I liked this letter from Caroline Lucas in the Guardian this morning, commenting on an article by Larry Elliott:
Larry Elliott (Opinion, 30 November) is absolutely right to question a fixation on growth at all costs. We know that infinite economic growth simply isn't compatible with a planet of finite resources, and we also know that the treatment of environmental concerns as “externalities” in pursuit of never-ending GDP increases is incredibly damaging. So if we know that growth is environmentally damaging, and not a guarantee of increased wellbeing, how do we shift our focus towards a new measure of a good society?
We need a new set of indicators that better reflect genuine wellbeing. For a start I would suggest we should aim to share out paid work more widely and evenly, and increase the amount of positive leisure time people have, giving them more choice about time with their communities, friends and family. The Green party's calls for a shorter working week are often attacked as being anti-growth, but that misses the point of policymaking that should surely be to serve people rather than worship at the altar of GDP.
It feels like Britain is ready for a real conversation about what makes for a good life, and I for one am looking forward to the time when growth figures are considered an old-fashioned way of monitoring progress.
Caroline Lucas MP
Green, Brighton Pavilion
I guess I should declare an interest: both Caroline and Larry are fellow members of the Green New Deal group. Of course we challenge GDP as a measure. It's arbitrary, ignores value, encourages excess and fails to take account of distribution amongst its many faults. But there are alternatives. Charles Adams of Durham University who usually blogs at Progressive Pulse but on this occasion was on Brave New Europe made a good case for one alternative measure, which is increasing median disposable income of households:
We know that money buys freedom but we cannot simply maximise freedom by giving people more money. The only result would be inflation. Better is to maximise disposable income for everyone–net income minus essential spend on basic subsistence, housing and energy (rents that act as a drag on productive activity).
Increasing disposable income for the whole of society opens up choices–including ones that GDP cannot measure, for example to do more in the community or spend more time with the kids. Disposable income changes the focus towards productive economic activity rather than wealth extraction. Investment in housing, sustainable energy, and transport infrastructure provide the foundation for a freer society where we are enabled to pursue a productive life.
A second key ingredient in choosing the right metric is to use median measures rather than a crude average (or mean). To see the difference, imagine a football team where one player is earning one million pounds per week and the other ten earn one hundred. The average salary is close to half a million whereas the median income is only one hundred. If the pay of the star player is increased to two million then average income doubles while median incomes remains almost the same. By optimising median income we optimise the distribution such that everyone can be maximally economically active. The importance of using the median measure is discussed on Jonathan Andreas' medianism blog.
If political-economy is to be of any use, it should not just try to understand the world but also try to improve it. Progress implies that something should be optimised. The GDP money-metric is a crude goal for life, better to maximise median disposable income, first by addressing the optimal distribution and second by provision of universal basic services (health, education, housing, and transport). By switching away from GDP to median disposable income we get closer to maximising freedom, and that matters.
I agree. The New Economics Foundation also has made valuable contributions in this area.
This is a case where we can simply do better. Let's get on and do it.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
In the football example, the average (the mean) is close to £100k, rather than £500k as stated on Brave New Europe. And, doubling the star player salary increases the average (the mean) by a bit less than a factor of two.
This sounds pedantic, but it’s really important to get it right. If not, those who are ideologically opposed will correctly point out the error, and incorrectly set up an inference that the underlying argument is unsound. Supporting arguments need to be particularly strong when arguing against the status quo (this, in itself, is hardly a bad thing).
So far as I can tell the article was referring to the median, not the mean. Two different things you know. Apples and oranges.
m-ga is correct – I was a bit sloppy in the final editing here. Total weekly team salary bill is initially 2,001,000 for 11 players so average is 182k (not that close to half a million), median is 100. After pay rise, salary bill is 4,001,000 so average is 364k (double and closer to half a million), median is the same. Main points of the article still hold. Will correct.
PS. Star player salary has doubled again from 2 to 4 million this time. Must have scored a hat-trick.
Most people don’t care about GDP or could even define it. Those that can, know they can do better but will never face political pressure to do so.
Real change will come when proposals fit with the general populations’ understanding. Rather than redefining the implicit meanings of tax and spend (tax being seen as bad and spending as good in moderation), we need to alter what is taxed to focus primarily on what is bad. This includes the externalities that Caroline Lucas discusses above. This could even percolate down to the individual level such that frugal lifestyles are rewarded.
On the spending side, we need to focus on purpose. As Caroline Lucas argues, wellbeing is one measure, but there are many others as George Monbiot covers in his extraordinary new book.
We then need to directly challenge the idea that spending needs to be linked to taxation. Much of the ‘value’ implicit in the redefined tax and spend categories above (well-being, externalities) cannot be measured in simple monetary terms.
A central insight from MMT is that spending does not depend on taxation- it relies on the availability of real resources. In other words, the amount of good we can do via spending need not be linked to the amount of bad things that need to be taxed. To restate this in a publically accessible way: Taxes should be low and spending as high as reasonably possible.
I’m sure there would be lots of support for that.
I agree
But it is a massive 3ducatiin programme
I’d argue that alterations to what is taxed and a clear statement of principles for spending are easier to achieve because they work ‘with the grain’ of human experience.
By contrast, arguing for a technical redefinition of GDP fails every public appeal test and will therefore be easily blocked by those whose interests are threatened.
Redefining GDP would be pointless – we need a figure for GDP
What we don’t need is to use it for everything as if money measurement were the universal good
I’m not sure the direct link between giving people money and price inflation is true any or, or possibly won’t be true in the very near future. I take it Charles Adams is making a side swipe at UBI? But, if we can utilise comprehensive automation and A.I. to deliver a genuine sustainable abundance economy (within a monetary union) it breaks the scarcity model used for classical economics and uncouples monetary inflation from price inflation.
However, there are still evolutionary psychological factors that could still cause problems, with the ‘horde now in case of a famine’ response cutting in from our deep evolutionary past. Additionally I think a country/ monetary union would need to be self-sufficient with the basics of energy and food as a very minimum as it would probably have an initial impact on exchange rates were a significant UBI introduced rapidly. However, if all the basics could be locally sourced their wouldn’t be too much of a issue as “the pound in your pocket” etc”. So I’d propose the level of UBI replace GDP instead of Mean Disposable Income.
Charles appears 5o endorse it in the article….
I tend to favour universal basic services over UBI as if you lower an individuals fixed costs then you raise their disposable income, and also make the country more competitive internationally. If the focus is solely on UBI you have to keep in mind that if rents and other costs rise in tandem then raising UBI achieves nothing.
Julian Snape says:
December 2 2017 at 11:11 am
“I’m not sure the direct link between giving people money and price inflation is true ….. ” neither am I so I’m going to ignore this paragraph for the time being.
“However, there are still evolutionary psychological factors that could still cause problems, with the ‘horde now in case of a famine’ response…….” I suggest we are seeing this writ large in the hoarding of heaps of pension cash. A poor substitute for an assured, adequate income in old age.
Particularly given that so much of the private pension market is reliant on market prices that have a way of behaving like a roller coaster.
“……. Additionally I think a country/ monetary union would need to be self-sufficient with the basics of energy and food as a very minimum…”
Hmmm…. serious signs of insecurity here as well. We really haven’t made much progress have we? In international relations, I mean. We are still expecting to have to dig up, and plant potatoes in, the lawn at any moment are we?
You might be right. But it’s nonetheless a sad indictment of where we think we stand.
I really like that metric (median disposable income) it captures in one number so many of the concerns of the bulk of the population.
Are there figures available that show how this has developed over time?
Yes, but not today…..
The mean salary would indeed be £100K rather than £500K, and although that mean average would not be a helpful salary guide to prospective players, it would be a lot more useful than the median if you were thinking of buying up the club.
Debates such as this inside the wider mission to change perspective will enormously contribute to wholesale change. Often the system as we know it, and are conditioned towards, uses measurement changes to mask regressive aim or agenda. Here though, opposition to making us think about striving for common good and not just what business wants as the norm, will expose itself more.
Economics has more purpose than economics itself, and certainly more purpose than being a convenience for freemarketeers who have taken possession of it for themselves like so many areas. Once people command it as a tool for themselves it will become what it always should have been. Coming at the problem from many tangents is what will solve it, pressurising the status quo, and this promises to be a useful route.
I like that!
Here are a couple of podcasts which maybe of interest to you:
http://www.bbc.co.uk/programmes/b09fy6l6 – Thinking allowed on GDP
http://www.bbc.co.uk/programmes/p05psn7t – Martin Wolff on Donald Trump’s economic plan
Thanks
It would be nice if Lucas lived in the real world, talking about ” positive leisure time “. We cannot micromanage people, we can help and support people, but the nonsense of having some sort of magic wand is laughable.
Why is that laughable?
It’s an observation of the fact many people have almost no time to do anything they’d like to do because of the pressure of work and childcare etc
I’m really not sure what is wrong with noticing that’s an issue
Caroline Lucas is envisaging helping and supporting people, as you say, by giving them more choice for their free time The “magic wand” resides in your world not hers
Desp
If I may, I’d like to support your blog by recommending 2 books I have read about and become aware of the problems with orthodox GDP as a measure:
1. ‘The Growth Illusion’ by the late Irish economist and humanist Richard Douthwaite (1999, Green Books).
2. ‘Growth Domestic Problem’ by Lorenzo Fioramonti – (2013, Zed Books) a smaller volume but straight to the point.
I know the first: it,s excellent
There’s also:
‘Doughnut Economics – Seven Ways to Think Like a 21st-Century Economist’ by Kate Raworth (2017, Penguin Random House UK).
First section starts ‘from GDP to the Doughnut’, breaking away from growth addiction.
Please forgive me; I appreciate that you are an accountant; but please tell me this:
when you say: “Of course we challenge GDP as a measure. It’s arbitrary, ignores value, encourages excess and fails to take account of distribution amongst its many faults. But there are alternatives. Charles Adams of Durham University who usually blogs at Progressive Pulse but on this occasion was on Brave New Europe made a good case for one alternative measure, which is increasing median disposable income of households”, could you explain why we need a “measure”?
Please understand that I understand and would promote “measurement”; but in matters that are essentially “scientfic”. Values are not essentially scientific, and need not be used, even to value science. We can of course measure everything that has utility, but life should be beyond utility (unless you are a utilitarian, but I consider utilitarianism to have its philosophical limitations, and the most literal quantitative utilitarian – Jeremy Bentham – a philosophical dead-end).
There are parts of my thinking that concur with your view
But we do need measures – to tell if we’re getting things right. And for ensure there is a tax base as well
I think to suggest measurement is not needed is way to utopian for me
I do not believe in utopia. I do not believe “measurement” is a usable substitute either.
John – your point about realising the difference between what can and should be measured was also central to the my previous point in this discussion.
I just don’t agree with Richard when, referring to GDP, he says “we do need measures to tell if we’re getting things right”.
The intellectual addiction to GDP, even amongst its opponents is longstanding and widespread. Even Kuznets, the designer of the current postwar standard, objected to its use as a proxy measure of welfare. Those who muse about its replacement haven’t really challenged the underlying philosophy. If you measure the wrong thing you will inevitably make the wrong decision. How can it be possible to tell if we are ‘getting things right’ using the wrong measure?
It is hard to conceive how deeply embedded financial measurement and related proxies have become. The idea that everything has to be quantifiable is at the core of most Neoliberal excesses. When teachers spend more time focusing on exam results than teaching, when Universities pressurise staff and game league tables, when hospitals focus on waiting lists instead of need. These are not side-effects of good quality systems, they are symptoms of failing systems. Metrics currently rule. This must be challenged – metrics have a place; but they need to be subservient to wellbeing not vice-versa.
Similarly, taxation and spending need to be related to wellbeing, not to each other.
I will muse on what you say
I agree in very many ways
Lots of things do not need measurement to know that they are of value
But some do
Let’s keep some balance here
It always helps
Thank you both for the comments. The problem is perhaps one of “conflation”; the tendency to use the measurement as the only test; ironically the purpose of the measurement implies greater thought and accuracy, but in fact the measurement tends to run away with the objective. It is not the accuracy of the measurement that is important, or the thought into producing it, or reading it as a proof that something works. What matters is the outcomes, whether or not viewed through the prism of the “measurement”. I think I am thinking along similar lines to Trevor Dale.
I might here suggest considering this in the context of Hume’s philosophical problem of “naturalism”, but I do not want to reduce this to an academic dispute; nevertheless, when Hume observed that he noticed among moralists the tendency to drift from the claim that something “is” the case, to claiming that something “ought to be” the case (the conflation of “ought” with “is”).
It is precisely this use of “measurement” to focus attention on the intellectual effort of measurement that happens too often; the effort of thought is expended on the measurement, while nobody notices that the advocates of measurement have become the judges of what we should also value; and the measurement acquires a distinctive moral and political authority, which it acquires with the complete absence of thought.
I think you just moved to common ground
I can agree with that
I was in a board meeting on Friday meeting urging colleagues to consider waht can’t be measured
“metrics have a place; but they need to be subservient to wellbeing not vice-versa.”
I agree. Another way to put it, might be, if we must have a metric then at least we should make more effort to ensure it is better aligned to ‘median’ wellbeing.
Agreement is breaking out here…
Trevor Dale says:
December 2 2017 at 10:02 pm
“John — ………realising the difference between what can and should be measured was also central to the my previous point in this discussion.”
Agreed. And as you go on to say “If you measure the wrong thing you will inevitably make the wrong decision.”
I just don’t agree with Richard when, referring to GDP, he says “we do need measures to tell if we’re getting things right”.
Agree and disagree with this. Surely you DO need measures to tell if you are getting things right. But GDP is obviously a flawed measure of useful economic activity. How does it benefit a society to spend a fortune on ‘security’ in its various forms – from door locks to Nuclear armed submarines when the solution (real solution, though idealistic in terms of human nature, I admit) is to remove the threat by improving human relations.
My heart sinks every time I hear a politician promise more spending putting more police on the streets. I would prefer to live in a society where there was no requirement to have police at all. Police, like mental health services (mental illness services) are something we should be aspiring to need to spend less on. We need to address problems and we constantly address symptoms.
How the divil you produce better figures to measure real successful societal values I don’t know. ‘Happiness’ and it’s synonymous emotions are not easy beans to count.
Fewer police and a massive reduction in the consumption of antidepressant medication would be a good start. Both very baaad for GDP.
@Andy Crow. Agree that GDP is not a metric to measure success. However, there are many alternative measures. Most can be used to advise policy makers such as survey data on citizen satisfaction in X,Y or Z areas. Note: that metric advice is very different from metric targets, as managers need to be trusted to use their best judgement. From time to time, management performance will need to be reviewed, with the understanding that outright incompetence and fraud will have consequences. On most occasions, however, managers try to do their best and if things are not working, they should be helped and not punished.
By contrast, some metrics really do have scientific meaning and must be measured; examples include CO2 emissions, biodiversity indexes, soil health, river health and Mortality indexes. A great debate could be started on the different types of metrics and their value. Even with these clear examples, it may not be possible to ascribe agency to particular individuals as there will be a shared responsibility.
A key context for deciding whether metrics are appropriate for any activity are where they fall on two axes: simplicity versus complexity and stable versus dynamic. Simple-stable systems can be effectively measured (e.g. mass production). Complex Dynamic systems cannot and require greater judgement (e.g. crisis management, real-time assessment; see: Ben Ramalingam’s work). In my view most egregious examples of Neoliberal metric misapplication fall in the Complex-Dynamic category and money is the most commonly misused metric.
You are welcoepme to contribute to Progressive Pulse on this
In fact, please do
Trevor Dale says:..
Can’t argue with any of that Trevor.
Interesting point you make about the malign influence of metrics as targets. I hadn’t quite nailed that in so many words, but I understand the cogency of that. It produces some perverse effects.
Are you familiar with Kate Raworth and her book on doughnut economics – for example https://www.theguardian.com/commentisfree/2017/apr/12/doughnut-growth-economics-book-economic-model
She gave an interesting lecture at the LSE recently. A podcast is available. http://www.lse.ac.uk/Events/2017/11/20171123t1830vSZT/doughnut-economics
Excellent book
Thankyou, Andrew for the Kate Raworth links.
Excellent. Further disseminated already. Good stuff with lots to think about.
I’m rather hoping it will stop the local group of debaters continuing to argue about the precise colour of the stripes on the deckchairs on the Titanic. I think there are more interesting things to discuss. Raworth raises quite a few.
Aren’t services included in GDP? I don’t understand this fixation on limiting growth. You don’t have to use up the earth’s resources to produce services. That’s one of the reasons why I don’t support UBI. There is no end to the demand for services provided by human beings.
They are
This is my standard rebuttal to those who say we cannot grow endlessly
Actually most of what we need is services and most meet need, not wants, so we should be growing in that way
“Actually most of what we need is services and most meet need, not wants, so we should be growing in that way”
I’m having to think about that.
I don’t see food and shelter as services. Although they could I suppose be organised as such, but that’s pushing nanny statism somewhere many wouldn’t be keen to go. They are in a sense services parents provide their children. This sort of issue is at the very heart of political party disagreement.
Needs and wants are not simply delineated. In the realms of debt counselling and repayment terms, for example, ‘we’ seem to think that television is an essential service these days. (It isn’t.) But once it would have been universally seen as a luxury now it is regarded as essential. A lot of other things similarly change their status as we (on average) increase our affluence. Is internet access essential? Increasingly so.
We don’t have common agreed standards on ‘needs’. There has been a wide consensus on health care provision, but recently we are getting a lot of disagreement on elderly care and the dividing line between what is healthcare and what is social care.
This really is the realm where politics and economics meet. We are, as a society, ill-equipped to consider these issues intelligently and produce rational and beneficial outcomes.
Parliament serves us badly; education serves us badly; mainstream media serves us badly.
When I said most of what we need is services I was referring to what we need and have not got
I accept all the issues surrounding food banks, of course, but for many what 8s needed is care, education, help and so on
Of course there is plenty of good work – human services – that could be done, and paid for by the government as the employer of last resort. But to oppose UBI because we like to support work is missing the point. UBI is not a replacement for work, but a replacement for a welfare system that is not fit for purpose.
I disagree. The problem with welfare payments are that they are means-tested. The more efficient way is to provide benefits as they are needed according to condition and then tax them. I would like it explained to me which welfare payments will be eliminated by UBI. Not the state pension, not disability benefits, not child allowance. Just job seekers, so far as I can see.
Carol Wilcox says:
December 4 2017 at 10:23 pm
” The problem with welfare payments are that they are means-tested.”
Only one problem with welfare stems from their being means tested, though I agree it is a ‘biggy’.
Another very big problem is that they have to be claimed by the recipient from a system which does not willingly explain the terms of entitlement. In fact is deliberately opaque and secretive about those terms.
In effect this produces, by default, a system of welfare payments which is discretionary. In extremis it can be reliant on the temper and temperament of an individual on the front desk. ‘ ‘Sanctions’ can (I stress ‘can’) be applied quite arbitrarily and appeal is lengthy complicated and difficult. Particularly since withdrawal of benefit is with immediate effect.
“The more efficient way is to provide benefits as they are needed according to condition and then tax them.”
Precisely how, in practice, this would differ from ‘means testing’ is mysterious to me.
“I would like it explained to me which welfare payments will be eliminated by UBI. Not the state pension, not disability benefits, not child allowance. Just job seekers, so far as I can see.”
Yes. Emphatically yes. The State pension WOULD be replaced by UBI.
Yes. Disability benefits WOULD in large measure be replaced by UBI. There would need to be additional provision in this area because disability covers a multitude of issues and a wide variety of need and possible response. But and this is important: The basic income would be there while the discussions of additional needs were being adjudicated. Currently there is the fear that if you apply for more everything can be put on hold until a total settlement is agreed. (WTF is Universal Credit only payable after a hiatus of nil income for FIVE weeks. many working families couldn’t survive on no income for this period This is a nonsense. In fact it’s obscene)
Child allowance. Why not? You have children you get child allowance. Fill in the from at the time of registering the birth.
UBI is not going to work and is not intended to work as a replacement to benefit payments. The key word is UNIVERSAL. Everybody gets it.
The positive benefits of this are inestimable. It will change our entire relationship to work. It will actually undermine the nonsense of forcing people to do shit jobs for shit money while we reward the people with the plum jobs with obscene bundles of cash.
How many people would want to be a refuse operative? Not so many but there’s a price that would make it worthwhile. Who would rather be England Football manager? Thousands, and some would make a better job than candidates we’ve payed £millions to with no visible success.
UBI is the way to go. Get your head round it, please Carol. The last thing we need is for people of enlightened and progressive views not to ‘get’ the importance of this. There will be plentiful opposition from the dinosaurs.
Read Rutger Bregman again. Urgently. ‘Utopia for Realists’
UBI really does make sense. But it has to be Universal. Everybody gets it. At present the principle benefit recipients are those who operate the system at the DWP. They think they are working for a living and in reality much of what they do is just societal on-cost. Much of that money could be better spent to wider benefit of society. It could save a bloody fortune in antidepressant medication alone.
One of the measures should be happiness! No idea how this could be done though!
NEF have tried it
There are measures
One is by looking at an indication of the opposite – which is seen to be mental illness
A contentometer as a paper exercise even has a purpose. Thinking about a plus or minus scaling system, subsistence income gets a zero at best. Twenty quid saving a year on your council tax in a polluted conurbation causing your grandad to die fifteen years early is not happiness. If applied to every decision, policies for all people and not just the richest would immediately become the norm.
Even giving just a quick thought to this highlights the serious issue that aligned to contriving people poorer to suit a few is the raw intention of contriving people to be unhappy so that a few are both richer and happier.
Deaths from austerity, mental illness, for example are result of extreme unhappiness, which connects to extreme inequality.
This article has highlighted there is a serious case to apply a measurement system to policy decisions in addition to a new GDP measure that checks the happiness concept is working.
No minus-points policy acceptable and zeros to be rare and only if approved by panel with full explanation.
‘Happiness Growth’ would be a thing and an election issue and inequality impossible to strive for let alone exist.
I’m being a bit open-eyed here, but the point is there is serious potential by the door opened in the article.
GDP as a measure is bad. Imagine you take over a country of nice caring communities. They share child care, cooking , washing up, simple diy and even food gathering or production. You could boost GDP overnight by making everybody pay each other for services received. It would be a zero-sum game on things like welfare and community ‘wealth’. It would not improve productivity directly, though it would allow a new trade – Accountancy. We should measure value-added not GDP.
@Carol and @Andy
UBI is an idea not a rigid franchise model. ‘My’ idea of UBI includes a basic living allowance to replace everything but the extremes of needs, e.g. adapting a house or car for a disability. Others may have better ideas.
The operation of it is indeed more efficient than benefits (though think of the unemployment caused !). My vision for it represents a living wage for 1 adult and their share of offspring* and that is the starting point for taxation (or just below the starting point).
*Offspring are a want not a need. Discuss.
Good thread this.