Measuring Progress

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I’m in Paris for a meeting of a new Commission on the Measurement of Economic Performance and Social Progress. It’s a city that invites reflections on the past that can make the future shimmer.

Walking down the Rue des Francs Bourgeois in the Marais I recall an essay contest sponsored by a group of learned French scholars in 1759. They asked, “Has intellectual and economic progress contributed to the moral improvement of humanity?” The winner, Jean-Jacques Rousseau (smiling enigmatically on the left), elaborated famously on his basic answer: non!

Today, his answer seems less interesting than their question. Moral improvement will probably not be on the meeting agenda. Economists are much more nervous about measuring economic progress. Richard Easterlin’s paper observing that reported happiness in the U.S. has not increased along with Gross Domestic Product is finally getting the attention it deserves. A spate of books such as Richard Layard’s Happiness document yawning gaps between objective and subjective well-being. A recent paper by economists Betsey Stevenson and Justin Wolfers grabbed headlines simply because its international comparisons held out the slim hope that money might increase happiness a bit, after all.

Neoclassical economists face an especially serious challenge to their assumption that more is always better. But virtually all economists praise Gross Domestic Product (GDP) as though it were another three letter abstraction that begins with G. I sometimes feel agnostic about possibilities for either economic or spiritual progress. But like Pascal, I prefer to wager on the positive.

I’m no economic atheist, but my religion needs reform. Preparing for the meeting, I realize, to my surprise, that the principles I want to nail on the cathedral door are moral ones: 1) We should care about future generations. This implies consideration of natural assets (such as forests and fisheries) and the sustainability of ecological services. 2) We should care about others who are alive today. This implies consideration of poverty and inequality on a global scale. 3) We should care about own capabilities: our health, our education, our self-awareness, more than our own consumption (which appears not to make us all that happy, anyway).

Any new measures of economic progress that redirect our attention away from GDP toward these broader concerns will be helpful. The devils, of course, are everywhere, including in the details.

4 Responses to “Measuring Progress”

  1. K Maeve Powlick says:

    Thanks for letting me know about your blog. I will share it with my students and friends.

    I agree with your three principles – we should care about future generations, about the people alive today, and about our own development as individuals.

    My guiding moral principle has always been that as long as we’re not harming anyone, we should all be able to do whatever we want – and this of course includes consideration future generations. This matches well with the definition of justice I learned in Jim Boyce’s classes – that everyone should experience both the costs and benefits of their own actions – and suggests the centrality of ‘externalities.’ As I believe many UMass professors would agree, and is clearly stated in your work, externalities are at the heart of economic issues and are ubiquitous, rather than an exception that can for the most part be ignored.

    I look forward to future posts!

  2. Luis Enrique says:

    “Neoclassical economists face an especially serious challenge to their assumption that more is always better”

    You’re doing economists a bit of an injustice here. First of all it’s more accurate to say that neoclassical economics makes a modeling assumption that, all else being equal, people will prefer a bundle with ‘more’ in it to one with less. Believing that this is the best available way to model behavior is not the same thing as assuming more is better in any absolute sense.

    The word ‘better’ suggests to me a social welfare function, and neoclassical economics makes no such assumption that more is better there (social welfare may involve preferences over distribution, for example, so more may not be better at all). I’d be surprised if you could find many economists who’d equate GDP with welfare.

    In addition, neoclassical economics has no problem defining utility over more than just material goods – models where more leisure is preferred are of course mainstream, but you could write a model where more love or more social cohesion enters utility – whether you’d get much insight from that is another matter.

  3. Indian Economy is one good example. The fourth estate and most neoclassical economists glorify the 8% GDP growth!

  4. SAM says:

    “Neoclassical economists face an especially serious challenge to their assumption that more is always better. But virtually all economists praise Gross Domestic Product (GDP)….”

    I would clarify this (slightly careless) comment with the following:

    Good economists recognize that the obsession with GDP has always been about how readily measurable it is. The problem is that as a group we have let the data constraints inform our values — obsessively focusing on growth without carefully ensuring the link to increased welfare.

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