In recent years, a troubling pattern has emerged across developed economies: While GDP and other economic indicators improve, many people don’t feel better off. This disconnect isn’t just anecdotal. In 2020, Dennis Snower and Katharina Lima de Miranda empirically demonstrated that social wellbeing has significantly diverged from economic growth in more than 30 advanced economies. Specifically, they showed that measures of social affiliation (comprising social support, trust in others and giving behavior), as well as individual empowerment (including employment security, life expectancy, education and confidence in institutions) have decoupled substantially from GDP per capita trends in developed countries.
This decoupling has produced destabilizing political and economic effects across the developed world. For policymakers committed to fostering truly inclusive prosperity, it poses a critical challenge: How can we design economic policies that enhance both material and social welfare?
The challenge stems partly from our economic models. Traditional frameworks focus primarily on consumption and income, assuming that increases in these metrics naturally translate to improved individual wellbeing. But reality is more complex. Social connections, community engagement and personal empowerment all contribute fundamentally to personal welfare. They impact economic indicators, yet are rarely captured in standard economic analysis. This gap between our modelling tools and real-world complexity makes it difficult for policymakers to anticipate — or shape — how economic interventions might affect overall societal wellbeing.
My recent research incorporates key social dimensions from Snower and Lima de Miranda’s SAGE framework (Social cohesion, Agency, Material gain, Environmental sustainability) into a standard macroeconomic model to create a new framework for analyzing how economic shocks and policy interventions affect both economic and social outcomes. This enhanced model was calibrated using French economic data, providing a realistic laboratory for testing how different aspects of wellbeing interact in a modern economy. It provides a rigorous test case for incorporating multidimensional wellbeing into our economic models.
The results reveal two crucial insights. First, economic changes can produce starkly different wellbeing outcomes across society. This “wellbeing inequality” is an empirical inequality that can be tracked in addition to income or wealth. When simulating a modest positive productivity shock — the kind of economic boost policymakers often target — high-income households saw improvements in both economic and social dimensions. However, lower-income households experienced a troubling divergence: While their economic situation improved modestly, their social wellbeing indicators declined. In other words, the rising tide does not lift all boats, either in terms of significant economic gains or quality of life.
Second, the model successfully reproduced the decoupling phenomenon observed in real-world data. Even as aggregate economic indicators improved, social cohesion measures followed a different trajectory, creating a widening gap between material and social prosperity. This theoretical validation of empirical observations suggests that the model captures fundamental dynamics in modern economies that previous models have missed.
These findings have profound implications for policy design. Using updated models would allow policy makers to complement traditional economic policies with measures that specifically target social cohesion and personal agency. For instance, productivity-enhancing policies could be paired with initiatives that strengthen community bonds and social capital, particularly for individuals with differing income or wealth situations. The model can provide a framework for evaluating such comprehensive approaches, helping policymakers identify and understand both direct economic effects and broader societal impacts.
The path forward is clear: We need to expand our policy toolbox to address both economic and social dimensions of prosperity. My research demonstrates that economists can rigorously model and analyze these broader dimensions of wellbeing. This opens new possibilities for evidence-based policymaking that takes seriously the goal of recoupling economic and social prosperity. While this research emerged at the onset of the COVID-19 pandemic, it has become even more relevant in its aftermath. The post-pandemic landscape has intensified the decoupling phenomenon. While many economies show signs of recovery in traditional metrics, we’re witnessing deepening social isolation, growing mental health challenges and widening inequalities across the developed world. The mounting pressures of climate change, technological disruption and geopolitical tensions only make the need for comprehensive policy frameworks more urgent.
My modeling provides a foundation for developing tools that capture the impact of multidimensional wellbeing. Immediate next steps involve refining these models further, incorporating additional dimensions of wellbeing and testing different policy combinations. But the core message is clear. Recoupling economic and social prosperity is possible — and necessary — but requires us to change how we model, measure and manage economic development.
Alessandro Conway is Senior Manager at Jobs for the Future (JFF), a national workforce and education non-profit based in the USA. A graduate from Sciences Po Paris’s doctoral school in Economics as a Fulbright Scholar, he is currently pursuing a PhD in Economics at the University of Paris 8. His work focuses on resilient local economic development and labour market forecasting to holistically and tangibly navigate regional economic challenges. With extensive experience as an Italian-New Zealander who has also lived in France and the USA, Alessandro seeks evidence-based solutions that promote quality of life equitably across the globe.
Featured image credit: Photo by Christian Lue on Unsplash