Tapu Misa: It's time to measure what really matters

Not everything that can be counted counts, said Albert Einstein, and not everything that counts can be counted.

Most of us would concede the truth of this, even as we keep trying to quantify the unquantifiable. "How do I love thee?" wrote Elizabeth Barrett Browning, "Let me count the ways."

I count, as I write this, the nearly 9000 people who love Radio New Zealand enough to join a Facebook group dedicated to saving the national broadcaster from a government they see as hell-bent on driving "the last true provider of public service broadcasting in New Zealand" into the ground.

If this is a measure of the value of public broadcasting, it may be the only one that some people understand.

How do we measure the things that really matter to us?

In a world ruled by quantifiable bottom-lines and commercial imperatives, it is becoming increasingly difficult to argue the intrinsic worth of some public goods and services, and the value of human activity in which no money changes hands.

It seems nothing counts these days, unless you can attach a monetary value to it. That's certainly the case with GDP (gross domestic product), that measure of economic growth that's come to dominate, even dictate government policy.

As Robert Kennedy observed back in 1968, GDP measures everything "except that which makes life worthwhile".

GDP has been around since the Great Depression, when economics professor Simon Kuznets was asked by the US Congress to find a way to provide an accurate picture of how the economy was doing and whether Roosevelt's New Deal policies were working.

Kuznets developed a forerunner of what we now know as GDP, but he cautioned that his model was limited because it took no account of the kind of unpaid activity that had a high social value - raising children, for example; nor of the human and environmental costs of some economic activity.

"The welfare of a nation can, therefore, scarcely be inferred from a measurement of national income," he said.

But governments haven't heeded his warning. In the decades since, GDP has become an end in itself, a voracious god that worshipful governments have been prepared to appease with little acknowledgement of the human or environmental cost.

It's not a big leap to imagine that as we've relied more and more on GDP as a proxy for societal health, the unpaid and uncounted activities that have nurtured families and communities have become devalued as a result. If we don't measure it, does it really matter?

"What we measure affects what we do," says the September 2009 report of The Commission on the Measurement of Economic Performance and Social Progress, a group of economists led by Nobel laureates Joseph Stiglitz and Amartya Sen.

"And if our measurements are flawed, decisions may be distorted. Choices between promoting GDP and protecting the environment may be false choices, once environmental degradation is appropriately included in our measurement of economic performance."

The commission has called for a change to how we measure economic performance and social progress. Its findings constitute a high-level challenge to the dominance of GDP as a reliable or even desirable barometer of a country's success and well-being.

Joseph Stiglitz argues that GDP is a flawed measure of economic performance, let alone social progress.

What is good for GDP isn't necessarily good for human beings or the environment. Putting children in creches and ageing parents in old people's homes is good for GDP growth, while the unpaid work of caring for children and elderly parents is uncounted and unvalued.

Mining in our national parks may get our GDP closer to Australia's, even as it damages the environment and New Zealand's image as a clean, green haven.

As the Financial Times noted in a 2009 article, not all production makes us better off.

"Some parts of GDP - weapons, prisons and 24-year-old derivatives analysts come to mind - rather reflect production it would be good to have less of. More opulence is worth little if it benefits only those at the top.

"Then there are values besides wealth. For instance, with each rise in GDP we forgo enjoying the same productivity growth as leisure time."

GDP takes no account of income distribution, so as inequality increases, "most people can be worse off even though average income is increasing".

As the Stiglitz commission's report noted, GDP not only fails to take account of the things that really matter, it failed spectacularly to warn the world of the iceberg that was the looming global economic crisis.

"Neither the private nor the public accounting systems were able to deliver an early warning, and did not alert us that the seemingly bright growth performance of the world economy between 2004 and 2007 may have been achieved at the expense of future growth.

"It is also clear that some of the performance was a 'mirage', profits that were based on prices that had been inflated by a bubble."

"This crisis has shown that the GDP numbers for the US were totally erroneous," Stiglitz told the Financial Times. "Even before the crash, most people were worse off than they were in 2000. It was a decade of decline for most Americans."

We need a more reliable compass, says the commission, and a global debate on "what we, as a society, care about and whether we are really striving for what is important".