Success factors for GDP and beyondindicators

e-FrameAmsterdamFebruary 2014

Funded by:

BRAINPOoL is an EU funded project parallel with e-Frame

BRAINPOoL (‘Bringing alternative indicators into policy’) is an FP7 funded project aimed at identifying and overcoming the barriers to ‘alternative’ indicators being used in policy.

‘Alternative’ = the ‘beyond’ part of ‘GDP and beyond’.

During the project we have carried out research and interviews, conducted workshops and knowledge-brokerage seminars and conducted seven action research case studies to explore ways to improve uptake of Beyond GDP indicators.

1. What this presentation is about

2. Barriers

3. Overcoming the barriers

‘Beyond GDP’ refers to how an indicator is or should be used

“those indicators and indicator sets that have been proposed as necessary and central to the measurement of societal progress in a

broad sense, other than those indicators, such as GDP or the unemployment rate, that

are already playing this role.”BRAINPOoL WP1 report

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Success factors for these indicators include generic ones

The indicators have to work technically– Ease of understanding– Quality data, unbiased (and perceived to be)– Timely

There has to be demand for the indicators– Fits with vision, language and organisational strategy– Measures things that can be influenced by policy– NB demand can come from outside the policy world (democracy!)

Someone has to make the connection with the user– Users engaged from the start in development, direct contact– Need for statistical entrepreneurs – who are persistent

But ‘measurement of societal progress in a broad sense’ in the definition makes clear that there is more to it than that

So the further question is what would it take (the ‘success factor’) for some new central measure of progress to drive policy

So far this only happens at local and regional level

• Local successes are easier because – It is easier to bring stakeholders together

– Citizens feel more connected with their locality

– It is easier to bring different parts of local government together

– The focus is spatial planning and local services, not the economy

• Hence some of our examples– Jacksonville Community Indicators, Florida, SPIRAL, Toronto’s Vital Signs

• National examples are not economic and not really ‘central’– Alcohol, public health, service delivery, farmland birds

• Regional level potentially interesting– More emphasis on structural policies

– Balance of power more equal (finance ministries)

– More political consensus and citizen connection

So we cannot take an example at national level and say ‘what made this work?’

We have to start by defining what it would look like for some new central measure of progress to drive policy including at national level.

Then we can ask what it would take for this to happen.

Traditional theory says maximise output and market efficiency

Policy Intervention

Growth, efficient markets

Welfare

… making GDP the natural primary measure of progress

Policy Intervention GDP*

Welfare (not measurable

directly)

*GDP is not used in day to day micro-policy making – however it measures the progress which justifies much of that policy

Of course economic policy can be complemented by other policies…

Economic Policy

Intervention

Growth, efficient markets

Welfare = wellbeing as seen by

economics depts

Other Policy Intervention

Social/environmental

objectives

Wellbeing as understood by other

policy depts

With their respective indicators…

Economic Policy

InterventionGDP

Welfare = wellbeing as seen by

economics depts

Other Policy Intervention

Social/environmental

indicators

Wellbeing as understood by other

policy depts

But this is not ‘beyond GDP’ – we have had this mix for years

Economic Policy

InterventionGDP

Welfare = wellbeing as seen by

economics depts

Other Policy Intervention

Social/environmental

indicators

Wellbeing as understood by other

policy depts

What we need – what is ‘beyond GDP’ - is more integrated policy

Policy Intervention

Traditional economic objectives

Wellbeing – now and future (sustainability)

New (for economics) objectives

… measured through a suite of indicators

Policy Intervention GDP

Indicators of Wellbeing –

now and future

Beyond GDP driver

indicators

…allowing policy makers to target good quality growth…

Policy Intervention ↑ GDP

↑Wellbeing indicators

↑Beyond GDP

driver indicators

…not bad quality growth

Policy Intervention ↑ GDP

↓Wellbeing indicators

↓Beyond GDP

driver indicators

…and in some instances to sacrifice growth.

Policy Intervention ↓ GDP

↑Beyond GDP

driver indicators

↑Wellbeing indicators

So the question is what it would take for this integrated process to happen…

So the question is what it would take for this integrated process to happen…

… in the real world

1. What this presentation is about

2. Barriers

3. Overcoming the barriers

It is not that there is no demand for new policy frameworks

• Distinction between ‘good’ and ‘bad’ growth is recognised in many places– Strong support for new definitions of progress– Wellbeing is still rising up the agenda

• There is a constituency for change– The left is looking for a new political narrative– Some parts of civil society and business want change

• But… getting back to ‘business as usual’ seems to many an easier route to success post crash

There are two key actionable barriers to going beyond GDP

• Lack of legitimising narrative• Lack of integrating policy process

The development of beyond GDP indicators can contribute to overcoming these barriers - provided it is integral to the action.

(A proliferation of competing indicators is symptomatic of activity that is not integral to the action…)

GDP did not and does not face these barriers

• It has a legitimising narrative linking ends, means and politics– “Growth delivers good things, ie private and public

consumption (ie welfare)”– “Competent governments know how to maximise it”

• There is an integrating policy process based on theory– Economic theory and evidence can guide policy makers – It can help reconcile conflicting objectives (it is claimed)– Anyway there are just two dominant, complementary

economic objectives: market efficiency and growth

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Beyond GDP does not have a narrative identifying the means “GDP measures something central to modern society – what

is there to replace it?” – or even complement it? Wellbeing and sustainability do not do the trick: they appear

to be primarily outcomes, not explanations So, what are the explanatory variables? To date all we are able to say is that progress is a multi-

dimensional concept In the absence of a clear alternative, the traditional view –

that growth and efficient markets will deliver – predominates This means no new indicator framework is needed And no connection with political action can be made

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Indeed even the ends are problematic… How should we define and thus measure wellbeing, the

ultimate goal of policy (right hand box in the diagrams)? One option is in terms of ‘self-evidently’ valuable personal

characteristics measured subjectively (‘life satisfaction’ etc) But this does not (yet) resonate with the public

– A technocratic concept? Need for stronger democratic legitimacy?– The public are interested in housing, jobs, crime, health, living

standards… To the extent wellbeing is driven by these things, the concept is redundant

– To the extent that it is not, eg when driven by personal relations, it is not ‘political’ so its use in politics seems frivolous, illegitimate

“My colleagues are not interested in wellbeing, and they are not interested because the public is not interested”

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So should we choose housing, jobs, crime etc? The alternative is to define wellbeing in terms of societal

characteristics the public agree are important (housing, jobs…)– Many well known attempts to do this

This only works if the resulting measures can be combined to measure wellbeing – not necessarily through an index– In the absence of some integrating framework you simply have the

parallel policy streams rather than an integrated one– An integrating framework does not necessarily mean an index –

provided there are only a few measures (we return to this) As yet no successful attempt to do this

– Too many variables– Some confusion of ends and means– Not always based on democratic processes, hence legitimacy questions

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This complexity of beyond GDP raises process issues… Genuinely integrated policy is difficult because traditionally

good policy design means tackling one problem at a time… Multi-dimensionality may make new requirements

– It may require combinations of policies the impact of which will be difficult to predict

– The necessary analysis is both complex and uncertain and traditional quantitative techniques may be inadequate

– There may appear to be more reliance on value judgements – although in reality these are implicit in traditional analysis

– It may require closer co-operation between disciplines, including new ones, and between functional departments

Without an effective solution, any ‘cross departmental committee’ is trumped by Finance Department imperatives

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So why not just stick to the traditional story? At this point we may need reminding why we are botheringIt is tempting to say – well, actually the traditional narrative is pretty robust; why don’t we just focus on correcting market failures? Why do we need a new indicator system? It all seems very difficult.

There are two reasons1. The market failures and inequalities generated by the system

are so great that analysis in these terms is not helpful2. There is no political solution to the sustainability crisis if

framed as a market failure

1. What this presentation is about

2. Barriers

3. Overcoming the barriers

1. What this presentation is about

2. Barriers

3. Overcoming the barriers… work in progress…

This is partly a democratic and political process…1. Establish public support for the ends

– Wide and representative public engagement around ends (not means) – including subjectively measured ends

– Concerted communication of the results, and development of appropriate headline measures people care about

2. Show politics matters – with policies and participation– Identification and communication of how policies would be different

given the ends just identified– Public engagement around links between policies and ends– Standard measures – but political parties can weight different

measures differently

3. Create a narrative to explain progress better than GDP– Eg a political economy story about institutions and democracy– Reducing risk – based on all four dimensions of sustainability

What should indicators be like to support this process?

• ‘End’ indicators that people care about and have said they care about– How to interact with results of work on ‘expert’ group priorities of

inequality, subjective wellbeing and sustainability?– Resulting credibility drives political statements drives media

• ‘Means’ indicators that people believe drive events• Absolute maximum of 7 indicators – ideally fewer• Used by politicians in their political narrative – possibly

more attention given to this or that at different times• But do we need a single champion comparable to GDP,

either as an ‘end’ indicator or as a ‘means’ indicator? –– NB not a measure of everything

Sendsteps question

To go “beyond GDP” we need:• a single index• a small dashboard of 5 headline indicators • Significantly more than 5 headline

indicators

An analytical/organisational process is needed to support this• Public support drives choice of end goals (the right hand

box in the diagrams) for assessing policy– These can be used separately (allowing judgement as to trade offs)– They can also be combined into a single numeraire, using a

politically determined weighting

• The narrative to explain progress helps development of framework for assessing the most important interactions between intermediate variables (the middle boxes)

• Then use this in finance/economics ministry policy– All policy assessments including value for money– But beyond this: development of innovative approaches to policy

development to take account of probable interactions

• Do we then have adequate indicators to support this?– Eg human, social and environmental capitals?

But economic policy making is founded on theory…

• The existing narrative and use of GDP is founded on an economic theory, and this theory guides policy making

• So there is a question – as well as a new narrative, do we need a new theory comparable to the existing one? – Going beyond consistency with Stiglitz Commission

• Or can we be more pragmatic if we build a strong coalition?• This is a question about how to achieve change within

finance ministries

Sendsteps question

Should indicators for “GDP and beyond” be related to economic theory?• Yes• No

Our next step is a dialogue with policy makers on 24 March

• The BRAINPOoL final conference is at the OECD in Paris on 24 March

• We will present a development of our recommendations applied to two key policy areas– The shift to a green economy and labour markets

• A panel of senior politicians and officials will respond and recommend what should be done

• We will try to define work needed – and by whom• Please come! – register www.brainpoolproject.eu

or email Charles.Seaford@neweconomics.org