The Complexity of Progress
Dave Pollard has an interesting post up at How to Save the World about moving beyond the Gross Domestic Product (GDP) to the Genuine Progress Indicator (GPI). Like they say in business, what gets measured gets done and with GDP, what gets measured is (roughly) the sum total of all goods and services purchased: without regard for whether what has been purchased is good for us or not and without regard for those transactions which weren't done for money.
The problem with attempting to replace GDP as the primary indicator of our success as a society is that the GDP is based on an economic framework in which everything is reduced to a common denominator of dollars in order to allow everything to be numerically combined. So far, to my knowledge, we have not developed any alternate 'currency' or set of units which we can use to measure ourselves and our society.
So if you want to construct a 'Progress Index' you need to arbitrarily choose what gets measured, arbitrarily choose how to measure it (in what units), and then arbitrarily choose how to translate it into a standard unit of measure.
For example, when the United Nations wants to measure progress based on more than just GDP, they add in life expectancy (measured in years), along with literacy rates (measured in percentage of adults) and school enrollments (measured in percentage of children). Then they calculate a life expectancy index (out of 100), an education index (out of 100) and a GDP index (out of 100). Then they take the average of those 3 scores to get a final number.
An alternate strategy, used by the GPI, is to accept the premise that money is the best unit to use for comparisons and to try and convert all the non-monetary factors (such as the value of housework, or biodiversity) into dollars. But what value do you place on being able to see a blue sky (instead of smog) during the summer, or on knowing that polar bears still exist outside of a zoo? Again we are reduced to making subjective judgments.
The pragmatist in me says, so what, we should just construct the best index we can and go with it - it's bound to be way better than the one-dimensional GDP figure.
But the theorist in me can't help wondering if there is some alternate currency we could use (based on energy and entropy perhaps), or at least some sensible framework for deciding what to include in the index and how important it is (besides dollars), or if maybe even the question we're asking (how do we measure our progress?) is ill-formed and we need to take a step back and re-evaluate why we are trying to progress or what the concept of progress even means.
I'm leaning more towards my pragmatic side on this one. At any rate, next time you hear that the GDP went up 3%, it's worth wondering how much of that increase was depletion of non-renewable resources, how much came at the expense of other sectors (like volunteer work) that we don't measure, how much was due to people working longer hours, how much was spent cleaning up pollution, how much depended on increased debt for consumers, how much was spent in fighting crime, depression, traffic jams, and on and on and on.
The problem with attempting to replace GDP as the primary indicator of our success as a society is that the GDP is based on an economic framework in which everything is reduced to a common denominator of dollars in order to allow everything to be numerically combined. So far, to my knowledge, we have not developed any alternate 'currency' or set of units which we can use to measure ourselves and our society.
So if you want to construct a 'Progress Index' you need to arbitrarily choose what gets measured, arbitrarily choose how to measure it (in what units), and then arbitrarily choose how to translate it into a standard unit of measure.
For example, when the United Nations wants to measure progress based on more than just GDP, they add in life expectancy (measured in years), along with literacy rates (measured in percentage of adults) and school enrollments (measured in percentage of children). Then they calculate a life expectancy index (out of 100), an education index (out of 100) and a GDP index (out of 100). Then they take the average of those 3 scores to get a final number.
An alternate strategy, used by the GPI, is to accept the premise that money is the best unit to use for comparisons and to try and convert all the non-monetary factors (such as the value of housework, or biodiversity) into dollars. But what value do you place on being able to see a blue sky (instead of smog) during the summer, or on knowing that polar bears still exist outside of a zoo? Again we are reduced to making subjective judgments.
The pragmatist in me says, so what, we should just construct the best index we can and go with it - it's bound to be way better than the one-dimensional GDP figure.
But the theorist in me can't help wondering if there is some alternate currency we could use (based on energy and entropy perhaps), or at least some sensible framework for deciding what to include in the index and how important it is (besides dollars), or if maybe even the question we're asking (how do we measure our progress?) is ill-formed and we need to take a step back and re-evaluate why we are trying to progress or what the concept of progress even means.
I'm leaning more towards my pragmatic side on this one. At any rate, next time you hear that the GDP went up 3%, it's worth wondering how much of that increase was depletion of non-renewable resources, how much came at the expense of other sectors (like volunteer work) that we don't measure, how much was due to people working longer hours, how much was spent cleaning up pollution, how much depended on increased debt for consumers, how much was spent in fighting crime, depression, traffic jams, and on and on and on.
Labels: gdp, gpi, maximization vs. optimization, progress
posted by Declan at
Monday, November 29, 2004
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