Less than ten years ago, the International Commission for Measuring Economic Performance and Social Progress published the report "The Wrong Mix of Our Lives: Why GDP Doesn't Make Sense." Its title sums up the content of the text - GDP is not a good indicator of well-being. What we measure affects what we do, and if we measure the wrong thing, then we will do the wrong thing. If we concentrate our attention only on material well-being (for example, on the production of goods, and not on the quality of health, education and environment), our lives will show the same shortcomings as those indicators: we become more and more materialistic.
We are extremely pleased with the reaction to our report. He encouraged an international movement of scientists, the civil sector and governments to create and apply a measurement method that would reflect the concept of well-being in a broader sense. The OECD defined the "Better Life Index" composed of a series of indicators that best determine the factors that make up and increase well-being. The OECD also supported the work of the High Level Group of Experts on Indicators of Economic Activity and Social Progress, and that group is our successor. As part of the sixth OECD World Forum "Statistics. Knowledge. Policy" held recently in Incheon, South Korea, the group released the report, "Beyond GDP: How to Measure What Really Matters to the Economy and Society."
In the new report, emphasis is placed on several topics (for example, trust and instability), which were briefly touched on in the report "Mismeasurement of our life", and some other issues (for example, inequality and sustainability) are explored in more detail. It explains how inadequate measurement leads to phallic politics in many spheres. Better benchmarks would make it possible to see the extremely negative and, probably, long-term impact of the deep economic downturn after 2008 on productivity and well-being. In that case, perhaps, the authorities would not implement the austerity policy so actively: it did help to reduce the fiscal deficit, but it reduced the volume of national wealth even more, if measured correctly - even more.
The political events of recent years in the USA and many other countries are a reflection of the state of insecurity and instability in which many ordinary citizens find themselves, and the GDP indicator practically does not take this into account. A series of solutions narrowly focused on the volume of GDP and budgetary economics increased this uncertainty. It is enough to remember the effects of the pension "reforms" that forced people to bear more risk, and also the "reforms" of the labor market, which in the name of increasing "flexibility" weakened the bargaining positions of workers and allowed employers to fire them with more freedom. . In turn, this led to lower wages and even greater insecurity. Improving the measurement system would allow, at least, a comparison of the cost of all those measures and their alleged benefits and, perhaps, prompt the authorities to accompany similar reforms with other measures that increase economic security and equality.
At the initiative of Scotland, a small group of countries has now formed the "Alliance for the Economy of Wellbeing". Governments that put welfare at the center of their programs are counted on to reallocate budgets accordingly. For example, the New Zealand government, focused on increasing welfare, could focus more attention and resources on eradicating child poverty.
Improving the measurement system can also become an important diagnostic tool that would help countries to spot problems before the situation gets out of control and to choose the appropriate tools to solve them. For example, if the US government paid more attention to health and not to GDP, then many years ago it would have noticed a shortening of the life expectancy of those without higher education, especially those living in deindustrialized areas of the country.
Equal opportunity indicators have only recently allowed America's hypocritical claims to be the land of opportunity to be exposed. Yes, anyone can break through and succeed, but only if they have rich, white parents. Statistics show that there are a number of so-called inequality traps in the US: those born at the bottom are most likely to stay there. If we want to eliminate such and similar traps, we must, first of all, find out that they exist and then determine why they arise and persist.
Almost a quarter of a century ago, US President Bill Clinton came out with the program "People's Interests First". It is devastating how difficult it is to implement, even in a democratic country. Corporate and other lobbyists are constantly striving to put their interests first. An ideal example of this is the huge tax reduction in the US that was introduced last year by the Trump administration. Ordinary people (the dying, but still large, middle class) will have to suffer tax increases, and millions will be forced to lose their health insurance, all to finance tax cuts for billionaires and corporations. If we want to put people's interests first, we are obliged to know what is important to them, what helps to increase their well-being and how we can give them more of that (whatever it is). Improving the quality of statistics, described in the report "Beyond GDP", will continue to play a decisive role in helping us reach these important goals.
The author is a Nobel Prize winner in economics and a professor at Columbia University Copyright: Project
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