Success factors for GDP and beyond indicators e-Frame Amsterdam February 2014

1. Success factors for GDP and beyondindicatorse-FrameAmsterdamFebruary 2014

2. 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.

3. What this presentation is about • Barriers • Overcoming the barriers

4. ‘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

5. 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

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

7. 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

8. 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.

9. Traditional theory says maximise output and market efficiency Policy Intervention Growth, efficient markets Welfare

10. … 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

11. 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

12. With their respective indicators… Economic Policy Intervention GDP Welfare = wellbeing as seen by economics depts Other Policy Intervention Social/environmental indicators Wellbeing as understood by other policy depts

13. But this is not ‘beyond GDP’ – we have had this mix for years Economic Policy Intervention GDP Welfare = wellbeing as seen by economics depts Other Policy Intervention Social/environmental indicators Wellbeing as understood by other policy depts

14. 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

15. … measured through a suite of indicators Policy Intervention GDP Indicators of Wellbeing – now and future Beyond GDP driver indicators

16. …allowing policy makers to target good quality growth… Policy Intervention ↑ GDP ↑ Wellbeing indicators ↑ Beyond GDP driver indicators

17. …not badquality growth Policy Intervention ↑ GDP ↓ Wellbeing indicators ↓ Beyond GDP driver indicators

18. …and in some instances to sacrifice growth. Policy Intervention ↓ GDP ↑ Wellbeing indicators ↑ Beyond GDP driver indicators

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

20. So the question is what it would take for this integrated process to happen… … in the real world

21. What this presentation is about • Barriers • Overcoming the barriers

22. 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

23. 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…)

24. 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

25. 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

26. 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”

27. 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

28. 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

29. So why not just stick to the traditional story? At this point we may need reminding why we are bothering It 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 reasons • The market failures and inequalities generated by the system are so great that analysis in these terms is not helpful • There is no political solution to the sustainability crisis if framed as a market failure

30. What this presentation is about • Barriers • Overcoming the barriers

31. What this presentation is about • Barriers • Overcoming the barriers … work in progress…

32. This is partly a democratic and political process… • 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 • 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 • 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

33. 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

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

35. 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?

36. 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

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

38. 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