In yesterday's NY Times (p. B1), we are told that "in a provocative new study, a pair of Nobel prize-winning economists, Joseph E. Stiglitz and Amartya Sen, urge the adoption of new assessment tools that incorporate a broader concern for human welfare than just economic growth." Mr. Stiglitz said on Tuesday during an interview with a number of journalists, "What you measure affects what you do. If you don't measure the right thing, you don't do the right thing."
Excuse me for saying so, but how is this thinking "new and provocative"? These ideas have been around for over 30 years. Our problem is not economic analysis: it is a combination of (1) human nature ("coveteousness" and "greed," speaking theologically); (2) an appalling lack of analysis and leadership in the academy; and (3) ignorance and lack of political will by elected leaders.
Just a short history of some alternative economic thinkers. In 1972 the Club of Rome study was published, in which limits to growth was questioned. The study considered the ecological impact of growth and the creation of wealth in relation to non-renewable resources.
In 1978, Hazel Henderson, economist and futurist, published a book entitled Creating Alternative Futures, in which she questions the value of judging human well-being with a measurement of Gross National Product. Since that time, she has continued to write and speak, developing her theories, encouraging a paradigm shift in economic thinking, and encouraging socially responsible behavior by corporations.
In 1989, economist Herman Daly and theologian John Cobb co-authored a book on economic theory entitled For the Common Good, challenging the assumptions and theoretical fallacies of contemporary economic scholarship. They recommended a shift from an economics based on individual self-interest to what they called an "economics for community." They said that current models address the acquisition of goods and services, but say nothing about relationships. (These two dare to believe that the disciplines of economics and theology have anything in common.) The book is 492 pages of dense but exhilarating reading (in the opinion of one who slugged through it).
I could mention others--Simon Kuznets, creator of the concept Genuine Progress Indicator (GPI), which could be used to replace Gross Domestic Product (GDP) as an indicator of economic growth. The idea is that, for example, just because someone gets cancer from chemical pollution, thus generating wealth for doctors and hospitals--well, that's not really a sign of human progress and well-being. So we need to look at both the costs and the benefits of growth. In current economic models, the costs are called "externalities" and are not considered.
There is the Canadian scientist David Suzuki, who has been speaking internationally for over 15 years about the ecological limits of growth. He has warned that societies typically can sustain only about 1.5%-3% new growth per year, without overwhelming their ecosystems.
Our Nobel prize winners say that we should not focus on goods and services produced, but on the material well-being of typical people. We should measure such things as availability of health care and education, their report concludes. That such statements should be considered "innovative" is a sign of where our society is, in terms of human services.
It is true, as the article states, that the problem of any new measurement of economic well-being is the "how to" factor--how do we do such measurement? It's relatively easy to measure GDP, but how about GPI? How do we measure, for example, the hours that a parent spends tending to a child's needs--for no pay at all? How do we measure the depression and devaluation of self-worth that often comes with unemployment?
The fact is that it is the most important elements of human life that are the most difficult to measure. (Try measuring love, for example. Or honor. Or peace.) But the difficulty of mathematical measurement does not excuse ignoring the economic realities of our lives and pretending that we are only what we get and spend. And certainly some of what goes unmeasured is amenable to simple accounting: what does it cost a city to clean up a polluted site, for example.
Progressive economic voices, most outside the mainstream, have been telling us for many, many years that what we're measuring is an inaccurate reflection of our well-being. Instead of remaining steeped in the conventional wisdom of their discipline, and composing mathematically verfiable articles for one another, economists should get down on the earth with the rest of us and help us structure an economic theory that corresponds to our existential realties. Stiglitz and Sen have given encouragement to their colleagues to do just that. I hope they take up the challenge.
Share this
Dear Marilyn,
I always find great value in your writings and will miss you greatly at First Church.
I completely understand and appreciate the spirit of you 9/24 release but in this particular case I had recurring thoughts while reading. So, as a closet economist here they are.
GDP or growth is only one measure of generalized economic activity. We already have accurate measures of many of the factors you raised. We already know how many workers are without jobs (more or less). We already know how many Americans have no health care access. We already know how many polutants are in our air and water. I remember swimming in the Willamette as a child in the 50's and coming out with brown film on my skin. It took a visionary like Tom McCall to clean it up. Now it is worse than ever. And we know exactly where most of the polution is coming from.
Perhaps a "GPI" indicator would provide a more relevant measure of human progress (Or digression) but we can't even decide today real root causes of most cancers.
I am hopeful that collective human insticts can know almost intuitively when we are headed in the wrong direction as indicated by the election of President Obama. To the extent that more accurate metrics provide some guidance I am all for it but I am not confident to the extent we have not made good use of the measures we already have.
Best regards.
Rev. Dr. Sewell:
As a lifelong Unitarian, and career-long economist, I think it should be pointed out that the notion that GDP is a quite inadequate indicator of economic welfare has long been conventional wisdom within mainstream economics. Certainly this is what I was taught in graduate school some 30 years ago. And I don't think it was a new or startling idea then.
If we consider benefit-cost analysis, which is mainstream economics brought to bear on policy issues, much of the subject matter of benefit-cost analysis is how to value such "non-market" goods as environmental quality, risks to life, the quality of life, etc.
What is perhaps new is the belief that GDP should be replaced even for annual and quarterly measures of the overall economy. This is quite difficult to do. It is challenging enough to put some valuation on the principal non-market goods that are relevant for a particular policy problem, perhaps relying on various historical data for valuing these goods with some ad-hoc updates. It is much more challenging to try to comprehensively measure all these factors throughout the economy for an economic indicator that is updated quarterly.
I don't think mainstream economists versus alternative economists differ so much in their evaluation of GDP as a measure of economic welfare. Where they differ more is over whether they believe that our main economic problems can be dealt with by tweaking the current economic system (perhaps even with some major tweaks), versus radically transforming the system.