When there are so many urgent global problems, it might seem pointless to worry about statistics. Yet without measurement, problems cannot be managed and — to borrow the well-known saying — they can’t even be properly diagnosed and understood. While the state of the world obviously impacts what can be measured, statistics remain the best tool for understanding the nature and scope of the problems we face.
The feedback loop between statistics and ideas about how the world works is evident throughout the history of economic measurement. We can see this relationship at work in the System of National Accounts (SNA) — and its main element, GDP — that has guided economic policy decisions since the mid-twentieth century. SNA was devised alongside J. M. Keynes’s macroeconomic theory for the purposes of short-term demand management, with a focus on the formal, monetary economy and markets. Keynes’s goal, set out in his masterpiece The General Theory of Employment, Income and Money, was to ensure that governments could avoid the kind of policy errors that had led to the catastrophe of the Great Depression and its political consequences.
Avoiding extreme business cycle movements in the short-term is important, as the recent experiences of the 2008 financial crisis and the 2020-21 pandemic demonstrate. But today’s pressing economic problems are long-term and concern the structure of economic activity. The intuition that focusing solely on GDP has led us astray helps explain the “Beyond GDP” campaign for alternative metrics, along with the “degrowth” movement.
The error of leaving natural resources usage out of the system of economic accounting is evident in our multiple environmental crises: climate, biodiversity and air, soil and water quality.
Humankind has been using nature for free and at an accelerating pace since the 1950s — the bill is coming due.
Likewise, the social and political resources that make economic activity possible are not captured by GDP. By and large these are collective resources, such as the quality of institutions, social infrastructures, household caring activities and human knowledge.
The importance of such unmeasured resources to economic activity is now widely acknowledged. However, they are not generally measured, or even well-defined in the academic literature. This is starting to change, with many efforts underway to improve the available statistical frameworks. Unfortunately, the official United Nations definitions in the SNA, due to be updated in March 2025, will include only small reforms. The revisions keep markets at the core of “the economy” and do no not acknowledge the vital role of everything that happens outside the market.
As these formal updates happen only every 10-20 years, others must do the crucial work of developing alternative statistical frameworks. There are many excellent initiatives to collect data and compile it in meaningful ways, from the SDGs to local dashboards. The challenge now is to root this work in a common understanding of what needs to be “seen” statistically. We can only measure what we have identified as worth measuring.
My proposal is that sustainability, broadly understood to include social and human as well as environmental dimensions, can provide a foundation for metrics that speak to specific problems or contexts.
By this I mean developing a balance sheet for the economy, an accounting for the lasting resources or assets that will enable people now and in the future to lead good lives.
In economics this framework is known as comprehensive wealth. It includes conventional assets such as infrastructure or machinery but also natural, human and social capital. It can incorporate today’s SNA as a partial picture and brings on board the statistical community. It can also provide the measures making up other frameworks that speak directly to today’s challenges, such as SAGE or the Better Life Index. It is consistent with conventional economic approaches and with alternatives such as the capabilities approach of Amartya Sen, reflected in the Human Development Index.
This must be a joint endeavor involving many stakeholders in collecting missing data — for example about local ecosystems or the state of essential infrastructure. It can happen on a small scale or a large scale, with different pieces of the puzzle slotting into the bigger picture. Above all, the very act of exploring and contributing to painting a richer, truer picture of our world may itself contribute to the shared sense of purpose so badly needed now.
Diane Coyle is Bennett professor of Public Policy at the University of Cambridge. Her next book, The Measure of Progress: Counting What Really Matters, will be published by Princeton University Press in Spring 2025.