The Tyranny of False Measurement

First, watch this.

Bobby Kennedy on “Gross Domestic Product”

“Too much and too long, we seem to have surrendered community excellence and community values in the mere accumulation of material things. Our gross national product … if we should judge America by that – counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for those who break them. It counts the destruction of our redwoods and the loss of our natural wonder in chaotic sprawl. It counts napalm and the cost of a nuclear warhead, and armored cars for police who fight riots in our streets. It counts Whitman’s rifle and Speck’s knife, and the television programs which glorify violence in order to sell toys to our children.

“Yet the gross national product does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages; the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage; neither our wisdom nor our learning; neither our compassion nor our devotion to our country; it measures everything, in short, except that which makes life worthwhile. And it tells us everything about America except why we are proud that we are Americans.”

Link

Yeah. What Bobby said.

The irrefutable fact of our environmental crisis is linked with the irrefutable fact of our economic crisis.

Our economy sucks for the same reason our environment is being destroyed: we’re measuring success with the wrong set of tools.

Joseph Stiglitz on “Gross Domestic Product”

Yeah. What Joe said.

I had not yet achieved political sentience when Bobby Kennedy made his speech on GDP. It was much later that I realized what was going on. It was October, 1995, and I was standing on a subway platform in Cambridge, Massachusetts, waiting for my train, and wishing I had something to read.

One of the amenities of the subway system at the time was the “share & ride” rack, where riders could trade in one cheap paperback for another. This day it was bare, devoid even of the usual plethora of trashy romance novels with embossed covers, the literary equivalent of a Cheez-Whiz and Marshmallow Fluff on Wonder-Bread sandwich. The rack was Empty.

Except for a rolled-up magazine.

I pulled it out, and discovered to my intense relief that it was not just any magazine, but a recent copy of the Atlantic Monthly. I opened it up and began reading.

The article was called, “If the GDP is Up, Why is America Down?” and as I stood there waiting for my train, I experienced an epiphany of sorts.

Excerpts from “If The GDP is Up…”:

By the curious standard of the GDP, the nation’s economic hero is a terminal cancer patient who is going through a costly divorce. The happiest event is an earthquake or a hurricane. The most desirable habitat is a multibillion-dollar Superfund site. All these add to the GDP, because they cause money to change hands. It is as if a business kept a balance sheet by merely adding up all “transactions,” without distinguishing between income and expenses, or between assets and liabilities.

Add pollution to the balance sheet and we appear to be doing even better. In fact, pollution shows up twice as a gain: once when the chemical factory, say, produces it as a by-product, and again when the nation spends billions of dollars to clean up the toxic Superfund site that results. Furthermore, the extra costs that come as a consequence of that environmental depletion and degradation–such as medical bills arising from dirty air–also show up as growth in the GDP.

This kind of accounting feeds the notion that conserving resources and protecting the natural habitat must come at the expense of the economy, because the result can be a lower GDP. That is a lot like saying that a reserve for capital depreciation must come at the expense of the business. On the contrary, a capital reserve is essential to ensure the future of the business. To ignore that is to confuse mere borrowing from the future with actual profit. Resource conservation works the same way, but the perverse accounting of the GDP hides this basic fact.

When The Wall Street Journal added up the Simpson legal team ($20,000 a day), network-news expenses, O. J. statuettes, and the rest, it got a total of about $200 million in new GDP, for which politicians will be taking credit in 1996. “GDP of O.J. Trial Outruns the Total of, Say, Grenada,” the Journal’s headline writer proclaimed.

…For the media in particular, the GDP serves deep institutional cravings, combining the appearance of empirical certitude and expert authority with a ready-made story line. It also serves the industries that thrive on the kind of policies it reinforces; those inclined to deplete and pollute are especially pleased with an accounting system that portrays these acts as economic progress. This came to light clearly last year when the Clinton Administration proposed, sensibly, that resource depletion be subtracted from GDP…instead of added to it.

…the Administration’s actual proposal was modest in the extreme. Still, at a House Appropriations Committee hearing in April of 1994 two representatives from coal states pounced on the department staff. After a series of jabberwocky exchanges that illustrated why members of Congress usually leave technical issues to their staffs, Congressman Alan Mollohan, of West Virginia, finally got to the heart of the matter. If the national accounts were to include the depletion of coal reserves and the effects of air pollution (which would be added eventually), he said, “somebody is going to say . . . that the coal industry isn’t contributing anything to the country.” Better to keep depletion and pollution hidden under the accounting rug called “growth.” The committee demanded an expensive outside review, effectively delaying the project. (emphasis courtesy WarrenS)

I stood there on the subway platform, and when the train came, I boarded it in a reverie with strong overtones of fury; the dimensions of the lie we were being sold became clear to me.

By the time I got home I’d read the piece twice, and my first act after taking off my coat and putting down my bag was to call the authors’ organization, “Redefining Progress.” They were located in San Francisco, and the person at the other end of the line couldn’t have been nicer. She said they’d been getting a lot of phone calls from the article…and she sent me a big packet of stuff.

I started trying to work this information into my university classes (no easy task, given that they were on various aspects of music and music education), and eventually developed ways of familiarizing my students with the hidden messages in our economic indicators. (actual student-to-student quote: “You should have been in class today! Warren took down the whole capitalist system!”)

My point is this: you don’t have to be a genius to recognize an idiot. Measuring our national well-being by economic activity is like measuring our physical health by weight gain (good for the first few years of life, but after that, not so much). In other words, idiotic.

So what other ways of measuring are available?

How about Gross National Happiness?

The concept of gross national happiness (GNH) was developed in an attempt to define an indicator that measures quality of life or social progress in more holistic and psychological terms….A better measure of economic well-being would deduct such costs, and add in other non-market benefits (such as volunteer work, unpaid domestic work, and unpriced ecosystem services) in arriving at an indicator of well-being. As economic development on the planet approaches or surpasses the limits of ecosystems to provide resources and absorb human effluents, calling into question the ability of the planet to continue to support civilization (per the arguments of Jared Diamond, among others), many people have called for getting “Beyond GDP” (the title of a recent EU conference) in order to measure progress not as the mere increase in commercial transations, nor as an increase in specifically economic well-being, but as an increase in general well-being as people themselves subjectively report it. GNH is a strong contributor to this movement to discard measurements of commercial transactions as a key indicator and to instead directly assess changes in the social and psychological well-being of populations.

The term was coined in 1972 by Bhutan’s former King Jigme Singye Wangchuck, who has opened up Bhutan to the age of modernization, soon after the demise of his father, King Jigme Dorji Wangchuk. He used the phrase to signal his commitment to building an economy that would serve Bhutan’s unique culture based on Buddhist spiritual values. At first offered as a casual, offhand remark, the concept was taken seriously, as the Centre for Bhutan Studies, under the leadership of Kaarma Uru, developed a sophisticated survey instrument to measure the population’s general level of well-being. The Canadian health epidemiologist Michael Pennock had a major role in the design of the instrument, and uses (what he calls) a “de-Bhutanized” version of the survey in his work in Victoria, British Columbia.

Wiki

How about Subjective Well-Being?

SWB (Subjective Well-Being) is another measure that has been used. One study was done last year which showed that SWB correlated most with health, then wealth, then education. From a global perspective, poverty put a damper on SWB. The study was the first to result in a comparative map of Global Happiness. The Calvert-Henderson Quality of Life Indicators is another measure that takes into account more wholistic factors. A systems approach is used to illustrate the dynamic state of our social, economic and environmental quality of life. The dimensions of life include: education, employment, energy, environment, health, human rights, income, infrastructure, national security, public safety, re-creation and shelter.

{snip}

If as Americans we could measure well-being as a basis for success, rather than just size of the economy, there would be more support for reforms that we really desperately need. We could tax carbon emissions and depletion of natural resources rather than taxing goods (labor, savings, investment.) We could reduce income disparity and reform international trade so that our environment was protected, labor rights were respected and blind greed was no longer rewarded.

Link

France is trying to develop some measures that make sense:

In 1934, one of the original developers of the Gross National Product economic indicator (GDP) cautioned that “the welfare of a nation can scarcely be inferred from a measurement of national income.” Deeply flawed though it is, GDP became our primary way to measure the wealth, and health, of nations. But this week, for the first time in seventy years, we may be moving towards using a more accurate barometer.

The leader of a major developed country, President Nicolas Sarkozy of France, has announced that he intends to begin a ‘great revolution’ in the way we measure social progress. The announcement came after a year and a half of research by a commission set up by the President to reconsider the way progress is measured. The commission was chaired by former chief economist at the World Bank, Joseph Stiglitz, and its star-studded cast included development guru Amartya Sen, Nobel-prize winning psychologist Daniel Kahneman, and economist-turned-climate-change-hero Lord Nicholas Stern.

The commission’s final report, which has been fully endorsed by President Sarkozy, recognizes that “new political narratives are necessary to identify where our societies should go” and boldly advocates for “a shift of emphasis from a ‘production-oriented’ measurement system to one focused on the well-being of current and future generations.”

Link

The good people at Redefining Progress, naturally, offer their own measure, the Genuine Progress Indicator.

It’s worth reading the whole thing; they’ve thought pretty deeply about how to quantify increases and decreases in value to society. I have philosophical quibbles with the use of the word “progress;” I think our culture tends to use the term teleologically, and I am unconvinced that our notion of economic health should include an endpoint. Sustainability is by definition non-teleological.

No matter — it’s the most rigorous attempt thus far and it deserves your full attention. I’ll just give you the heading paragraphs and the sub-heads here:

Genuine Progress Indicator

We believe that if policymakers measure what really matters to people—health care, safety, a clean environment, and other indicators of well-being—economic policy would naturally shift towards sustainability.

Redefining Progress created the Genuine Progress Indicator (GPI) in 1995 as an alternative to the gross domestic product (GDP). The GPI enables policymakers at the national, state, regional, or local level to measure how well their citizens are doing both economically and socially.

Economists, policymakers, reporters, and the public rely on the GDP as a shorthand indicator of progress; but the GDP is merely a sum of national spending with no distinctions between transactions that add to well-being and those that diminish it.

The GPI is one of the first alternatives to the GDP to be vetted by the scientific community and used regularly by governmental and non-governmental organizations worldwide. Redefining Progress advocates for the adoption of the GPI as a tool for sustainable development and planning.

…

How We Measure Progress

The GPI starts with the same personal consumption data that the GDP is based on, but then…adjusts for factors such as income distribution, adds factors such as the value of household and volunteer work, and subtracts factors such as the costs of crime and pollution.

Because the GDP and the GPI are both measured in monetary terms, they can be compared on the same scale. Measurements that make up the GPI include:

Income Distribution

Housework, Volunteering, and Higher Education

Crime

Resource Depletion

Pollution

Long-Term Environmental Damage

Changes in Leisure Time

Defensive Expenditures

Lifespan of Consumer Durables & Public Infrastructure

Dependence on Foreign Assets

Link

So…where to go from here?

The germ of an action idea is taking shape in my mind; I welcome your thoughts and suggestions. This strikes me as something that could effectively be carried out with state legislatures. If enough people started a campaign to convince legislators to introduce bills which would include alternatives to GDP on a statewide basis, to be included in state economic messaging, that might make a difference in the national discussion.

Imagine: “Massachusetts today released its third-quarter economic numbers, showing that overall Subjective Well-Being in the state has continued to increase slowly and steadily over the past three months. Governor Theophilus Q. Hassenpfeffer announced that these figures now rank Massachusetts among the five happiest states in the Union, although figures are not available for Arkansas, Utah, Texas, Arizona and Oklahoma, which have not yet adopted the SWB system.”

What do you think?

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