Transcript DSS item 2.1, 11

Inna Šteinbuka
Director, Social and Information Society Statistics
Eurostat
Summer Course, St Sebastian, 5
July 2010
Limits of GDP as Indicator of Economic Growth
and Social progress
Communication on GDP and beyond:
Measuring progress in a changing
world
Recommendation of Stiglitz-SenFidoussi commission
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Outlines
 GDP: pros and cons
 EC communication to the Council and the EP: GDP and
beyond. Measuring progress in a changing world – What it is
about?
 Recommendations of “The Commission on the measurement
of Economic Performance and Social progress”
 The new needs for statistics
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GDP: pros and cons
 Developed in the 1930s, GDP has become a standard
benchmark for fiscal, budgetary and monetary policies
 GDP = private consumption + investment + (export – import)
 The framework and rules of calculation are set in the
European System of Accounts which is broadly consistent
with the UN System of National Accounts
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GDP: pros and cons
“Too much and too long, we seem to have surrendered community
excellence and community values in the mere accumulation of
material things. Our GNP, if we should jugde America by that,
counts air pollution and cigarette advertising, and ambulances to
clear our highways of carnage. It counts special locks for our
doors… Yet the GNP does not allow for the health of our children,
the quality of their education, or the joy of their play… it measures
everything, in short, except that which makes life worthwhile. And it
tells us everything about America except why we are proud that we
are Americans.”
Robert F. Kennedy Address, University of Kanzaz, 1968
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EC communication to the Council and the
EP: GDP and beyond. Measuring progress
in a changing world – What it is about?
 The Communication identifies a number of actions to be
taken in the short and medium term on better measuring
progress
 The aim is to develop more inclusive indicators that
provide a more reliable knowledge base for better
policy-making
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Recommendations of “The Commission on
the measurement of Economic
Performance and Social progress”
In the lesson, the integrated conclusions of two
initiatives will be presented. The special focus will
be placed on the main messages and
recommendations of Stiglitz–Sen–Fidoussi
Commission.
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Stiglitz Commission: main messages and
recommendations
I. Towards better measures of economic
performance in a complex economy: before going
beyond GDP it is worth analysing where existing
measures of economic performance need improving.
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Stiglitz Commission: main messages and
recommendations
II. From Production to well-being
1. When evaluating material well-being, look at income and
consumption rather than production.
2. Emphasise the household perspective.
3. Consider income and consumption jointly with wealth.
4. Give more prominence to the distribution of income, consumption
and wealth.
5. Broaden income measures to non-market activities.
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Stiglitz Commission: main messages and
recommendations
III. Well-being is multi-dimensional:
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Material living standards (income, consumption and wealth);
Health;
Education;
Personal activities including work;
Political voice and governance;
Social connections and relationships;
Environmental (present and future conditions);
Insecurity, of an economic as well as a physical nature.
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Stiglitz Commission: main messages and
recommendations
IV.
Objective and subjective dimensions of well-being are both important
6. Quality of Life depend on people's objective conditions and
capabilities. Steps should be taken to improve measures of people's
health, education, personal activities and environmental conditions.
In particular, substantial effort should be devoted to developing and
implementing robust, reliable measures of social connections,
political voice, and insecurity that can be shown to predict life
satisfaction.
7. Quality-of-life indicators in all the dimensions covered should
assess inequalities in a comprehensive way.
8. Surveys should be designed to assess the links between various
quality-of-life domains for each person, and this information should
be used when designing policies in various fields.
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Stiglitz Commission: main messages and
recommendations
IV. Objective and subjective dimensions of well-being are both
important (continued)
 9. Statistical offices should provide the information needed to aggregate
across quality-of-life dimensions, allowing the construction of different
indexes,
 10. Measures of both objective and subjective well-being provide key
information about people's quality of life. Statistical offices should
incorporate questions to capture people's life evaluations, hedonic
experiences and priorities in their own survey.
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Stiglitz Commission: main messages and
recommendations
V. Use a pragmatic approach towards measuring sustainability
11. Sustainability assessment requires a well-identified dashboard of
indicators. The distinctive feature of the components of this
dashboard should be that they are interpretable as variations of
some underlying "stocks". A monetary index of sustainability has its
place in such a dashboard but, under the current state of art it should
remain essentially focussed on economic aspects of sustainability.
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Stiglitz Commission: main messages and
recommendations
VI. Physical indicators for environmental pressures
12. The environmental aspects of sustainability deserve a
separate follow-up based on a well-chosen set of physical
indicators. In particular there is a need for a clear indicator of
our proximity to dangerous levels of environmental damage
(such as associated with climate change or the depletion of
fishing stocks).
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National Accounts-related Recommendations
 Recommendation 1: When evaluating material well-being, look
at income and consumption rather than production
 Recommendation 2: Emphasise the household perspective
 Recommendation 3: Consider income and consumption jointly
with wealth
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National Accounts
And Social Statistics (1)
 Recommendation 4: Give more prominence to the distribution of
income, consumption and wealth
– Average measures of income, consumption and wealth should be
accompanied by indicators that reflect their distribution, e.g. median
and quintiles
– This will require stronger linkages between social statistics (household
surveys and administrative sources) and national accounts figures
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National Accounts
And Social Statistics (2)
 Recommendation 5: Broaden income measures to intrahousehold non-market activities
– Compile comprehensive and periodic accounts of household
activity as satellites to the core national accounts
– Time-use surveys are a major source for these data
– Comparisons of living standards over time and across countries
need to also take into account the amount of leisure that people
enjoy
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Social Indicators on Quality of Life (1)
 Recommendation 6:
– Steps should be taken to improve measures of people’ s health,
education, personal activities, and environmental conditions,
and
– Substantial effort should be devoted to developing and
implementing robust, reliable measures of social connections,
political voice, and insecurity that can be shown to predict life
satisfaction
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Social Indicators on Quality of Life (2)
 Recommendation 7: Quality of life indicators should assess
inequalities in a comprehensive way
 Recommendation 8: Surveys should be designed to assess the links
between various quality-of-life domains for each person, and this
information should be used when designing policies in various fields
 Recommendation 9: Statistical offices should provide information
needed to aggregate across quality-of-life dimensions, allowing the
construction of different indexes
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Social Indicators on Quality of Life (3)
 Recommendation 10: Measures of both objective and subjective
well-being provide key information about people’s quality of life.
Statistical offices should incorporate questions to capture people’s
life evaluations, hedonic experiences and priorities in their surveys
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Sustainable Development
and Environment
 Recommendations 11 & 12 are dealing with sustainable development
 This does not mean that they are focused on environment
 Sustainability requires the simultaneous preservation or increase in
several “stocks”: natural resources, human, and physical capital
 The measurement of human capital is an important challenge for
social statisticians. A task force has been launched by OECD.
Coordination is needed.
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Thank you for
attention
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