For all its flaws, I like GDP better than those new indexes. It's less judgemental. It (not so) simply counts the value of goods and services produced while leaving (most of) value judgements to buyers. Whereas HDIs and progress indexes give (undue imho) weight to things valued by the creators of the index: higher ed, access to information, discrimination, democracy.
Given we are talking about how to judge a "Successful" country. There is a value judgement already at play. GDP to judge success is a value judgement.
Defining success in a more utilitarian "Greater good for greater number of people" sense does seem more sensible than counting money coming in.
EDIT:
To give an absurd example:
If a country has HUGE GDP but a government policy of destroying so many tons of dollars/gold/oil every year (i.e wealth destruction). It would still rank highly... even though being absurdly bad.
The value judgement in a progress index extends far beyond conflating GDP with success. Creators decide what is the "greater good." And of course it's coloured by their tastes so higher education is included and luxury cars are not even if they're both just tokens in status games.
Your absurd example is how signalling often works. In this case, if they can afford to waste gold and oil for no reason then they're clearly doing well. It's like lighting a cigar with a $100 bill, or buying a diamond ring for your fiancée.
I think no one could argue that the creators index does not in any way reflect their values. But that doesn't make GDP any better as a measure. Think of it this way, what country would you have liked to be randomly born into the most? The one where you will be able to participate in society no matter who you are, or the one where a subset of the population makes the most money? Would you like to be born into Saudi Arabia as a woman?* They have a great GDP per capita.
I think we have to accept that there is no objective measure of success of a country. In fact we haven't even figured out how to measure success of a company reliably, even if we constrain our self to measuring shareholder value. The best we can do is try finding measures that somehow correlates with quality of life and be explicit about what we are measuring.
* In case you are not sure, you don't want to be born into Saudi Arabia as a woman.
Reducing the importance of education to status games seems to me as a pretty absurd notion, considering that how educated a population is has an important (if often hard to precisely measure) impact in the technological and social development of a civilization. Regardless of what it says about individuals, as a measure of the success of a nation, the amount of luxury cars it consumes indicates very little[1]; the reasoning skills and knowledge of their average citizen is a far more indicative of the capacity of a nation.
Now, you can argue that formal higher education is not the only way to instill that knowledge and skills, and also varies widely between education systems. That much is true. But the point is to get easy to measure proxies for what you are really trying to measure. Does the amount of people that go through public education predict the average level of knowledge and reasoning of that country's citizenship better or worse than looking at the amount of things they produce and sell? (not a rhetorical question, both answers can be supported, and each leads you to either HDI or GDP as a "better" measure.)
[1] Well, very little compared to what GDP+GINI would tell you
The idea is that a hypothetical Lamborghini-index would give you information that is essentially a tiny subset of what you'd already know from GDP+GINI. So you can compare GDP+GINI to GDP+GINI+luxury cars and conclude there is no advantage of having the extra information. It basically tells you "there are at least n people in this country who can afford a Lamborghini, furthermore if you assume that r percent of people who can afford a Lamborghini actually buy one, then this country has approx m=r*n such people". But basic economic data already lets you estimate m fairly well, so what's the need for knowing n?
Perhaps if r varies a lot between countries knowing the actual number of cars gives you some extra information about how much that country in particular values cars as symbols of status. But, would that be useful?
Either way, this is very tangential to the point I was trying to make, which is that education and cars are not equal measures of the development of a society and that an educated population is more that some sort of social status scorecard :)
Reducing the importance of education to status games seems to me as a pretty absurd notion, considering that how educated a population is has an important (if often hard to precisely measure) impact in the technological and social development of a civilization.
What evidence do you have of this?
Further, even if true, you are still measuring the inputs rather than the outputs. Energy consumption is also highly correlated with the technological and social development of a civilization, but it would be as silly thing to include.
Well clearly Net Domestic Product is what you want to measure - this includes depreciation, other forms of wealth destruction. Not sure you can find the figures, and we clearly should make more of an effort to measure this properly.
GDP scores a people based on some metrics some people once thought were useful. If you prefer GDP to these other metrics it says you consider goods in / goods out to be a better measure of a country than anything else. That's a pretty narrow view.
Using GDP alone to judge countries is a huge value judgement. You're saying profit/productivity is the only thing that is worth measuring. This type hyper-capitalistic framing is what is causing a lot of our current problems, specifically because things like "higher ed, access to information, discrimination, democracy" end up being ignored while everybody focuses on profit.
> leaving (most of) value judgements to buyers
A working, fair market is a law of nature; assuming that markets will fix everything is a just-world hypothesis[1].
Markets (and capitalism in general) work wonderfully as a way to efficiently allocate scarce goods, iff the buyer has access to good information and the opportunity to shop around. For things like "democracy" and "discrimination", these conditions usually do not exist or they require some significant additional cost. For example, moving to another city for a job can be costly, but is done by people all the time; moving to another country to "shop around" for democracy is difficult and often impossible. Capitalism - in a pure form that is judge only by GDP - is the wrong tool for this kind of goal.
That said, I am not familiar with the specific index mentioned in the article (SPI), so I can't say anything good or bad about it. My point here is only that while GDP is certainly useful, other goals need to be included as well when we consider how to judge a country (or state, or city, or business, ...), or we end up getting what we asked for: a society that is very productive, at the expense of everything else, which usually ends badly.
Instead, I suggest at least some type of balance, pragmatic approach where many topics are considered. Yes, it will include value judgements - just like the value judgemet to exclude those topics. Solving this kind off political mess is time consuming and annoying, but it's a maintenance cost of running a free society.
In principle, using GDP alone is simply saying that you are willing to allow other people to judge for themselves the value of things and you'll take their judgements at face value. I.e., if a person values an XBox but doesn't value college (as demonstrated by purchasing the former but not the latter), that's ok.
The real issues with GDP in this regard are definitional issues (e.g., man marrying his maid), positional goods (college degrees, suits, and similar things are not intrinsically useful but let me get the job over someone else), compulsory goods (legal defense against lawsuits, obamacare) and govt spending (valued at cost).
GDP has another interesting quality -- it can be measured with some degree of accuracy, and people who know what they are talking about can tell you (eventually) whether the number was accurate or not.
You've captured a bunch of interesting nuances, but I think those things are hard to measure in the form of an index.
Correct me if I'm wrong, but GDP includes government spending so if the government increases the public debt in order to spend more, the GDP increases without any relation to the value of goods and services.
And then there's the downright manipulation done in the European Union by introducing estimates for prostitution and drug trade to cater for differences between countries where those are part of the official economy and those where they are completely in the black market.
GDP is like measuring calories burned without any other context. Expenditure is a means, not an end.
As engineers I think we are aware of the danger of optimizing around the wrong fitness function. The GDP is used as shorthand for "the economy" in federal policymaking, so now there are many ways to "stimulate" the economy by creating various forms of inefficiencies and misery. [1]
It's not merely used in policy making: GDP as a metric basically emerged for policy making in the contexts of resource allocation during the Great Depression and war planning during WWII. (And arguably during prior wars before that: http://www.google.com/search?q=invention+of+gdp .)
Certainly you've heard a government official frame an issue he didn't like as "bad for the economy"? In the US, it's basically the first page in the playbook for both sides of the aisle because very few issues are as sacred as a healthy economy. But if hurting the economy just means bringing down the GDP, then there are countless reasons why the underlying issue might still be beneficial to the welfare of its citizens.
Want to boost your country's GDP? Here's some tips. Become terminally ill. Get involved in a costly divorce. Try gambling or drinking habitually. Take a job where you commute long hours wasting gas in traffic. Hell, open a strip mine - every resource extracted is a net positive on the national ledger. Bonus points if you can coerce your fellow citizens into compulsory spending - a nasty coal plant triggering asthma in the local population is a great example.
Even worse, a focus on GDP directly contributes to income inequality because as a measure it is blind to the distribution. If the top 1% gain more than every one else loses in a year, GDP still rises. For this reason Rowe calls GDP a "statistical laundry operation that hides the suffering at the bottom".
Measuring and tracking GDP is a splendid idea, but using it as even a proxy for national welfare is insanity. I encourage anyone interested to read the linked article, which is as true today as when Rowe testified before the US senate 8 years ago. Also at the end he takes a first pass at laying out principles around new metrics to fix the situation.
Freedom of speech in Finland is supposed to be the same as in Afghanistan? I'm sure they theoretically have it in Afghanistan if the table says so, but the consequences will be very different.
Health and Wellness: Life expectancy is a good overall indicator, but how can you quantify the situation of people who fell ill? Cheap access to good medical care varies a lot between countries.
Globally ranked universities: how about normalizing this by size of population, e.g. Switzerland vs. Germany?
Personal Freedom of Choice/Early marriage: where's the freedom of choice part in this? I don't think the relatively early marriages in the US, Canada and New Zealand are all arranged.
I'm having some difficulty looking at their site. UAE is #1 for tolerance of immigrants? They're a modern-day slave state! Similarly the UAE placed as high as 20th in the rankings for 'discrimination against minorities'.
Similarly Belarus gets a top score for religious tolerance, while western Europe gets second bottom. Belarus's form of religious tolerance is 'you're free to be whatever religion, as long as it's the state religion' (Orthodox). You don't get any protections from the state if you're not Orthodox.
There's quite a few spots where things look iffy in their rankings.
Algeria, where homosexual acts are illegal, is more "tolerant of homosexuality" than Thailand, which might not be a liberal paradise but embraces homosexuality and transgenderism as part of cultural norms like few other places.
The highest level of religious tolerance is exhibited in the Islamic Republic of Mauritania, which handed out a death sentence to a blogger for apostasy at the end of last year. Western Europe, apparently, should look towards them to as an example.
This is not just a bit iffy. This is dangerously bad ranking.
Which pair of western countries have the property of one having a higher GDP than the other and also a lower standard of living for some demographic of people preset in both countries?
GDP per capita rankings vary hugely according to who's doing the calculations, and precisely when, so Western countries frequently swap places. That's a quick reminder that GDP really isn't that much more neutral and objective than other development rankings, especially when you have to choose between vast arrays of possible baskets of relevant goods, intra-country price variations and inter country purchasing habit differences to construct purchasing power parity measures.
That said, Ireland still performs very well in recent nominal GDP rankings, even relative to the likes of Germany, yet has huge unemployment problems and is universally agreed to be in a worse economic state than Germany. The poor in the US are usually regarded as being far worse off than the poor in most Western European countries, but the US almost invariably comes out on top.
Just as an FYI with regards to Ireland - GDP is not actually an appropriate measure in the presence of large multinationals and their tax-avoidance schemes. The money flows through the country, but doesn't actually have much impact on the economy. In general, GNP is better for countries such as Ireland and Luxembourg.
Catherine Austin Fitts has a happiness and social health measurement that she calls the "popsicle index". This a measure of how comfortable a parent is giving their child money to walk to a neighborhood store by themselves to buy a popsicle.
I would add a general "comfort index" of how people feel about the future. In the USA we have a strange situation. We have lots of raw materials, good education systems, and we are relatively geographically isolated. All nice advantages. Yet, we have very poor governance. A huge majority of our population does not trust Congress and the office of the President. Statistically, people respect our military and the Supreme Court and that is about it. Couple this with a general uneasy feeling about the future of the dollar vs. SDRs, etc. and lack of confidence our ability to be highly productive, and I would have to give my own country a mediocre "comfort index."
All indexes or rankings are "biased" in the sense that they are a weighted sum of different parameters that often have little to do with each other (adding apples and oranges). As such no index could be perfect for all since we have different values.
For example if you value freedom of speech a lot, the US would be way up compared to say, Germany (illegal to deny the Holocaust), if you value human rights, the death penalty is an aberration and the US would be at the bottom part of the index. If you value safety over rights, Singapore would have a high index, otherwise low etc.
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[ 4.6 ms ] story [ 67.0 ms ] thread1. Democracy Index (http://en.wikipedia.org/wiki/Democracy_Index) 2. Human Development Index (http://en.wikipedia.org/wiki/Human_Development_Index) 3. OECD Better Life Index (http://www.oecdbetterlifeindex.org)
Defining success in a more utilitarian "Greater good for greater number of people" sense does seem more sensible than counting money coming in.
EDIT:
To give an absurd example:
If a country has HUGE GDP but a government policy of destroying so many tons of dollars/gold/oil every year (i.e wealth destruction). It would still rank highly... even though being absurdly bad.
Your absurd example is how signalling often works. In this case, if they can afford to waste gold and oil for no reason then they're clearly doing well. It's like lighting a cigar with a $100 bill, or buying a diamond ring for your fiancée.
I think we have to accept that there is no objective measure of success of a country. In fact we haven't even figured out how to measure success of a company reliably, even if we constrain our self to measuring shareholder value. The best we can do is try finding measures that somehow correlates with quality of life and be explicit about what we are measuring.
* In case you are not sure, you don't want to be born into Saudi Arabia as a woman.
Now, you can argue that formal higher education is not the only way to instill that knowledge and skills, and also varies widely between education systems. That much is true. But the point is to get easy to measure proxies for what you are really trying to measure. Does the amount of people that go through public education predict the average level of knowledge and reasoning of that country's citizenship better or worse than looking at the amount of things they produce and sell? (not a rhetorical question, both answers can be supported, and each leads you to either HDI or GDP as a "better" measure.)
[1] Well, very little compared to what GDP+GINI would tell you
Well that's a bogus comparison. You would have to compare to GDP + luxury cars.
Perhaps if r varies a lot between countries knowing the actual number of cars gives you some extra information about how much that country in particular values cars as symbols of status. But, would that be useful?
Either way, this is very tangential to the point I was trying to make, which is that education and cars are not equal measures of the development of a society and that an educated population is more that some sort of social status scorecard :)
What evidence do you have of this?
Further, even if true, you are still measuring the inputs rather than the outputs. Energy consumption is also highly correlated with the technological and social development of a civilization, but it would be as silly thing to include.
> leaving (most of) value judgements to buyers
A working, fair market is a law of nature; assuming that markets will fix everything is a just-world hypothesis[1].
Markets (and capitalism in general) work wonderfully as a way to efficiently allocate scarce goods, iff the buyer has access to good information and the opportunity to shop around. For things like "democracy" and "discrimination", these conditions usually do not exist or they require some significant additional cost. For example, moving to another city for a job can be costly, but is done by people all the time; moving to another country to "shop around" for democracy is difficult and often impossible. Capitalism - in a pure form that is judge only by GDP - is the wrong tool for this kind of goal.
That said, I am not familiar with the specific index mentioned in the article (SPI), so I can't say anything good or bad about it. My point here is only that while GDP is certainly useful, other goals need to be included as well when we consider how to judge a country (or state, or city, or business, ...), or we end up getting what we asked for: a society that is very productive, at the expense of everything else, which usually ends badly.
Instead, I suggest at least some type of balance, pragmatic approach where many topics are considered. Yes, it will include value judgements - just like the value judgemet to exclude those topics. Solving this kind off political mess is time consuming and annoying, but it's a maintenance cost of running a free society.
[1] http://en.wikipedia.org/wiki/Just-world_hypothesis
The real issues with GDP in this regard are definitional issues (e.g., man marrying his maid), positional goods (college degrees, suits, and similar things are not intrinsically useful but let me get the job over someone else), compulsory goods (legal defense against lawsuits, obamacare) and govt spending (valued at cost).
You've captured a bunch of interesting nuances, but I think those things are hard to measure in the form of an index.
http://www.theguardian.com/business/2012/nov/20/economics-gh...
Not true in the case of:
* Currency manipulation
* Corruption
* Waste
For some countries you've accounted for about 1/3 of their GDP just with those 3 things.
>Whereas HDIs and progress indexes give (undue imho) weight to things valued by the creators of the index
For the man who values money above all else, GDP is the ideal measurement.
Is that you?
And the terrible living conditions for the general population: http://www.bbc.com/news/world-latin-america-19649648
Correct me if I'm wrong, but GDP includes government spending so if the government increases the public debt in order to spend more, the GDP increases without any relation to the value of goods and services.
And then there's the downright manipulation done in the European Union by introducing estimates for prostitution and drug trade to cater for differences between countries where those are part of the official economy and those where they are completely in the black market.
As engineers I think we are aware of the danger of optimizing around the wrong fitness function. The GDP is used as shorthand for "the economy" in federal policymaking, so now there are many ways to "stimulate" the economy by creating various forms of inefficiencies and misery. [1]
[1] http://jonathanrowe.org/the-gross-domestic-product
Want to boost your country's GDP? Here's some tips. Become terminally ill. Get involved in a costly divorce. Try gambling or drinking habitually. Take a job where you commute long hours wasting gas in traffic. Hell, open a strip mine - every resource extracted is a net positive on the national ledger. Bonus points if you can coerce your fellow citizens into compulsory spending - a nasty coal plant triggering asthma in the local population is a great example.
Even worse, a focus on GDP directly contributes to income inequality because as a measure it is blind to the distribution. If the top 1% gain more than every one else loses in a year, GDP still rises. For this reason Rowe calls GDP a "statistical laundry operation that hides the suffering at the bottom".
Measuring and tracking GDP is a splendid idea, but using it as even a proxy for national welfare is insanity. I encourage anyone interested to read the linked article, which is as true today as when Rowe testified before the US senate 8 years ago. Also at the end he takes a first pass at laying out principles around new metrics to fix the situation.
Freedom of speech in Finland is supposed to be the same as in Afghanistan? I'm sure they theoretically have it in Afghanistan if the table says so, but the consequences will be very different.
Health and Wellness: Life expectancy is a good overall indicator, but how can you quantify the situation of people who fell ill? Cheap access to good medical care varies a lot between countries.
Globally ranked universities: how about normalizing this by size of population, e.g. Switzerland vs. Germany?
Personal Freedom of Choice/Early marriage: where's the freedom of choice part in this? I don't think the relatively early marriages in the US, Canada and New Zealand are all arranged.
Similarly Belarus gets a top score for religious tolerance, while western Europe gets second bottom. Belarus's form of religious tolerance is 'you're free to be whatever religion, as long as it's the state religion' (Orthodox). You don't get any protections from the state if you're not Orthodox.
There's quite a few spots where things look iffy in their rankings.
The highest level of religious tolerance is exhibited in the Islamic Republic of Mauritania, which handed out a death sentence to a blogger for apostasy at the end of last year. Western Europe, apparently, should look towards them to as an example.
This is not just a bit iffy. This is dangerously bad ranking.
That said, Ireland still performs very well in recent nominal GDP rankings, even relative to the likes of Germany, yet has huge unemployment problems and is universally agreed to be in a worse economic state than Germany. The poor in the US are usually regarded as being far worse off than the poor in most Western European countries, but the US almost invariably comes out on top.
I would add a general "comfort index" of how people feel about the future. In the USA we have a strange situation. We have lots of raw materials, good education systems, and we are relatively geographically isolated. All nice advantages. Yet, we have very poor governance. A huge majority of our population does not trust Congress and the office of the President. Statistically, people respect our military and the Supreme Court and that is about it. Couple this with a general uneasy feeling about the future of the dollar vs. SDRs, etc. and lack of confidence our ability to be highly productive, and I would have to give my own country a mediocre "comfort index."
For example if you value freedom of speech a lot, the US would be way up compared to say, Germany (illegal to deny the Holocaust), if you value human rights, the death penalty is an aberration and the US would be at the bottom part of the index. If you value safety over rights, Singapore would have a high index, otherwise low etc.