The LA Times reports that the City of Santa Monica has received $1 million dollars to create a local quality of life index. Below the fold, I sketch out the methodology to measure quality of life and my price tag would be $20 to finalize this report.
“Much of the prize money will be paid to consultants who help develop the index, Kubani added. He said the city is contributing about $750,000 in contributions of staff time, but no additional dollars.
Fitness trainer Angela Parker lives and works in Santa Monica and called her city a “very special neighborhood.” She said she was pleased that the city wants to examine nontraditional metrics such as connectedness.”
Starting in my 1993 Ph.D. dissertation, I’ve worked on revealed preference methods for identifying areas with high quality of life. If a city offers mediocre labor market opportunities but rents are high and people keep moving there and incumbents don’t move out, then this suggests that its quality of life must be quite desirable. For some of my peer reviewed stuff, read this, or this or this. Below the fold, I discuss the specifics about measuring Santa Monica’s quality of life and the nasty index numbers problem that the fat cat consultants will have to face.
The LA Times article makes a big deal that the consultants will survey the people of Santa Monica and measure their “connectedness”. In Robert Putnam’s work on Social Capital and in my work (joint with Dora Costa) on social capital, researchers have used nationally representative data sets that include survey questions of; “do you often meet with neighbors?” Such work doesn’t speak to the issue that the LA Times highlights of; “If an earthquake takes place, will the people of Santa Monica congeal as a community and help each other? If they try to help, how much extra safety does this provide for the less fortunate?”.
The RAND consultants will create statistics such as “smog days”, “the murder rate”, “share of high school students who go to a 4 year college”. But, how will they add up these apples and oranges into a single index of “Wellbeing”? This is the index weights problem. The person who picks these weights is imposing his/her priorities on the rankings. The same issue arises when US News and World Report ranks universities. The Magazine collects a lot of data and then weights each category equally but why is this the right set of index weights? Santa Monica consists of many different neighborhoods. North of Montana (zip code 90402) is a different place than neighborhoods near the Santa Monica airport. How will the well paid consultants factor in this heterogeneity?
While the RBC readership has little love for economists, the economic approach would simply map local real estate prices relative to the rest of Los Angeles. High home prices in most of Santa Monica immediately indicate that quality of life is high. Do renters in Santa Monica have high quality of life? It would be interesting to survey them regarding why remain in an expensive place if life isn’t good. Housing in Memphis is cheaper. Opportunity cost is an important concept.