DP blog #3. What should National Accounts Encompass?

Abstract: This is my third blog. This blog is a continuation from my previous blog on the failures of GDP. In this blog, I identify elements of society that must be evaluated in order to assess the well being of a society. The ascendancy of GDP has been criticized in recent years; the rebuke of GDP is the failure to encompass the whole society. I will follow up in my third blog (on this thesis) with a critical analysis of some national indicators and their positive and negative attributes.
Motivation: “The time is ripe for our measurement system to shift emphasis from measuring economic production to measuring people’s well-being.”
—Stiglitz, Sen, and Fitoussi, 2009

Thesis: As stated in the article: Sustainable Development Indicators: The Tyranny of Methodology Revisited , it is hard work to condense the complexity of society into single values that can be more easily digested and acted upon. However, as the world’s population is exponentially growing and the environment in which we live is deteriorating it is imperative that we find new ways of reporting on national accounts. We must work towards full body indicators to serve as a platform in which action can then be taken.

When I was in third grade my teacher assigned the class to go home and write a paper with the title: What I want to be when I grow up? I went home and took out my notebook and wrote: happy. The next day at school, the teacher said: I didn’t understand the assignment and I told her: she didn’t understand life. Domains of ones life such as health, how we spend our time, our standard of living, education, attitudes and beliefs, political participation, our rights, our income and wealth, our shelter, the environment in which we live all need to be accounted for when access our well being and the well being of a nation. The ultimate goal of national indicators should be to access the overall well-being of the nation’s citizens. As I established before GDP fails to encompass the full picture of a countries well being. We need to adopt a “eudaimonic,” approach (derived from psychology) that infers that providing a rich understanding of human motivations and needs, how there are met by our living conditions, and how they contribute to our overall subjective experience in terms of satisfaction of life. This is different from the hedonic approach, which is, more concerned with pleasure and enjoyment. (Eurostat Feasibility study for Well-being Indicators, pg.4) There needs to be an indicator that gives a comprehensive assessment of the entire state of society. Indicators are used to improve decision-making and implement policy that will direct the nation to a greater state of well being. So therefore, we must access what accounts for the well being of a society and its citizens.
GDP fails because it has one focus and ignores several key domains that create the well being of a society and an individual. The Stiglitz Commision led by Joesph Stiglitz, Amartya Sen and Jean Paul Fitoussi have influenced me greatly in the need to move away from measuring economic production to measuring people’s well being. Various indicators of different latitudinal and functional scales need to come together in order to accurately report on the state of a nation. Performance indicators such as GDP have long been embedded in the government’s procedures, this strong link has led to programmatic and financial planning budgets that has consequently lost sight on the individual’s subjective well being as well as most notably reported on failure to access the environment and sustainability of a nation. These two ideas are separated from the present and the future of well being. The Stiglitz Commision’s focus on subjective outcome indicators has been criticized for the omission of eudaimonic approaches to subjective well being, however it is still is eons ahead of the GDP as a national indicator.
Stiglitz Commision’s recommendation is that quality of life depends on people’s objective conditions and capabilities. Policy makers should be concerned with the inherent value of citizens and assertive in alleviating the failures and shortcomings of a society that directly affect its citizens. Action 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,”( Eurostat Feasibility study for Well-Being Indicators, pg. 7) Developing an indicator that reports on all aspects of society will enable policy makers to follow up and act upon drivers that potentially enhance the well being of their society.
Dr. Simon Bell goes so far as to compare the GDP as a tyrannic tool “Tyranny defies both law and justice in its impact upon its subject. The key factor here is the idea that methods ….. are often not justified by context (without adaptation). They are imposed in an arbitrary fashion without regard to what would be just or lawful. They are exercised with immense power over a population who have little capacity to either reject or modify them.”(pg.2) He believes that the GDP is a western tool that focuses on one domain of life and in this new globalized world the GDP fails to be just. The State of Society, identifies the main problems with indicators is how they are “ reported and used, who are the users, and how contingencies and institutions affect these indicator systems.” If a full-bodied indicator is developed it will be hard for policy makers to ignore their countries shortcomings.
The State of society has identified 14 categories synthesized from 79 indicators that need to be assessed and woven together as one working model that can measure the well being of the country and the citizens. I have excluded National Stability and sustainability as I have put them into personal well-being and natural environment. I believe that all categories’ need to be assessed to measure the state of a society. I have briefly identified the categories’ and quickly assessed how I feel they fall short. They are as follows:

• Poverty: percentage of people living at and under the poverty level. Demands from the government, welfare.
• Health: traditionally life expectancy, maternal and infant mortality, death rate, and morbidity. Should be extended to nutrition and availability and cost of health services. Both Mental and physical health. Only physical is reported on.
• Education: usually measures literacy, school enrollment, and drop out and completion rates. Needs to be extended to a full range of academia and its availability and cost.
• Employment: unemployment and employment rates need to be expanded to account for the unpaid work force.
• Income and Wealth: comparative income. It needs to factor in lifetime earning disparities due to women dropping out of the labor force to care for children or to the elderly, and indicators of income disparities among various populations in society are generally missing.
• Shelter: main indicators fall short of homeownership rate and rental cost. Standard of shelter not reported on, definition of shelter?
• Natural Environment: hugely inaccurately accounted. Lack of measurement tools to adequately measure natural resources. Needs to be a measure of capacity and readiness to respond to environmental disasters. Ecological Economics. Value of a tree. I very much align myself with Ecological Economist using National Matrix including Environmental Accounts (NAMEA) which links economic indicators such as GDP, balance of payments and the environment. (Kepa’s class)
• Political participation: rate and range of political participation needs to be reported on. Reports that focus on woman to men shares of parliament is of great interest and widely ignored as irrelevant.
• Civil Society: Indicators of civility or intergroup relations. Church and Worship. Active citizens. Community involvement.
• Economic Participation: Assess the ability of all members of society to be part of all aspects of the economy.
• Human Rights: basic rights and freedoms of individuals: freedom of press, speech, and choice. I believe human rights is hugely ignored with an estimated 30 million modern day slaves worldwide believed to generate 32 billion US dollars annually, where is this accounted for? Countries should put these alarming statistics into their national accounts so that they may work towards alleviating that tragedy of modern day slavery that falls on the shoulders of mostly woman and children. If in the USA, which apparently is seen as the most productive country adorning a high GDP has an estimated 14,500 to 17,500 human beings trafficked into the US annually then clearly the country is not doing as well as the GDP states.
• Family and household well-being: building blocks of society. The demise of the nuclear family and the consequences.
• Personal Well being: Age, gender, ethnicity and disability all affect well-being and so indicators must report on the “happiness,” of a citizen in order to implement policy to alleviate misery.

Traditional GDP has too many shortcomings. There has been much attention, research and reporting looking towards an evolved national indicator that accurately reports on a nation. The Federal Reserve Board has documented gains of America’s wealthiest one percent of more than $2 trillion more than everyone in America’s bottom 90% percent combined. The GDP reports on that one percent. A more well rounded and in depth indicator can establish goals and see where a nation fails to meet these goals. If in the United States that contains less than 5 percent of the world’s population and spends 42% of the world’s health care expenses, and yet Americans are less healthy than the residents of nearly every developed country and some of the poor ones then there is something seriously wrong. The GDP tells us nothing about the state of society and the well being of its citizens. We need to push for an equitable indicator. The GDP turpitude ignores the majority of the population. If we work towards a well-encompassed indicator it will lead to results in management, estimation and justification of resource requirements and reallocation, and development. It will exemplify areas in the society that are lacking and policy makers will be better equipped to initiate policy that works for the whole of society and not just a few elite individuals.

Work Cited
All previous references were of course used, here are some additional sources

Bell, Dr. Simon. Sustainable Development Indicators: The Tyranny of
Methodology Revisited. Consilience: The Journal of Sustainable
Development. Vol. 6, Iss. 1 (2011), Pp. 222–239

Elizabeth T. Boris and Erwin de Leon. 2010.The State of Society and
Measuring Economic Success and Human Well-Being.The Urban
Institute.

Stiglitz, Joesph E., Amartya Sen, and Jean-Paul Fitoussi. 2009. Report by
the Commission on measurement of Economic performance and Social
Progress. Paris: Commission on Measurement of Economic Performance and Social Progress.

Websites:

Society at a Glance 2009—OECD Social Indicators
http://www.oecd.org/document/24/0,3343,en_2649_34637_2671576_1_1_1_1,00. html#data
Measure of Domestic progress: http://www.neweconmics.org/gen/well-being_mdp.aspx.
Organisation for Economic Co-operation and Development Family Database

http://www.oecd.org/document/4/0,3343,en_2649_34819_37836996_1_1_1_1,00.html

CNN.com The Freedom Project. The facts. 2011.
EuroStat Feasibility Study for Well-Being Indicators.pdf. epp.eurostat.ec.europa.eu/…/Feasibility_study_well-being_Indicators.
GDP and beyond Achievements. –Eurostat. epp.eurostat.ec.europa.eu
Human Development Report. 2011. Sustainability and Equity: A Better Future for All. United Nations Development Programme 1 UN Plaza, New York, NY 10017, USA

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