Why do some (better) alternatives to GDP get picked up, while others sink without trace? Useful new study on political economy of indicators.

Took me a while to overcome my reluctance to read a document subtitled ‘Deliverable 1.1’ on the front page (yuk), but I’m glad I did so. The paper ‘Review report on Beyond GDP indicators: categorisation, intentions and impacts’ (cracking title too…..) is published by BRAINPOoL – ‘Bringing Alternative Indicators into Policy’ (is that the sound of teeth grinding?).  The authors come from Eurothinktanks CUEC (Czech Republic) and the new economics foundation (UK).

But enough of the snark, because the paper is really good. Rather than add yet another indicator to the smorgasbord of measures that go ‘beyond GDP’, it tries to understand why some of these indicators get picked up, while others sink without trace. Asking the right question, as Einstein said, is a lot more than half the battle.

The researchers sought to answer that question with a mix of desk research, interviews with indicator nerds, and media analysis. First they tried to categorize the ever-growing list of alternative indicators. They came up with:

• Level of impact – international, national, local
• Indicator domains – environmental, social, economic
• Indicator approaches – subjective, objective
• Indicator types – single indicator, set/dashboard, aggregated, composite
• Envisaged users – politicians/policy makers, public, experts
• Link to GDP – adjusting GDP, “replacing” GDP, supplementing GDP

Media analysis showed that single figure indicators get far more pick up than complex dashboards, as do those that enshrine ‘simple and meaningful concepts’ like the Human Development Index or Ecological Footprint, which lead the pack by some way (see chart).

But a media splash, while useful, is not the main purpose of the indicators studied, which was overwhelmingly to influence policy. When have they achieved it and why?

• The most basic influences noted were transmission to or reference by a decision maker.
• The next step up from this is use of Beyond GDP indicators in assessment. Examples of this include GPI, ISEW and QUARS being integrated into regional or local official assessment frameworks in the US, UK and Italy. Also noteworthy is the Ecological Footprint being used to set environmental impact targets in several national governments.

• Actual policy changes connected to indicators were also reported. These include (i) the implementation of schemes to improve habitat for farmland birds after changes to the UK Defra Sustainable Development Indicator set (ii) the investment of $15 billion by the UAE government to develop alternative energy sources spurred on by a poor ranking in the Ecological Footprint.
• The most prolific successes, however, were achieved by local level indicators, perhaps because the distance between producer and user of the indicators is much smaller, making it easier to achieve a better ‘fit’ while also achieving legitimacy and relevance. For example, the Jacksonville Community Council Indicators are believed to have been instrumental in reducing infant mortality rates, recidivism and water pollution in the area. The Council of Europe SPIRAL project, meanwhile, achieved change to the delivery of food relief in France and the transformation of the approach to homelessness in Belgium.

And what lessons did the authors draw from all this?

“Indicators were successful when they had real relevance for policy makers. Crucially they need to measure something that policy makers believe they can influence. Subjective well-being indicators when used incorrectly can appear to fail this test, which explains efforts to build the evidence base for how policy can influence wellbeing. Another factor here is cost. In the current climate, indicators that provide clues for low cost policies, or indeed those that can help save money, are of particular interest.

Salience for a broader audience is also crucial and entails the elements of simplicity, understandability and good communication. Initiatives are effective when they allow one to produce a simple and attractive message that relates a meaningful concept. Using communications experts and avoiding taboo words were also identified as being important.

Indicators need credibility and legitimacy. Aside from the requirement of quality data, the appearance of neutrality was seen as the best route to achieve this with some interviewees comparing advocacy organisations’ data unfavourably with that of National Statistical Offices.

Developing the indicators with the audiences at whom they are targeted and/or encouraging participation (in the way that the Jacksonville Community Council Indicators initiative has done) is also seen as a key success factor. The importance of relationship-building also applies to policy makers with most initiatives that had achieved policy success citing direct face-to-face channels as vital.

Several barriers to the success of Beyond GDP indicators have also been identified. The economic crisis was viewed by many interviewees as a challenge for this agenda as it has moved the policy focus. Ideology and vested interests are also noted barriers with subjective well-being and composite indicators receiving strong resistance from those with libertarian or right of centre political views.”

Not sure I buy that last point – isn’t a crisis just as likely to create opportunities for adoption of new indicators, especially if the failings of existing indicators are seen as partly responsible for the crisis? I remember being struck by a presentation from the South Korean statistics office (I really do have all the fun), arguing that Korea was adopting a new quality of life index, based on over 100 objective and subjective indicators of wellbeing, because GDP was incapable of explaining why an ‘economic miracle’ like Korea had the highest suicide rate and the lowest birth rate in the OECD. Failure is a great source of innovation.

The Brainpool project continues and is worth following (especially if they ditch the naff titles). Oxfam is getting involved, working with nef in Brazil and India to explore likely reactions by politicians and voters to possible indicators. It will build on Oxfam Scotland’s Humankind Index, which was an earlier foray into this field. I hope the research includes applying a more serious power analysis to the findings in this report: what fractions of the state, private sector, political class or popular movements adopt new indicators, either individually, or in coalition with others? When and why? That could get very interesting.

What can opinion polls tell us about well-being and revolution? Quite a lot, actually

I’m on a plane to Delhi today, to the big OECD conference on ‘Measuring Well-Being for Development and Policy Making’. In preparation, I dropped in on the scarily smart (in both senses) young pollsters from Gallup. Fascinating, and also vaguely relevant to today’s ‘blog action day‘, on the theme of  ’the power of we’ – few organizations are better placed than Gallup to tell us what ‘we’ actually think.

Gallup is moving increasingly into working in developing countries, picking up on issues like food security and water and sanitation.

But it was their work on well-being that really got my interest. Since 2005, they have been developing their wellbeing survey methodology, and now run it annually in 161 countries. They divide up the poll questions into two bunches:

Evaluative: Evaluate your life on a scale from 0 to 10 today. Where do you think you will be about 5 years from now?

Experiential: how did you feel yesterday? (well-rested; treated with respect; smile or laugh a lot; learn or do something interesting) What about negative feelings? (physical pain; worry; sadness; stress; anger)

That produces a well-being snapshot across a lot of people (something like 200,000 in the last poll), and the results are a real mix of the expected (Greece and Spain top the list of most worried nations) and the unexpected.

In which latter category I would put their findings on gender and well-being. Globally, women say they have roughly the same degree of life satisfaction as men. The best countries to be a woman (i.e. those where women are most likely to say they are ‘thriving’) are Denmark, Canada and Australia. The worst are Afghanistan, Nepal and Madagascar.

So far, so unsurprising. But when we get onto gender gaps, it gets much more interesting. The biggest gender gap, in terms of men reporting more positively than women are in Ukraine and Vietnam. The list of countries where women are significantly more positive about their lives than men is led by Qatar, Angola, South Korea and Iran.

If you’re skimming, read that list again. Maybe the cartoonist (left) is onto something? (OK, I’m heading for the bunker right now).

Even more baffling: South Korea has the worst gender pay gap in the world – women earn 38% less than men, and 10% more women say they are thriving than men. Any theories?

Other fascinating findings from the Arab world: Across the Arab world, men’s support for women’s equal legal status and right to hold any job they are qualified for was positively linked to men’s life evaluations, employment, and other measures of economic and social development. Gallup also found that there is no link between men’s support for Sharia as the only source of legislation and antagonism toward equal rights for women.  If the economy continues to suffer, women’s rights may as well. This suggests that economic trouble may be a greater threat to women’s rights than public support for religious legislation.

Now the standard NGO response to reading something ‘counterintuitive’ – i.e. we would rather it wasn’t true – is to question the methodology. But unless you really are an ubergeek, I would strongly advise against taking Gallup on. Like I said, they are scary, as is their readiness to get down and dirty on methodology.

I recommend an idle wander through gallup.com – a real treasure trove. The Middle East leads the world in negative emotions – but how about Somaliland having the lowest level of negatives (maybe just not being Somalia gives you a boost?)

Finally, as they talked about measuring anger and rage across the world, I asked the obvious question – could you have predicted the Arab Spring? There answer was ‘not yet’ – ‘we know when something is ripe for chaos – you can see Spain and Greece are really brittle right now’. Their polling showed that despite high GDP growth, well-being was ‘plummeting’ in Egypt and Tunisia for some years before the uprising. Hope they don’t manage to crack the predictive thing, or I imagine some rather unsavoury customers will be lining up to buy their services.

Here’s some more links for potential browsers and data geeks, c/o Gallup’s Andy Rzepa

“Income, Health and Wellbeing across the World”, paper by Angus Deaton

“Women and Men Worldwide Equally Likely to Be “Thriving”” Lymari Morales and Kyley McGeeney

Gallup WorldView, data visualisation portal

And a footnote from Oxfam wellbeing guru Katherine Trebeck. The Oxfam Humankind Index for Scotland will be broken down by gender next year so we’ll see how women and men compare according to the 18 priorities our consultation revealed (the Scottish Government have promised us access to unpublished data that allows us to do so).

How can we measure Scotland’s well-being? New index from Oxfam.

Really interesting project from Katherine Trebeck and colleagues in Oxfam’s UK Poverty Programme – constructing and testing a wellbeing index for Scotland. Guardian coverage here.

Here’s how it works:

Oxfam consulted 3,000 people across Scotland (focus groups, community workshops – see pic, street stalls, an online survey, and a YouGov poll) to establish what aspects of life make a difference to them.

The consultation process produced an index based on a weighted set of elements (‘sub-domains’) that people reported as affecting the ability to live well in their communities (see table). People identified the following (in descending order of priority) as being the most important assets in their lives:

• An affordable, decent and safe home and good physical and mental health

• Living in a neighbourhood where you can enjoy going outside and having a clean and healthy environment

• Having satisfying work to do (whether paid or unpaid); having good relationships with family and friends; feeling that you and those you care about are safe; access to green and wild spaces; and community spaces and play areas.

Using official data, the Oxfam Humankind Index was then calculated for 2009-2010 and 2007-2008, with at least one surprising result: ‘Since 2007-2008, Scotland’s prosperity has increased by 1.2%.’

Eh? Things are getting better in the middle of a recession? The reason is that since people weighted issues like housing, health and safety higher than economic factors like job security and having enough money, even though the economic factors have slumped since the onset of the current economic crisis, improvements, particularly in perceptions of health and community spirit, more than made up for the deterioration. This also reinforces the discussion at the big well-being conference in South Korea a few years ago, where well-being experts said that well-being demonstrates much less volatility than some of the more conventional economic numbers.

The index also explored the differences between the average numbers and those for some of Scotland’s most deprived areas and found that

‘Deprived communities come off worse on 12 of the 15 subdomains for which differences between the two communities were able to be measured. The major disparities are in terms of whether people are able to enjoy going outside and having a clean and healthy environment; access to green spaces and play areas; and safety. These three areas account for just over 40% of the difference between deprived communities and all of Scotland. People living in deprived communities are also less likely to feel they are part of a community, and overall the majority of the deficit thus arises from differences in the quality of life in the local area.’

The project highlighted some gaps in the official data (on relationships with family and friends, job and income security and human rights and respect), that the Scottish Government could usefully fill.

The good news is that the project will improve with age, as updates of the survey start to build a picture of how Scotland’s wellbeing and the multidimensional inequality evolves over time, enabling a really interesting comparison with the traditional economic indicators.

Last word to Gerry Hassan, one of Scotland’s most influential commentators, from his piece in The Scotsman:

‘We have just been given the beginnings of a debate that could start to shape an alternative Scotland, one where we consciously imagine and create our own collective future and idea of society. Maybe, many years from now, we might remember this week more for that, than for all the hullaballoo about the Murdochs, Trump and Rangers FC.’

And a really lovely 3 minute youtube video – reminds you what it’s all about.

Poverty reduction v well-being: a cash transfer experiment from Malawi

What difference does it make to development interventions if you worry about well-being rather than income poverty? A rather neat example has just come through from some new research by Sarah Bair, Jacobus de Hoop and Berk Özler for the World Bank Poverty and Inequality team. They looked at the impact on girls’ mental health of cash transfers in Malawi (why do so many researchers work on Malawi? They must be reaching plague proportions – a researcher poll tax would probably solve the country’s problems overnight).

The researchers used a randomized control trial (no surprise there, then) involving nearly 4000 girls to compare the psychological impact of unconditional cash transfers with making them conditional on school attendance and uncovered some striking differences.

“The provision of monthly cash transfers had a strong beneficial impact on the mental health of school-age girls during the two-year intervention. Among baseline schoolgirls who were offered unconditional cash transfers, the likelihood of suffering from psychological distress was 38 percent lower than the control group, while the same figure was 17 percent if the cash transfers offers were made conditional on regular school attendance.”

The researchers concluded that the main psychological benefit stemmed from improved family income, rather than school attendance, and that making them conditional on school attendance put sufficient stress on the girls to undo a lot of the benefits. ‘When an important source of income for the family depends on the actions of the adolescent girl, it might place a heavy burden on her and to cause adverse effects on her mental health’ eroding over half the psychological benefits of the cash transfer.

Conclusion?

‘Overall, the results presented in this paper indicate that mental health among adolescent girls can substantially improve when they experience positive income shocks. However, if these income shocks are administered as part of a cash transfer intervention such as the one examined here, these mental health benefits can also be quickly eroded if sufficiently large payments are made to the parents conditional on the actions of their adolescent daughters.’

So if you focus on income poverty, conditional cash transfers offer you a double bonus – direct poverty alleviation, and greater school attendance leading to lower poverty in future generations. But if you focus on wellbeing, the equation becomes more complex. Interesting.

Can democracies kick the growth habit? A debate with Tim Jackson

Last month I spent an enjoyable hour debating zero growth with Tim Jackson in his back garden, for a slot in the July issue of New Internationalist magazine. Tim is the UK’s first Professor of Sustainable Development (at Surrey University) and author of the excellent Prosperity Without Growth (reviewed here).

We largely went over the ground covered in previous posts on his work: Total global carbon emissions = GDP multiplied by grams of carbon per $ of output. To reduce emissions you either improve the carbon efficiency of the economy (fewer grams per $, known as ‘decoupling’), or accept a reduction in GDP, or both.

But Tim reckons that decoupling growth from carbon emissions at the required speed isn’t going to happen, so if we are to avoid catastrophic climate change, the rich countries will have to move to a post-growth paradigm, not least in order to make room for poor countries to keep growing. The justification for the different approaches in rich v poor countries is that, once you get past a certain level of GDP, growth delivers diminishing returns in terms of well-being.

degrowth in action?

Tim argues that zero or negative growth is not possible in the current system, not least because firms compete to increase productivity, and finance and investment restlessly seek profits based on productivity, and as productivity rises, you have to grow to soak up the newly unemployed. Because of this, growth is like a bicycle – if it stops, you fall off (my analogy, not his). His answer is a broad brush shift away from the emphasis on consumption, and a new model of investment that recognizes environmental constraints on economic activity.

We kicked around some ideas for how this might happen, drawing analogies with other parts of the economy. Carbon accounting systems would have to be developed in a way similar to financial accounting; firms would be required to manage climate risk, for example paying higher taxes on emissions over a certain level.

But what struck me most was when we got onto the political system needed to deliver what is at least in part a war economy, with a centrally agreed figure for total carbon emissions (and usage of other finite environmental goods). Such an economy would require a combination of carbon markets  and hard and soft regulation (eg rationing, prohibiting some kinds of technology, or debt-driven industrial expansion; penalties for excess carbon emissions; mandatory carbon emissions accounting).

Politics becomes far harder in a zero or negative growth economy. In a growing economy, everyone can have a larger slice of pie; in a static economy your gain is someone else’s loss and distributive conflicts are bound to rise. Tim sees growth as necessary for political as well as economic stability under the current system. No wonder that politicians routinely dismiss any talk of limiting growth.

Collective action problems would also abound – if one firm or country decided to go for zero growth, for example by stopping investing in new technologies, but other firms continued to do so, they would rapidly gain a competitive edge and push the others out of business. At an international level you would require enforceable coordination mechanisms to a far higher degree than currently exists – something close to global government, in fact.

Which leaves me with the nagging question, ‘are democracy and individual rights compatible with the ‘managed contraction’ of the economy?’ I was left thinking that the systemic obstacles to zero growth are at least as great as those preventing a drastic acceleration of technologies to decouple production from emissions, e.g. through the launch of 20 Manhattan Projects. And both would require a far higher centralization of power.

My conclusion? A successful long-term containment of climate change will come through a combination of partial decoupling, perhaps driven by big climate shocks, and maybe combined with fragmented shifts to a post-growth paradigm, but it will be very messy indeed and may not look very democratic.

In the end we agreed on an unlikely combination of Sherlock Holmes and Antonio Gramsci – ‘When you’ve eliminated the impossible, then whatever’s left, however improbable, has to be the truth’, and ‘I’m a pessimist because of intelligence, but an optimist because of will’.
 
And as always, it’s far easier to pick holes in other people’s arguments than provide solutions of your own, but it’s important to think through the politics of these kind of big new ideas. I would dearly love to be convinced that zero growth is both achievable and compatible with human rights – over to you.

well-being v ‘growth with equity’: what are the pros and cons?

The process of evolution takes place in three stages: random mutation, selection and replication. It’s not a bad model for how new ideas emerge within a large organization like Oxfam. Every week seems to bring a new idea swirling around in conversations and meetings (mutation). Most of those will fade away but a small percentage will get ‘traction’ (horrible management-speak word, sorry) – that’s the selection part. Eventually, the survivors will find their way into the machinery of planning, allocation of staff and money, work plans etc etc – in other words, replication.

Part of my job is to contribute to the random mutation by chucking in new ideas from the outside world and getting into conversations about them. This week it was well-being, which I’ve been blogging on at intervals for some time, and it led to an interesting discussion on the pros and cons of adopting well-being as an organizing principle for development.

Strengths:
Well-being would reconnect us to the lived experiences of poor people. Some aspects of well-being – things like freedom from shame, humiliation and anxiety, may seem fuzzy to economists and the ‘measurement community’, but they are instantly recognizable to poor people themselves, and anyone who has spent time in poor communities. I also find it much more positive, human and engaging than the rather arid and legalistic language of rights and the ‘rights-based approach’, which can sometimes sound like little more than an endless series of complaints, and yet well-being covers much of the same ground as the rights framework.

Well-being neatly sidesteps the polarized pro- v anti- growth debate (see my scepticism on the degrowth movement). It relegates growth to its proper position as a possible means to an end (enhanced well-being), which functions well in some circumstances and not in others. For example, growth appears to increase general life satisfaction in poor countries, but not in rich ones (see graph).

The official world of statistics and measurement is forging ahead on this issue, developing indicators of well-being and quality of life (see my reports from the recent OECD conference on this). We need to understand and if possible shape that process.

Finally, it moves us on from the old dichotomies of North-South, core-periphery, developed-developing etc. Enhanced well-being is a universal goal, albeit achieved in different ways in different times and places.

So what could be the downsides?
Firstly I worry that the concept is still too broad and fluffy, meaning all things to all people. Let it loose in a large organization and soon everyone would just be working on their own pet subject, but calling it well-being. What would you stop doing if well-being became your guiding principle?

That perception of fluffiness could also see us branded as mere ‘lifestyle activists’ divorced from the hard material realities of development and, in particular, government. Many official institutions are still run or heavily influenced by the orthodox economics of growth, returns on investment, incomes and assets. Those all form important parts of the pursuit of well-being, but the concept itself has less resonance in those circles than more traditional frameworks such as poverty reduction.

Or growth-with-equity. For at least the last ten years, ‘growth with equity’ has summed up what Oxfam seeks from international development. Environmental constraints are leading many to question the ‘growth’ bit – quality v quantity, prioritising growth in poor countries etc, but what about the equity part? At first sight, well-being seems a step backwards on social and economic justice, and downplays the genuine conflicts between rich and poor over resources and power – development is not just about win-wins, sometimes it involves a fight and someone (hopefully not the poor and vulnerable) losing. ‘Wellbeing with equity’ anyone?

Which leads me to my final concern – what would our partners in developing countries make of it? Would they recognize it as a more accurate portrayal of their concerns and struggles, or think ‘oh no, Oxfam’s gone northern hippy and lost its edge (and the plot)’?

Any thoughts?

Is Growth with Equity getting old?

Growth with Equity has been one of the development industry’s overarching economic narratives for over a decade (Oxfam published ‘Economic Growth with Equity: Lessons from East Asia’ in 1998). OK, it’s better than just ‘Growth’, and where it’s been achieved, it has an unrivalled impact on poverty, but thinking has moved on in a number of areas, and G+E is starting to look distinctly threadbare. I’ve been putting up posts on this blog on different aspects of this, but here’s a synthesis, and some links to relevant posts:

1. How much Growth?: Climate Change and other environmental challenges mean that the boundary conditions on economic activity are becoming much more salient.

• Barring a miraculous new technology, it is far from certain that the carbon intensity of growth can be reduced to stay inside a safe emissions pathway at current growth rates. If that is true, then there are only two options: less global growth or more climate change. If the choice is the former, then who grows and who does not (growth rationing) becomes a crucial issue of economic justice. Growth may be just too scarce and precious to waste on the rich countries (where it doesn’t make people any happier).

Further Reading:

• Do we need to ration growth?
• Prosperity without Growth? Report of the UK Sustainable Development Commission

2. Are we measuring the right thing?: The recent report of the Stiglitz Commission to President Sarkozy highlights just how mainstream concerns over measurement have become. Stiglitz argued that the way we measure economic activity has to be reformed on 3 fronts:

Reform GDP to respond to the evolution of the economy – from quantity to quality, from goods to services, the importance of the caring economy etc. (But I’m not sure South Africa is on the right course in expanding GDP to include criminal activity (see article here))

Shift from measuring economic output as the primary indicator of policy success to measuring the impact on human well-being, including the caring economy

Pay much more attention to long term economic, social and environmental sustainability (stocks, rather than flows)

Changing what we measure (and therefore value) might also provide a more imaginative political escape route from the entrenched pro v anti growth debate.

Further reading:

• Stiglitz Commission
• Stiglitz at the OECD well-being conference 
• Stiglitz v Layard

3. The importance of volatility and unpredictability: economic issues are usually discussed in terms of stocks (eg of assets) and flows (e.g. average incomes). However, virtually all serious studies of poor people’s lives show that it is uncertainty and unpredictability that is often the defining, and most dreaded, feature of  ‘ill-being’. This has led to increased interest in a range of mechanisms to reduce vulnerability to such sudden shifts, including social protection, enhanced social capital, disaster risk reduction, keeping health and education free at the point of use etc.

Further Reading:

• Cash transfers and inequality
• Chronic Poverty Report

4. What do we do about Financialisation?: The eclipse of anglo-saxon capitalism, the critique of structural adjustment, and the damage wrought by financial crises in Asia and Latin America, and most recently, the global economic crisis, have led to a profound questioning of the ‘wisdom of markets’. At the same time, the extraordinary size and power of the financial sector, even when reasonably well regulated, poses serious threats to the real economy in which most poor people live. How strong is the case for capping and reducing the overall weight of the financial sector? See interesting piece on shrinking the banks in the most recent issue of Prospect.

And that’s just within the economic arena. There’s plenty more to say on politics and culture (state building, rights, the centrality of faith in the lives of the poor etc etc), but that’s far too much for one blogpost.

Any other candidates on economic issues?

100 indicators of well-being or just one? Stiglitz v Layard

The OECD conference I’ve been attending is winding down. Lots of banquets, but not much booze, so I never had to try the hotel’s tempting room service item ‘outer leaves of cabbage broth to chase a hangover.’ What’s the takeaway (ideas rather than food)?

The key debate seems to me to be over complexity. The various presentations described literally hundreds of different indicators already being used to measure progress, and proposed hundreds more. The World Bank reportedly has 27 indicators of governance alone. The Stiglitz Commission proposes ‘dashboards’ of indicators, allowing different people and institutions to combine them in different ways to measure and track the things that matter most to them (mental health, carbon emissions, citizen participation or whatever).

But there’s a cost to that, as Geoff Mulgan pointed out. Decision makers and ordinary people can only keep a limited number of indicators in their heads (Geoff put it at about 5). Above that and they get increasingly baffled. A South African number cruncher lamented that ‘an indicator cloud has descended on Africa, creating a fog of confusion’, while an EC statistician worried that composite indicators rapidly become a political football as each member state argues for the combination that puts its own performance in the best light, and each successive government changes them, meaning you lose comparability both between countries and across time. For similar reasons I started to harbour heretical doubts about the merits of ‘bottom up’ indicators designed by communities – fine, as a way for the community to understand itself, but the cost is that the government won’t be able to compare progress with the village next door (which will have designed its own, different bottom-up indicator).

Geoff’s answer was to combine the merits of simplicity and complexity by picking 3-5 standardized indicators, each of which would be at the centre of a cluster of disaggregated numbers allowing policy makers and researchers to drill down into the relationships between different aspects of people’s lives (eg between income inequality and child well-being). A key to this model’s success is what the conference called ‘visualization’ – efforts to make data much more intelligible and interesting – including the launch of what looks a potentially remarkable ‘wikiprogress’, which among other things is going to use graphics software that’s even more funky than gapminder.

Richard Layard was more drastic. He argued that ‘we have to go much further than the Stiglitz report and establish a different metric from the metric of money.’ His preference is self-reported life satisfaction (i.e. happiness), which he predicts will replace GDP within the next 25 years. Like Mulgan’s model, satisfaction would be reported across a number of domains (health, family, work, income, community, environment etc).

The conference (and the OECD, judging by its roadmap for future work on well-being, distributed in Busan but not yet online), largely sided with Stiglitz. They had doubts about the robustness of happiness as an indicator – does it really mean the same thing in different countries? If people are happy through ignorance of what they are missing, does that invalidate their view (false consciousness alarm bells)? Don’t things like voice and engagement matter on their own merits? Are we proposing the social lobotomy of a Brave New World of drugged, happy, obedient slaves?

But I’m leaning towards Layard. This was a conference of the modern data magisterium, the ‘counting community’ as one speaker called it. They live and breathe statistics and complexity. But most people are not like that. If you want to measure well-being in a cash-starved low income country, communicate messages to the public, or interest politicians, simplicity is vital.

The Layard v Stiglitz debate set me thinking about paradigm shifts. One typical feature of a paradigm shift is that as the old model starts to get into trouble in describing reality, layers of complexity are added to it to try and keep it afloat. Eventually someone like Copernicus comes along and says ‘let’s put the sun at the centre of the solar system, not the earth’ and the complexity melts away. Layard feels much more like the Copernicus of well-being than does Stiglitz or any other speaker at this conference.

The last word on this conference goes to the wonderfully serene (and enigmatic) abbot of Beomeosa, a breathtaking Buddhist monastery on the outskirts of Busan. I asked him if he could help us by telling us what happiness is and how we could achieve it. He smiled and told me to drink my tea, and then he would answer. ‘Did you like the tea? Yes? That is happiness.’ He also described happiness as ‘thinking about happiness’ and ‘the undivided mind’. Put that into your metrics, guys.

Joe Stiglitz addresses ‘the movement’ on well-being v GDP

I’m still surrounded by the world’s statisticians (not as bad as it sounds) at the OECD Measuring the Progress of Societies conference in South Korea, where yesterday Joe Stiglitz gave a great presentation. Rather than simply rehearse the findings of his commission’s report to President Sarkozy, he reflected on why criticisms of GDP, which have been around for almost as long as GDP itself, have recently gone mainstream (see previous blog) – quite striking hearing him address a room full of besuited number crunchers as ‘this movement’.

First and most obviously, is the crisis (’crisis is the mother of statistics’ as Korea’s rep to the OECD observed earlier in the conference): booming GDP numbers in 2005-7 were based largely on the escalating profits of the financial sector, which were ‘fictitious – a mirage’. Ditto counting as genuine profits from the real estate bubble.

GDP ignores the growing concerns over financial sustainability, i.e. the level of debt (one of the more innovative features of the Stiglitz Commission’s report is the way it calls for the inclusion in our metrics of different aspects of sustainability, not just environmental.)

Climate change has highlighted how distorted prices become when you effectively put a zero price on carbon. This has led to a ‘carbon bubble’, which must now burst through including carbon prices in economic decision making.

Globalization makes GDP seem rather parochial, because it measures output according to place, rather than who benefits. In Stiglitz’s words: ‘if a foreign transnational opens a mine, takes away the minerals, pollutes the environment, damages people’s health and pays no taxes, if you focus on GDP would say the mine’s a good thing.’ Using Gross National Product instead would help correct this bias.

The growing share of government in the economy is misread by GDP, which ignores productivity improvements because it measures government inputs (eg health spending) not outputs. So US health spending of 17% of GDP v 11% in France does not reflect the fact that the health system is actually better in France. Correcting this single anomaly removes a third of the GDP difference between the two countries, questioning whether the US is doing ‘better’ than France in any real sense.

GDP growth is increasingly based on improvements in quality (rather than quantity) of products. Imputing values to improvements in quality is much less reliable, and so introduces more questionmarks.

Politicians like Sarkozy are keenly aware that the metrics are not consistent with what people feel. That leads to a ‘dangerous distrust of government’. A number of speakers have echoed this sentiment – statisticians worry about the political impact of their work on the ‘social contract’ between citizen and state.

Rising inequality means that the boom in wealth of a tiny proportion of the richest people raises the average, while most people see no benefit (in the language of the conference, medians and averages diverge).

On the positive side, improvements in research and our understanding and measurement of well-being provides more robust alternatives to GDP.

What are the implications?

Political impact: Stiglitz pointed to what amounts to pre-crisis GDP envy– Europeans admiring deceptive US GDP numbers and so calling for a shift to the anglosaxon model of deregulation.

Moreover, a better measure of economic performance would remove many of the false choices that bedevil public debate – eg protect the environment v maximise GDP growth. If GDP includes environmental degradation, you can get over the current polarization of the ‘limits to growth’ discussion.

Economic impact: The economics profession runs endless regressions to determine what factors lead to GDP growth. But if GDP is misleading, so will be the policy conclusions from such regressions, eg because of the faulty measurement of public sector activity, regressions usually find that a smaller public sector is good for growth.

Interesting stuff. Everyone here shares the view that we have reached some kind of tipping point on the need to measure well-being. And these are hard-boiled chief statisticians, not tree huggers. Whether they can do so in a way that actually gets the attention of the politicians is a different issue, and a subject for tomorrow’s blog. Off to listen to Richard Layard now.

3 minute conference youtube including interview with Stiglitz below

How could we measure well-being in a crisis? Some thoughts from Korea

I am currently in Korea’s second city, Busan, attending a big OECD conference on ‘statistics, knowledge and policy’, organized by its ‘Measuring the Progress of Societies’ project. The massive conference centre looks out on a consumerist paradise, including a giant Tesco’s supermarket (everything’s big here, giving you that sense of suddenly having shrunk that you get in Tiananmen square) and what declares itself to be the world’s biggest department store, complete with ice rink, spa etc, so perhaps it’s an appropriate setting to talk about what matters in terms of human wellbeing, and how to measure it.

Yesterday was the first day of three, but it’s already got me thinking about the tensions between efforts to fill 3 gaps in our knowledge

-         a more holistic understanding of well-being, including issues such as happiness and environmental sustainability, that remedies some of the failings of GDP (the cartoons offer two opposed versions of that story)

-         the need for real time or ‘high frequency’ data on what is happening in poor countries when crises hit. The current crisis has revealed a remarkable gap in our ability to find out fast what is happening to poor people when a shock hits.

-         the weak statistical systems of many low income countries

The Stiglitz Commission recently reported back to President Sarkozy (see previous blog) with recommendations that were essentially pretty complex: it’s futile to try and replace GDP with another single indicator. Instead, what we need is dashboards of dozens of indicators, from which people can construct composites that capture what they want to measure (human security, safety, material well-being, health etc).

Well fine, but that militates against sorting out gaps 2 and 3. You can’t collect high frequency data on dozens of issues, and in any case low income countries struggle to meet even current data requirements. 

So my question is ‘given weak statistical capacity, is there any one thing we could measure easily and at regular intervals (eg monthly) that would give a better guide than GDP to the state of well-being in a poor country?’ Frances Stewart of Oxford University and Vikram Nehru from the World Bank East Asia team suggested infant mortality rates (too complicated and unreliable for high frequency collection), or self-reported life satisfaction (‘are you happy?’). Others suggested physical security (‘do you feel safe?)’ or access to services such as healthcare. Any other candidates?

Frances reckons that it might be worth some NGOs getting together and piloting these – if we’d had them in place as the global crisis spread to the poorest countries, what would they have shown? Worth thinking about…..

The conference is being webcast Wednesday and Thursday here