Stiglitz, Sarkozy push for new measures of country performance
This is brilliant.
France’s president on Monday urged other countries to adopt proposed new measures of economic output unveiled by a panel of international economists led by Joseph Stiglitz, the US Nobel Prize winner. via “France to count happiness in GDP” at FT.com
What are these new measures and why do we need them?
Conventional metrics of national accounting, like GDP, essentially measure economic output alone. Economic output equals a country’s performance. Case closed.
The new measures proposed by the International Commission on the Measurement of Economic Performance and Social Progress, would offer a more comprehensive method for measuring a country’s performance by taking into consideration people’s well-being and the sustainability of a country’s economy and natural resources.
Mr. Sarkozy is a bit of a screw-ball, and admittedly this sounds like a pretty screwy idea at first. But Sarkozy makes a good point: he says the world has become trapped in a “cult of figures.” The famed Mr. Stiglitz elaborates:
While there is no single indicator that can capture something as complex as our society, the metrics commonly used, such as gross domestic product, suggest a trade-off: one can improve the environment only by sacrificing growth. But if we had a comprehensive measure of well-being, perhaps we would see this as a false choice. Such a metric might indicate an increase in wellbeing as the environment improved, even if conventionally measured output went down. Via “Towards a better measure of well-being” at FT.com
Essentailly, Stiglitz argues that if we use the wrong metrics, we will strive for the wrong things. Health care in America illustrates this beautifully. The US spends 15 percent of its GDP on health, while France spends 11 percent. Yet if GDP accounted for the outcomes of our expensive health care instead of just how much money we spend, the report suggests it would cut US GDP per capita by a third. This would be a mighty blow to our collective egos, yes, but perhaps it would encourage us to focus on preventative care and health outcomes instead of just throwing money at insurance companies. Costs would finally come down and we’d be a healthier nation for it.
Stiglitz asks, “Should we ‘punish’ a country – in terms of our measure of performance – if it decides to take some of the fruits of the increase in productivity from the advancement of knowledge in the form of leisure, rather than just consuming more and more goods?” No. But we currently do.
To me it seems axiomatic that as a county’s wealth grows, so should the well-being of its citizens. I have been left to wonder how it is, then, that the world’s richest country fails to provide its citizens with paid time-off from work, paid sick leave, paid parental leave, or universal health care. On all of these measures Europeans are far ahead, yet the world still looks to the American model for “growth.” Americans, for all our wealth, are only granted an average of 10 days off from work a year, while Europeans are guaranteed an average of four weeks. Most European countries provide at least a year of paid maternity leave and even some paternity leave. No European will ever go bankrupt because of health care bills. What is “wealth” without well-being?
The fact is that we’ve confused our ends with our means—and our system of metrics continues to shove us along this path. “Our economy is supposed to increase our well-being,” Stiglitz reminds us. “It, too, is not an end in itself.”