeing” might not spring to mind when people think about the economy. So what is a “wellbeing economy” and how is it influencing Scottish Government policy? 

The idea of a wellbeing economy has far-reaching consequences. Its proponents often argue for a complete redesign of our entire economic system.  

In particular, they argue against the pursuit of Gross Domestic Product (GDP) growth as an end in itself. Instead, they would widen the metrics by which we design and evaluate economic policy to include its impact on peoples’ wellbeing and the natural environment. 

“While definitions vary, a wellbeing economy can be described as an economic system operating within safe environmental limits, that serves the collective wellbeing of current and future generations first and foremost. 

The wellbeing economy approach emphasises that economic growth should not only be sustainable and inclusive but should also serve as a means to an end – that of collective wellbeing of people and planet – rather than be considered an end in itself.”  

Wellbeing Economy Toolkit, Scottish Government

The problem with GDP 

GDP is an attempt to measure the value of everything produced and sold in the economy, or “economic output”. A SPICe briefing on Gross Value Added (GVA), which is similar to GDP, provides more detail on how this is measured.  

GDP is often used as a yardstick by which we judge how an economy is performing. But economists recognise that GDP is a flawed measure of an economy’s performance.  

First, on its own terms, GDP does not capture the value of all economic output. For example, unpaid care and some digital activity is not included, even though value is generated by these activities. 

Second, even if it did accurately capture all economic output, GDP still tells us nothing about the distribution or sustainability of that output.  

“Income inequality, the happiness of children, access to green spaces, access to housing. None of these are captured in GDP statistics but they are all fundamental to a healthy and a happy society.” 

Nicola Sturgeon TED Talk 

Furthermore, GDP doesn’t distinguish between economic activity that enhances human and environmental wellbeing and activity that harms it. This can lead to “failure demand” where, for example, spending resources to clean environmental disasters counts towards GDP, whereas protecting natural ecosystems in the first place does not.  

A key premise of the wellbeing economy is that, given its flaws, GDP growth should not be pursued as an end in itself. In fact, some advocates argue that GDP growth should be abandoned altogether as a policy objective, although this is not the stated position of the Scottish Government. 

What does a wellbeing economy look like? 

Whilst it offers a valid critique of our current economic system, the wellbeing economy does not always offer clarity over what to replace it with. To help, advocates often point to concrete examples of the wellbeing economy in action.  

These include social enterprises and businesses owned by their workers, businesses using more localised supply chains, ethical banking models that prioritise environmentally friendly investments, and participatory budgeting from governments. 

However, there is an obvious challenge over how to expand these fairly small-scale examples.  

Proponents argue that a key part of the solution is to invest in the “four capitals” – human capital, social capital, financial capital and natural capital. It is argued that these are needed to enhance human wellbeing now and in the future. 

“If we are sustaining, investing in and nurturing these four types of resources, we can be confident that we are increasing our capacity to deliver wellbeing for current and future generations, even if the causal mechanisms through which this happens are highly complex.” 

Wellbeing Economy Monitor, Scottish Government 

The wellbeing economy in the Scottish Government 

Establishing a wellbeing economy has been a key ambition behind the Scottish Government’s economic policy over the last two sessions of Parliament. 

In 2018, the Scottish Government was a founding member of the Wellbeing Economy Governments partnership (WEGo), along with Iceland and New Zealand. Finland, Canada and Wales have since joined. The partnership aims to “share expertise and transferrable policy practices to advance [members’] shared ambition of building wellbeing economies.” The partnership operates through “policy labs” – forums where government officials can exchange expertise on relevant policy issues. 

More recently, the objective of building a wellbeing economy was mentioned repeatedly in the document that set out the new First Minister’s priorities in government. This continues a trend in recent Programmes for Government.  

In 2022, the government’s National Strategy for Economic Transformation – a strategy that is designed to guide economic policy over the next decade – explicitly stated that building a wellbeing economy was the government’s overarching objective.

“Our vision is to create a wellbeing economy: a society that is thriving across economic, social and environmental dimensions, and that delivers prosperity for all Scotland’s people and places. We aim to achieve this while respecting environmental limits, embodied by our climate and nature targets.” 

National Strategy for Economic Transformation, Scottish Government 

Each section of the strategy feeds into this objective of delivering a wellbeing economy. The strategy concludes by claiming that “as a consequence of the 6 programmes, 18 projects and 77 actions set out in this strategy, we will have achieved our vision of building a wellbeing economy.” 

However, some independent economists are not convinced that the strategy will deliver the government’s objectives.

“Although billed as a strategy document rather than an action plan, a range of actions are set out. What was missing was the demonstration of how the actions will lead to improvements in the economy and wider outcomes.” 

Fraser of Allander Institute, Strathclyde University 

There is also a question of scale, and whether 77 actions of a devolved government can bring about the economic transformation that proponents of the wellbeing economy envisage. 

Monitoring success 

So, whilst the wellbeing economy is often mentioned in high level strategy documents, it is not always clear how Scottish Government policy will deliver it.  

To help scrutinise policy, the government has developed the Wellbeing Economy Monitor – a series of fourteen benchmarks against which success can be measured. Desired outcomes are categorised under the four capitals – human, social, financial and natural. They include: 

  • fewer preventable deaths
  • a shrinking gender pay gap 
  • higher investment (measured by gross fixed capital formation as a % of GDP) 
  • reduced greenhouse gas emissions.  

Growth in GDP, productivity or average wages are not included. 

The government has also developed a Wellbeing Economy Toolkit to support local authorities design economic policy.  

All of this is an example of a government taking a more holistic view of economic policy, rather than defining success by GDP growth alone – a key tenet of the wellbeing economy.  

However, this also raises questions.   

The Wellbeing Economy Monitor takes a similar approach to the National Performance Framework (due to be refreshed this year), so which takes precedence when designing economic policy? How and when is the toolkit to be used? And how will all of this influence and guide government policy? For example, the Wellbeing Economy Monitor is not mentioned in the 2023-24 budget document, so it is not clear how these desired outcomes shaped decisions in the budget.  

Finally, there are questions around trade-offs. Every decision a government makes will come with trade-offs, especially at a time of constrained budgets. So to ensure effective economic policy, governments need to prioritise and assess where money is best spent to achieve their policy objectives. But this analysis can be harder when there are multiple competing objectives and limited resources available.  

So, there is lots for the new Cabinet Secretary for Wellbeing Economy, Fair Work and Energy to think about as he tries to deliver a wellbeing economy. 

Where can I find out more about the wellbeing economy? 

The Wellbeing Economy Alliance Scotland 

Scotland’s Futures Forum 

Dr. Katherine Trebeck TED Talk: Why the future economy has to be a wellbeing economy 

Cross Party Group for Wellbeing Economy 

Rob Watts, Senior Researcher, Financial Scrutiny Unit

Blog image: “English countryside – Shrewton, United Kingdom – Landscape photography” by Giuseppe Milo ( is licensed under CC BY 2.0.