Centre for Economic Performance
London School of Economics
Biography
Richard Layard is one of the first economists to work on subjective wellbeing, and his central interest for the last 20 years has been on how government policy can best promote the people’s wellbeing. He formerly worked on how to reduce unemployment and inequality.
Wellbeing research
He has always believed, as in the 18th Century Enlightenment, that societies should be judged by the happiness of the people. And since the 1970s he has urged fellow economists to return to the idea that public policy should maximise a social welfare function depending on the distribution of happiness. In 1980 he wrote (according to Richard Easterlin) "the first paper to focus specifically on the policy implications of empirical research on happiness". In 2005 he wrote Happiness: Lessons from a New Science, which was published in 20 languages.
In his early research on wellbeing, he focused heavily on the role of relative income as a determinant of wellbeing. He showed how in many countries the income of one’s reference group reduces one’s own happiness – and he showed the implications of this for tax policy and the measurement of the “excess burden” of taxes. He also studied (with co-authors) the form of the income-happiness relationship. This pioneering and much-quoted study found that happiness was approximately linear in log income.
He then turned to the whole range of influences on wellbeing as it develops over the life cycle, using longitudinal data from 4 countries. This co-authored work was published in 2014 and more fully in a book called The Origins of Happiness: The science of wellbeing over the life course (2018). It revealed, among other things, the huge impact of schools and teachers upon subsequent wellbeing, and the huge role that the independent variation of mental health plays in explaining the variance of wellbeing.
Given this, he argued strongly for more attention to mental health, both as a key factor affecting wellbeing, but also as an important factor of production affecting productivity and employment. He argued that the economics is quite different for mental and physical health. Mental illness is mainly a disease of working age, with huge economic costs, while physical illness is mainly a disease of retirement. Thus, inexpensive treatments for mental illness will pay for themselves in reduced welfare and increased taxes.
Together with the distinguished psychologist David M. Clark, in 2007 he proposed a new psychological therapy service for anxiety disorders and depression (NHS Talking Therapies). This was established in 2008 and now treats over 700,000 people a year, of whom half recover within an average of 8 sessions of treatment. The programme has paid for itself and has been copied in 5 other countries. In a series of co-authored articles he showed how psychological therapy affected employment and thus paid for itself in savings on welfare benefits and lost taxes. This work also showed what factors affected the recovery rates in different local services. This led to significant improvements in recovery rates. He summarised his analysis on mental health in in a book (co-authored with Clark) called Thrive (2014).
He also helped develop a major programme for mental health prevention in schools. This was a weekly 4-year curriculum in life skills for pupils aged 11-15 called Healthy Minds. It was highly manualised and when evaluated in a randomised trial in 32 schools, was found to be highly cost-effective.
Meantime in 2012 he became a founder co-editor of the annual World Happiness Report in which he has written numerous articles. In one of these (2021) he published the first estimates of the Wellbeing-Years (WELLBYs) a person could expect to experience if born in different areas of the world. His central aim has always been to develop wellbeing science to the point where it can provide key evidence for the selection of all policy priorities. In 2014 he laid out the framework for this approach in one chapter of the report Wellbeing and Policy, chaired by Gus O’Donnell. But the crucial need was to bring together the evidence on all the factors which affect wellbeing. In 2023 he did this in the first comprehensive textbook on wellbeing (with Jan De Neve) – Wellbeing: Science and Policy. This aims to persuade policy-makers that wellbeing is a feasible goal for them, and also to develop the cadre of trained analysts to help them target it. As the book makes clear, the aim is not to supplant traditional cost-benefit analysis (based on revealed preference), but to supplement it in the myriad of cases where revealed preference can provide no plausible evidence, but direct measures of wellbeing can. Layard’s current research is focused on showing how this approach can illuminate public priorities through worked examples of benefit/cost ratios across the whole field of policy.
Wellbeing policy
Layard’s policy work has reached far beyond mental health. He has been a major leader in the effort to put wellbeing at the centre of the movement to go “Beyond GDP”. In 2010 he persuaded the British Prime Minister David Cameron that wellbeing would be a major government objective, and be regularly measured in the national statistics. The measures were then recommended by the OECD to all member countries. More recently his team have been influential in getting evidence on subjective wellbeing officially accepted in the UK Treasury's manual on subjective evaluations. Internationally, he chaired the World Economic Forum Global Agenda Council on Health and Wellbeing, which in 2012 launched a report at Davos “WellBeing and Global Success”.
Since then the World Happiness Report has provided a stream of evidence for policy-makers on the ways in which they can improve the wellbeing of their people. Layard summarised more of the evidence on what can be done in each sphere of life in Can We Be Happier? (2020). Layard has co-founded two movements to promote the wellbeing of society. One, called Action for Happiness (founded in 2012), is a popular movement for personal change to produce a happier world. It now has 600,000 members and 6,000 trained volunteers providing courses and leading groups. The other is the World Wellbeing Movement (founded in 2022), a top-down movement targeted at decision-makers. Layard is a regular speaker at events about happiness and wellbeing.
Unemployment, skills and inequality
Before all this, he was working on unemployment. In the 1980s he and his colleagues developed the Layard-Nickell model of how the level of unemployment is determined. This has become the most commonly used model by European economists and governments. It assigns an important role to how unemployed people are treated, and provides the intellectual basis for the welfare-to-work policies introduced in many countries, including Britain, Germany and Denmark.
The basic message is in Unemployment: Macroeconomic Performance and the Labour Market. This was first published in 1991, and a second edition in 2005 showed how well the model predicted the development of unemployment in different countries over the years between 1991 and 2003.
Drawing on this work, Layard was active in the policy field on unemployment, both in the UK and outside. In 1985 he founded the Employment Institute to press for welfare to work policies, and his proposals were largely implemented in 2007 in the Labour Party’s New Deal policies for young people, and then older adults. His influence also spread to Europe. In the 1980s he was Chairman of the European Commission’s Macroeconomic Policy Group and in the 1990s the Hartz reforms in Germany were influenced by his work.
On inequality, his work shows the key role of education in influencing the income of individuals and families. He has been a strong advocate of better vocational education (including apprenticeship) for less academic youngsters. The case he made led to major increases in apprenticeship and the 2009 Apprenticeship Act which guaranteed access to an apprenticeship for qualified applicants (unfortunately repealed).
Other roles
From 1991-1997 he was a part-time economic adviser to the Russian Government, and co-authored The Coming Russian Boom (1996), which correctly forecast the rapid growth in Russia over the following years. From 1997 to 2001 he was a part-time consultant to the British government on welfare-to-work and vocational education. In 2000 he was made a member of the House of Lords, and for most of the time since 2005 has been a member of its Economic Affairs Committee.
He is deeply concerned about climate change. In 2014 he proposed, with six other colleagues, a Global Apollo Programme of internationally coordinated research to produce cheap, clean energy within 10 years. This provided the model for Mission Innovation - the major international programme launched by Presidents Obama, Modi and Hollande in Paris in November 2015, which has doubled public expenditure on clean energy research and development worldwide.
In 2020, the Economic and Social Research Council recognised Richard Layard with a rare Lifetime Achievement Award to celebrate the outstanding contribution he has made to social science and society in the UK and beyond.
ESRC executive chair Jennifer Rubin said:
“The impact of Lord Layard’s work can be seen in so many areas across the fields of education, employment, mental health and climate change and his influence is felt in academic research, public policy, community engagement – and across the political spectrum.”