If we measure the wrong thing, we will do the wrong thing

To coincide with the 10 year anniversary of the publication of the Report by the Commission on the Measurement of Economic Performance and Social Progress, the Carnegie UK Trust is publishing a series of blogs which outline the approach taken to measuring and improving wellbeing by different governments, organisations and initiatives around the world.

On 27 November 2018, at the 6th OECD World Forum on Statistics, Knowledge and Policy Joseph E. Stiglitz, Jean-Paul Fitoussi and myself launched the reports of the “High Level Expert Group on the Measurement of Economic Performance and Social Progress” (HLEG), the independent body hosted by the OECD that was created in 2013 to follow-up on the “Commission on the Measurement of Economic Performance and Social Progress” (a.k.a. Stiglitz-Sen-Fitoussi – or SSF – Commission), established by President Nicolas Sarkozy in 2007.

As Chairs of the Group, we provided a high-level perspective on the issues that fall under the “Beyond GDP” agenda, and put forward 12 recommendations to move the measurement agenda forward. Our central message is simple: “what we measure affects what we do. If we measure the wrong thing, we will do the wrong thing. If we don’t measure something, it becomes neglected, as if the problem didn’t exist”. But we also stressed that measurement issues are not only technical: they go to the root of how our democratic system functions. The gap between the ‘experts’ and the citizens they are supposed to be serving has played an important role in the bitter divisions within society that have been so vividly demonstrated in a number of recent elections.

This is not to dismiss the importance of GDP, which remains a critical measure for assessing economic conditions at large. But GDP also continues to be used for purposes that it was not designed for, i.e. it often remains the single yardstick to gauge the overall “success” of a country and the well-being of its people. What is needed is a broader range of established well-being statistics, including more granular and timely data that better capture the true state of the economy, the varied situations of different population groups, and the threats to the long-term sustainability of well-being.

What should be done to improve the measurement of social progress?

First, we emphasised the importance of not only better measuring people’s material conditions but also the quality of their lives, looking beyond averages to account for inequalities across a wide range of outcomes, and the resources needed to ensure sustainability in the future and the extent to which we are approaching (if not trespassing) critical “tipping points” and planetary boundaries. 50 years ago, Simon Kuznets, one of the fathers of the system of economic accounts, already stressed the importance of considering ‘qualitative’ aspects that are both important for the functioning of our economy and central to improve people’s lives.

But we also stressed that having the right measures is just the beginning. What we need is to anchor these measures in policy decisions, in ways that survive the vagaries of electoral cycles. A number of countries are now using well-being indicators in the different phases of the policy-making process, from identifying priorities for action, to assessing the advantages and disadvantages of different strategies, to allocate the resources needed to implement selected strategies, to monitor interventions in real time, and to evaluate the results achieved. New Zealand’s “wellbeing budget” is the most recent example of this approach in action, but there are others. While recent, these experiences hold the promise of delivering policies that, by going beyond GDP and traditional silos, are more effective in improving people’s well-being. It is in this way that we can close the gap between elites and ordinary people that are at the root of today’s political crisis.