Measuring progress not just money

by Crispin Hull on March 16, 2018

HERE is a hypothetical example about a small jurisdiction – Tasmania – which can be used to illustrate a point. Just say Tasmania’s GDP grows by 1.5 per cent one year to $30 billion and the Tasmanian Government says, “Wow, we are obviously getting it right.”

This is what typically happens on a national scale. GDP is up. We have growth. We are doing well.

But just say the 1.5 per cent “growth” of GDP – $450 million – went to just three people. Not only that, but just say these three people did not just get all the “growth in GDP” but a bit more. Let’s say they got $900 million between them.

That would mean everyone else went slightly backwards, even though GDP went up.

Then we take account of the 2 per cent growth in population in Tasmania that year, so the “growth” in GDP was really a retraction per head of 0.5 per cent.

Further, we take account of inflation, so the real retraction for nearly everyone was even worse.

In fact, this is not such an extreme example. Throughout Australia our political leaders take GDP as the magic measure and pat ourselves on the back that we have had a quarter century of increases.

But we do not account for the fact that all and more of that growth is swallowed up in providing for an increased population fuelled by high immigration and that a lot of that growth is going into the pockets of a very few people so that despite the overall “growth” the vast majority are staying still or going backwards.

Meanwhile, any damage to the natural environment, from which we get nearly all our economic value, is not even measured, though it makes people worse off. Neither is any social cost of people alienated by growing inequality or the sense that a rich elite runs the show so they are not getting a fair deal.

So the official statistics say things are getting better when wider measurements would tell us that things are at best marking time.

Statistics, for most people, are rather boring, but, properly used, can be the measure of whether humanity is getting better or worse.

Mathematics, on the other hand is different. If every human being died tomorrow, E would still equal MC squared and the square of the hypotenuse of a right-angled triangle would still equal the square of the other two sides.

But statistics would die with the humans. The statistics measure what humans do and how it affects the world’s environment. If every human died tomorrow, the statistics would change radically.

As it happens, it is an interesting time on the statistical and measurement level. Labor MP Andrew Leigh has just published, “Randomistas”, an incisive book on the use of statistically sound randomised trials to determine whether a public policy (or anything else for that matter) will work or not.

Nicholas Gruen of Lateral Economics will update his well-being index for Fairfax Media.

And New Zealand Prime Minister Jacinta Ahern said she would go beyond GDP and other purely economic measurements to look at how New Zealand society is progressing.

Relying on purely economic measurements allows governments to almost ignore their main purpose – improving people’s lives. If something is not measured it can be ignored.

As it happens, early this decade the Australian Bureau of Statistics began what Ahern wants to do. It set out to measure Australia’s progress. It did a wide consultation on what mattered to Australians. Economics was just one of four main areas of concern. The others were society, environment and governance.

Since then, we may have progressed economically, but regress has been the mark of the other areas.

Pertinently, regress in governance included the Coalition Government squeezing the ABS so much financially (and probably otherwise) that it was forced to abandon the Measuring Australia’s Progress program altogether.

Gruen’s well-being index may do as good or even better job, but it will not carry the same level of media attention or public credibility as an ABS series, which governments cannot ignore.

So the progress measure tells us how we have done up to now. But what about the question of what should we don now. This is where Leigh’s book comes it. He looks at the way randomised trials enabled humans to move from a position where belief in supernatural causes of things was mainstream to a position where the scientific method is used to find out how things really work. Part of that method is the use of randomised trials in which, typically a new medical treatment, is given to a randomly selected half of a group and not given to the other half who get a placebo which looks exactly like the real treatment, and seeing what happens.

Incidentally, there is no unfairness here because no one knows if the treatment is going to be any good and indeed might be harmful, as with thalidomide.

Leigh would like to see more randomised trials in the social sphere, especially if they could replace policy by gut feeling. A good example is the popular idea of work for the dole. Surely it would be sensible to test it by seeing whether it helps people into real work or hinders them because the scheme hinders their efforts to prepare and apply for jobs.

Other examples include new teaching methods and policies surrounding Indigenous intervention.

It would have been good if Tasmania had gone ahead with a poker-machine ban in pubs and clubs. Measured against the rest of Australia it would have been as good as a randomised trial to see whether widespread poker machine availability increased suicide, domestic violence, bankruptcy and poverty.

State-by-state trials certainly sped up the introduction of compulsory seatbelts after the dramatic cut in Victoria’s road toll made the freedom not to wear a seat belt untenable.

Alas, these days we are seeing more donor-based policy than policy developed through evidence or randomised trials – as we saw in Tasmania.

It is corroding our faith in democracy and government. We know this because, even if the ABS is not measuring it, the 40-year long ANU Election Study is.

If politicians want that faith restored they should rely more on science, measurement and evidence than money or populist gut feeling when deciding what to do.
This article first appeared in The Canberra Times and other Fairfax Media on 10 March 2018.

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