Across the world groups are working to develop new ways to measure economic performance. What are the dials on these new dashboards, and what do they say?
How should we judge economic performance? When seen through the lens of GDP growth the global economy has performed remarkably well over the past half century. Our analysis of long-run data collated in the Maddison Project Database shows that for a group of 143 countries tracked between 1966 and 2016, almost 90% saw improvements in per capita GDP. The average growth across these countries was 220% of the starting income—Poland, for example, was $7,750 to $24,850 after controlling for inflation. Larger countries grew faster, so that growth weighted by population—the most important measure—was almost 450%. Across the world, the average citizen has come to earn much more.
Of course, two longstanding caveats concerning the inclusiveness of growth remain. The first is that growth does not include every country: of the 143 countries we analysed 17 have seen living standards, as measured by GDP per capita, fall over this period. These include some countries with large and growing populations, the most important of which is the Democratic Republic of the Congo. Home to over 80m people the country shrank by an astonishing 60% over this period, with per capita income tumbling from $2,120 to $840. The second problem is inequality which is high and rising in important emerging markets like China and India; at the same time some of the best performing high-growth economies of the past 50 years, including Chile and Mexico, have become the most unequal. The old concerns about growth—that it does not include every country, or every person in growing countries—are ever present.
New problems, new measures
More recently new concerns have begun to bubble up. One worry is health, with measures of obesity, heart disease and diabetes highest in some of the world’s richest and fastest growing countries. Recent estimates for the US suggest that obesity is causing diabetes far earlier (between the ages of 35 and 39) and that the related diabetes epidemic costs the US economy almost $270 billion a year. (To put this number in perspective the entire GDP of Bangladesh, a country of over 160m people is $260 billion). There are also worries about measures of personal wellbeing and the ‘health’ of communities as measured by social capital. With these problems present in rich economies it is becoming clear that growth alone will not guarantee a country in which people flourish.
In response to these new problems new measures and indices are being put together that assess the performance of an economy. Taken together they add up to a hunt for a new economic dashboard. What types of things are being measured on this new set of dials and gauges, and what do they show?
The Organisation for Economic Cooperation and Development (OECD) in 2013 launched its Better Life Index, which allows users to compare well-being across the 35 members of the rich-world think tank grouping. The OECD’s site allows users to create their own rankings, picking from 11 topics the group argues is vital for quality of life. Most interesting is the way that economic and non-economic measures are correlated with feelings of life satisfaction. Unsurprisingly, countries reporting higher income tend to have higher life satisfaction on average. But life satisfaction is also strongly correlated with other measures including the quality of support network, and the availability of clean water.
The OECD has only been following the data for a few years but has already picked up some worrying trends. The share of people feeling supported by a network of friends or family has been falling. Trust in government is worryingly low, with OECD data suggesting that over half the population believe that corruption is widespread in government.
An interesting shift is the fact that some of the important players are private companies. Gallup, the polling company, have begun to track well-being since 2008, collecting data on 155 countries and interviewing a huge 2.6m people by 2017 (the Gallup data is one of the inputs the OECD relies on). The index is based on five elements: sense of purpose, social relationships, financial security, community wellbeing and physical health. Finland, Norway and Denmark rank as the three happiest countries, with Tanzania, South Sudan and the Central African Republic the least happy. Combining the data with traditional economic data yields some surprising results, with India standing out. The country has become much better off in traditional economic terms, with GDP per capita rising a huge 74% in 10 years. Yet over the same period its happiness score as measured by Gallup has fallen by 22%, making it one of the five worst-performing countries.
New perspective and new policies
Some of the most interesting work goes beyond the use of surveys using cutting edge technology and statistical techniques to assess a country’s wellbeing. The World Well-Being Project (WWBP) is a multidisciplinary group based at the Positive Psychology Center of the University of Pennsylvania in the Unites States. While the topics—health and wellbeing—are similar, the approach is very different. Rather than large-scale telephone and postal surveys as the OECD and groups like Gallup do, the WWBP’s data scientists collect data from social media to assess the language that people use, and what it might say about their well-being.
Some of the results from the cutting edge of data gathering are striking. One recent piece of research, for example, showed how analysing Twitter posts—the time of the post, the type of words used—can help identify users with ADHD. Another established a link between Twitter usage and heart disease. Other members of the research group are tracking social media posts to understand and predict feelings of empathy and distress in reaction to news events. This is early stage research, but since data collection and analysis can be automated and cover huge batches of posts the data collection is quicker, cheaper and can cover far large groups of people than surveys can.
New data sources are starting to influence policymaking. In 2017 the Swedish government introduced a new system of 15 measures to track economic, environmental and social dimensions of quality of life. They include environmental metrics like greenhouse gas emissions, measures of educational attainment as well as personal and social wellbeing. Many of these measures are the type that the OECD collected, the difference being that it Sweden they now feed in formally to the government decision making and influence policy. In April 2018 the Swedish government adopted a new bill that will reform public health with the goal of reducing avoidable health inequalities within a generation.
Where countries will end up is unclear. The fact that all is up for grabs makes this an exciting time to be debating how to measure economic and social wellbeing. A sensible prediction is that economies of the future will be judged on three levels. The first would be traditional measures of the whole economy, like GDP and employment rates (this is where countries in sub-Saharan Africa are failing). The second will be measures of the distribution of pay, jobs and growth across citizens—an angle on how equitable and fair a country is (this is where large emerging markets like Chile and Mexico are failing). The top layer will be new measures like health, happiness, and wellbeing. The challenge is that this top layer may be both the one the public care most about and the hardest to measure. This underpins the need for global perspectives, so that countries can learn from one another’s successes and failures, as the pieces in this journal attempt to set out.