Stiglitz Commission Reports; Sarkozy Implements

The Commission on the Measurement of Economic Performance and Social Progress (often referred to as the Stiglitz Commission, after its chair, Joseph Stiglitz) has released its report on recommended measures of performance (PDF). France's president Nicolas Sarkozy "urged other countries to adopt proposed new measures of economic output," according to the Financial Times, and has already instructed France's statistical reporting arm to implement the recommendations.

The report begins with this:

"... statistical indicators are important for designing and assessing policies aiming at advancing the progress of society, as well as for assessing and influencing the functioning of economic markets. Their role has increased significantly over the last two decades. This reflects improvements in the level of education in the population, increases in the complexity of modern economies and the widespread use of information technology. In the “information society”, access to data, including statistical data, is much easier. More and more people look at statistics to be better informed or to make decisions. To respond to the growing demand for information, the supply of statistics has also increased considerably, covering new domains and phenomena.

"What we measure affects what we do; and if our measurements are flawed, decisions may be distorted."

They present a compelling case for the problems with measuring GDP (Gross Domestic Product) as a sole measure of progress. We've talked about some of those problems before; here Stiglitz and Amartya Sen and a host of others present 80 pages of analysis on the question. It's worth reading, and summarizing it would be a disservice (their summary is 20 pages long on this question alone!)

The report then discusses quality of life, which it defines thusly:

"Quality of life is a broader concept than economic production and living standards. It includes the full range of factors that influences what we value in living, reaching beyond its material side."

They make the point that trying to measure quality-of-life aspects through extending the economic accounting system is inherently flawed -- it's not just about resources and resource allocation. People experience the use of resources differently, many of the transactions don't act within traditional markets and resource assignments would be highly variable and non-comparable, and much of quality-of-life is related to life circumstances that cannot be described as resources with immutable prices.

They summarize three approaches to quality-of-life measurement as subjective well-being, capabilities, and fair allocations. This is a fascinating section of the report. Read this part, at least the summary piece!

The third section deals with sustainable development and the environment. You will find the discussion of sustainability indicators familiar. The connection of the three (economic, quality of life, and sustainability measures) is what we've been working on for some time in local communities and global networks.

This report was completed during a time of global financial crisis and an emerging environmental crisis. Here's how the authors addressed that: "...the whole Commission is convinced that the crisis is teaching us a very important lesson: those attempting to guide the economy and our societies are like pilots trying to steering a course without a reliable compass. The decisions they (and we as individual citizens) make depend on what we measure, how good our measurements are and how well our measures are understood. We are almost blind when the metrics on which action is based are ill-designed or when they are not well understood. For many purposes, we need better metrics. Fortunately, research in recent years has enabled us to improve our metrics, and it is time to incorporate in our measurement systems some of these advances. There is also consensus among the Commission members that better measures may enable us to steer our economies better through and out of crises. Many of the indicators put forward by the report will lend themselves to this purpose."

This is probably my favorite quote in the report:

"The report is about measurement rather than policies, thus it does not discuss how best our societies could advance through collective actions in the pursuit of various goals. However, as what we measure shapes what we collectively strive to pursue – and what we pursue determines what we measure - the report and its implementation may have a significant impact on the way in which our societies looks at themselves and, therefore, on the way in which policies are designed, implemented and assessed."

Anyway, check out the report. This is of tremendous value on a global scale to discuss well-being of nations, and should also be of great help on a local scale as we debate the importance of measuring community indicators.