Mental Health

The New Frontier for Labor Economics1

Richard Layard

London School of Economics and Political Science, U.K.

Mental health is a key dimension of all our lives. Yet, when the present welfare state was being designed, this was far from people's minds. In his famous report on welfare reform in Britain, William Beveridge identified as the main problems of society five great giants that needed to be slain: they were poverty, unemployment, poor education, bad housing, and disease (by which he meant, of course, physical disease) (Beveridge, 1942; Timmins, 2001).

Over the 70 years since his report, most advanced countries have made huge strides on all of these fronts, except at times unemployment. But there is still widespread misery—and what surveys we have of happiness and misery suggest things have changed little since Beveridge wrote. So what did he and his fellow reformers miss?

They overlooked the human factor—the problems that come from inside ourselves (and not mainly from externals). It is because of the human factor that, despite unparalleled prosperity and mostly high employment, we now observe more family conflict, less trust, and more crime, than when Beveridge wrote. And this, in turn, helps to explain the need that so many people feel for a new metric to measure the progress of society.


We have never of course had a single metric before—nobody really believed that gross domestic product (GDP) was an adequate measure of how our society was doing. ...

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