Stiglitz report on measuring economic progress

The report of the high-powered Commission on the Measurement of Economic Progress and Social Performance set up by President Sarkozy and chaired by Joe Stiglitz and with a stellar cast of economists amongst its members was published today. President Sarkozy has promised to follow the report by measuring well-being as well as gross domestic product. The full report does not appear to be available yet on the Commission’s website, [Update:  link is now available]. For a flavour of the issues raised in the report, see Stiglitz’s commentary on the GDP fetish.

23 thoughts on “Stiglitz report on measuring economic progress”

  1. There is merit in this and maybe the UN’s Human Development Index already fills the role.

    In the good old days, it did seem a little odd when a hospital trolley index was regularly broacast on morning radio, people were being told that they were among the richest in the world.

    One of the BoI wealth reports had Ireland second to Japan in the world.

    At the time, about a third of Japan’s workforce were temps earning less than the Irish minimum wage, and a government report had shown that consumer anxiety was at a 40-year high.

  2. There is indeed great merit in this. It has the potential to shift the economic calculus in a way that might address some of the issues about economics being raised by Paul Krugman and others.

    However, I fear it will be dismissed as just another attempt by Sarkozy to seize the global economic policy agenda and to shore up the rapidly diminishing international stature of France.

  3. @Paul Hunt: Sarkozy is on-target in his concerns, and the French are in the lead on this issue, so perhaps we should say the suddenly increasing international stature of France. French social and economic policy can be faulted for some past errors, but the French establishment has also made some good decisions, and this concern for broader measures of economic, environmental and social progress is one of them.

  4. Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman’s rifle and Speck’s knife. And the television programs which glorify violence in order to sell toys to our children. Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile. And it can tell us everything about America except why we are proud that we are Americans.
    Robert F. Kennedy, 18 March 1968

  5. @Gregory Connor,

    It’s possible you may have misunderstood my intent. I applaud the initiative as much as I fear that its origin may hinder its wider application.

  6. @Paul Hunt: I agree with you. I just wanted to give the French some credit on this initiative since they are pushing in the right direction. You are correct that the French connection might sour the USA establishment on this (but see the beautiful Robert Kennedy quote above!).

  7. Camelot, alas, is no more. Obama is unlikely to be inclined – or indeed to be able – to restore even a vestige. The cultural divisions in the US run deep – the ‘freshwater/saltwater’ spats of the economists are mild by comparison. It shouldn’t be the case that a US endorsement of, and support for, this initiative should be required for it to gain the currency it deserves, but such is life.

  8. @Michael Hennigan

    I will be surprised if you long support the UN’s Human Development Index as a measure of economic progress and quality of life. Ireland came 5th in it last time and was the highest-ranked EU country. France came 11th and the U. Kingdom 21st. Your favourite countries, Israel and Singapore, came 24th and 28th respectively.

    http://en.wikipedia.org/wiki/UN_Human_Development_Index

  9. This debate – though not the report- risk confusing social norms with social statistics. So who has a fetish about GDP ? Well if policy makers, whoever, over-emphasize it that reflects their values but its not a fault of the measure itself which answers a reasonably well defined question though maybe not the question you happen to think is interesting. The popular alternative seems to be to create these composite measures like the HDI which are essentially arbitrary combinations of statistics which often confuse inputs and outputs, means and ends. Much like some of the rankings of universities that are published they are pretty useless.
    It seems to be that it makes sense to have good stand-alone measures of very well defined concepts (income,health,income inequality, environmental quality etc) and let public policy center around what we think is important. To try to roll these into one index is psuedo-scientific and will inevitably reflect someone’s particular values (or fetish,if you prefer).

    The report itself looks very interesting & obviously top class people are involved but I suspect few will read: the Executive Summary alone is 12 pages. Perhaps Summary means something else in French.

  10. @paul hunt
    That blog is truly sad & ill informed,lambasting some of my colleagues for the sin of studying in the US. That they get their facts so wrong does not help. The idea that the Phillips Curve is at the heart of neo-liberal economic thinking is so funny. Lucas would be turning in his grave (if he was dead, that is).

  11. @stephen douglas I don’t think theres anything particularly Marxist about the Stiglitz,Sen, Fitoussi paper nor does having won a Nobel prize for X imply anything about the merits of one’s arguments on topic Y even if it gives you street-cred.

  12. @paul hunt, good spot –

    the original blog post makes reference to stuff like “if the government was to invest in indigenous exporting industries, this would increase Irish exports and improve the balance of payments” – yeah, and if it invested in pixie dust we’d all be fairies – even before the EU Commission’s State Aid enforcers came calling. It’s not about Berlin or Boston – it’s about Brussels sir!

    Indigenous exporting industries – this in a country where multiples import milk from the North – milk! Sand and Arabs come to mind, or maybe it would be more progressive to talk about coal and Newcastle.

    To a non-academic, the listing of the PhDs of the Queens’ Colleges comes off a bit chip and shoulder too.

  13. I would say that the Government already invests about as much as it prudently can in indigenous exporting industries, chiefly through Enterprise Ireland, a bit through County Enterprise Boards, Shannon Development, Bord Bia and Teagasc, and also less directly through bodies such as Science Foundation Ireland.

    I have reservations about cutbacks in FAS and Skillnets support for indigenous industry, but don’t mind me on that because I’m not an altogether independent commentator in the area.

    If anyone thinks the Government can do better in this well trodden territory, they are more likely to be listened to if they make concrete proposals, and if they at least tip the hat towards what is already being done.

  14. @Kevin Denny, Mark Dowling,

    Just a few observations.

    1. In the quiet before the storm on NAMA, it’s good to reflect on some broader issues concerning economics. NAMA – and what occasioned it – are simply symptoms of a deeper malaise that President Sarkozy (with the assistance of Stiglitz et al) is seeking to address. The sound-bite condemns the “GDP fetish”, but I think the real target is the “cash nexus” – and not, I suspect, in an exclusively Marxist sense. I sense a desire to pick up the threads that lead from the liberal enlightenment objectives, enshrined in the preamble to the US Constitution, of “life, liberty and the pursuit of happiness”. Richard Layard of the LSE is on a similar track.

    2. That is why I deeply resent the debate being cast in terms of “Neo-liberals v. Progressives”. The real neo-liberals are those who seek to extract economics and political economy from the conservative and neocon forces. Robert Peel almost broke the UK Tory Party in forcing through the Corn Laws, but he shifted the Tory Party from mercantilism and, in the process, purloined many of Adam Smith’s insights to forge a power-winning economic programme that has largely endured. In some respects he was the first Neocon.

    The US tradition took longer to establish itself, but, in the Republican Party, it has always adhered to small government, low taxes, the enforcement of property rights and individual liberty. Since the collapse of the Warsaw bloc and of the Soviet Union, the revised Neocon international agenda builds on these to focus on democracy (provided it gives the right answers), free markets (with minimal policy or regulatory control that are governed and controlled by the projection of national (i.e., US) military and economic power) and the rule of law (provided it enforces property rights above all others).

    The US “freshwater” economists have proved to be “useful idiots” for the Neocons. In the US culture war that is why the “saltwater/freshwater” debate has been so intense and, occasionally, personal. This is a battle to get economics back on to the genuinely liberal track initiated by Adam Smith and that is best exemplified by Keynes’s effort to craft a path that avoided the depradations of mindless conservatism, on one side, and the malign forces of collectivism and corporatism, on the other.

    As we emerge from a similar depression/recession this is surely a worthy task for today’s economists and I see Stiglitz et al as the modern proponents of this tradition.

    3. Unfortunately the folks on Progressive Economy see themselves as opposed to everyone who does not agree with the thrust of their agenda and damn all equally. They fail to recognise that there is a genuine Neocon v neo-liberal debate taking place and that, historically, they are not at the races. Because of this it is difficult to engage constructively with them, but it is necessary to do so as the nostrums they pronounce are adhered to, however unthinkingly, by a significant – and, perhaps growing, share of the electorate.

    4. It is necessary for this debate to take place in Ireland and, because of its economic and economic policy focus, this, perhaps, is the best forum. I’m not for a moment suggesting that this site is frequented by neocons red in tooth and claw, but many posts betray an underlying divergence of opinion that should be articulated – and no where is this more evident than in discussions relating to unemployment.

    This is the scourge that FDR and Keynes fought manfully to cure. It is a scourge that Ireland will confront for many years. It is very likely that any recovery will be of the “jobless” variety. We may have become inured to its baleful impacts by the safety valve of emigration – and, tragically, this safety valve is coming into play again. But this, quite simply, is not good enough. It is entirely immoral to fail another generation.

    Let the debate begin!

  15. @paul
    I don’t understand much of what you say or at least the significance of it. Nonetheless I don’t believe the banking crisis,NAMA etc has anything to do with some deeper malaise that M. Le President is addressing.
    I read his commission as being about better indicators of social and economic progress, so its essentially about social statistics, no more and no less. If you don’t like people’s values I am not sure that even Joe Stiglitz can help. Bono maybe.
    Personally I have an aversion to these labels that people like to use so I have no idea what a freshwater or saltwater economist is (though I am curious to know whether I am either- I normally answer to the label “Neo-classical”). Why can’t people be less obscure?

  16. References have been made, in this thread, to the web site Progressive Economy. The aim of http://www.progressive-economy.ie is to to encourage a lively and open debate about the state of economics, economic thinking and public policy on any relevant matter. In the context of a discussion about Irish economists and their contribution to informing debate, we wish to encourage a debate that avoids personalizing but, rather, focuses on issues, concepts and ideas. There is as much, and indeed more, dissent among economists on the other side of the salt Atlantic waters than in this island. We have also noted the call in this thread for a wider debate on these matters.

  17. @kevin denny,

    I am a little saddened, but, perhaps, should not be surprised, at your failure to grasp the thrust and intent of the case I am making. Despite the best efforts of contributors to this site to focus on pure positive economics, economics can never be value- or ideology-free. It is this which is prompting the international debate within the profession and the initiative of M. le President seeks to broaden the assessment and measurement of what has value to inform the reform of economic and social policy.

  18. Certainly, nobody should deny that GDP or GNP are deeply imperfect indicators even of material wealth narrowly conceived, let alone of broader human well-being. But I think the roots of the GDP fetish lie to a significant degree in the connection between economic growth and labour market performance.

    While, on the one hand, the labour market remains a primary determinant of income distribution and social inclusion and, on the other, labour market performance depends on economic growth, the GDP fetish will probably remain with us.

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