The stats are there for all to see. FRED alone offers more than half a million US and international time series. It's not like the only number there is to look at is GDP.
In my recent
The Washington Post I started with
the production of things versus
the enhancement of life, and ended up with
the production of income versus
the enhancement of life. My point was that when the Washington Post said "the production of things" what they really meant was "the production of income", and that there is not really much difference between the production of income and the enhancement of life.
If there was a problem with my argument it was that producing income doesn't do much to enhance life when half the income goes to the three richest people in America (or whatever that stat is).
Now, via
Economist's View, along comes
There’s no point telling somebody who grows more desperate as each bill falls due that the overall economic situation is improving or to take a broader, longer-term view. If what the expert says has little or no relation to what people feel or can see all around them, it’s inevitable that they stop believing the experts and the politicians they advise, and look for answers elsewhere. President Sarkozy of France recognised this, and in 2008 convened the Commission on the Measurement of Economic Performance and Social Progress, the so-called Stiglitz-Sen-Fitoussi Commission.
I remember Sarkozy. He was on 60 Minutes one time, interviewed by Lesley Stahl. She asked him about his wife (or something; I forget) and his response was that before the interview he had made it clear he would not answer questions on that topic. Stahl's follow-up was to repeat the same question. Sarkozy got up and left. I decided right then that I liked the guy.
The article, at VOX, is an acknowledgement (complete with links) of the 2009 report of the Stiglitz-Sen-Fitoussi Commission and two follow-up HLEG reports from 2018:
HLEG argues that we need to develop datasets and tools to examine the factors that determine what matters for people and the places in which they live. The production of goods and services in the market economy – something which GDP does try to capture – is of course a major influence, but even in the limited domain of the market, GDP doesn’t reflect much that is important. The most used economic indicators concentrate on averages, and give little or no information on well-being at a more detailed level, for instance how income is distributed among households. Once conclusion of the HLEG is then that we need more granular data that capture all components of income and wealth and how they are related to each other. We also need to complete and render more timely the datasets we do have, both by integrating administrative and other types of data (such as from surveys) that already exist, and redesigning national accounts to incorporate distributional aspects.
Sounds like the brass ring, doesn't it? The thing we always wanted, even if we didn't know.
Note that the excerpt mentions distribution
twice.
They also say this:
Misleading statistics result in misguided policies. If governments think the economy is well on the road to recovery because that’s what GDP suggests, they might not take the strong policy measures needed to resuscitate the economy that they would take with metrics that inform on whether most of the population still feels in recession. If they do not have metrics on the extent of people’s economic insecurity, they may not take measures to bolster the safety net and social protection; they might even set about stripping away some social programmes.
Good one, isn't it? There can be no doubt that "misleading statistics result in misguided policies." I think the VOX article is very well written. But I don't like to be convinced by good writing. I like to be convinced by facts. I'm not comfortable when they say policymakers may "think the economy is well on the road to recovery because that’s what GDP suggests". I don't think that's what happens. I don't think policymakers are stupid. Lesley Stahl is stupid. Policymakers may use the "well on the road to recovery" thing when they are trying to convince us that the economy is well on the road to recovery, so that we'll go out and spend the money that actually creates the recovery. But that's not what the article says.
Nor am I comfortable when they say that these misguided policymakers "might even set about stripping away some social programmes." It sounds like something that was written for the Democratic National Convention. It is a mistake to bring politics into economic analysis, in my view. And anyway, in my first discomfort I pointed out that I don't think policymakers are misguided. They're not stupid, I said.
I think they don't know what to do to fix the problems. The policymakers who might set about stripping away social programmes don't know how to fix the problem. Nor do the ones who say the others are misguided by GDP. These are two political camps, looking at the economy as if it was a
political problem. Well, maybe for politicians it is a political problem. But it does the economy no good to bring politics into economic analysis.
Here's the ending:
But having the right set of indicators is just the beginning. They need to be anchored in policy. If we want people to trust us, we have to show them evidence that is at least as good as the evidence of their own eyes. And we need to act on this evidence, designing policies that improve their lives. In this way we can close the gap between experts and ordinary people that are at the root of today’s political crisis.
Last two words: "political crisis". They think the economic problem is political.
I'm impressed by the writing. But I'm not impressed by the article.
