GDP anew – Indigo Prize

The INDIGO PRIZE is awarded for the best answers to:

“How would you design a new economic measure for global economies that fully acknowledges not only social and economic factors but the impact of creativity, entrepreneurship and digital skills?

How should your new measure be used to improve the way we measure GDP in official statistics?”

 I sent the following email to the Indigo Prize team

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To: Indigo Prize <indigoprize@global-perspectives.org.uk>

I wonder if you are to publish the best of the winning submissions for your Indigo prize?

I ask because I seriously considered entering the fray having written a book ‘Productivity Knowhow’ where Section 20 is devoted to global productivity, the serious flaws currently within current GDP measurement and hence the equally serious flaws within labour productivity figures the ONS and others produce

However, I decided against entering because:

  • You ask for ‘one new economic measure’ when a suite of measures is needed – one all-embracing number is clearly not enough and will hide any useful information – you’ll end up with something akin to MFP or TFP which the BoE rightly called ‘magic fairy dust’ i.e. no manager or government minister understands or uses them
  • You also seek ways to improve ‘the way we measure GDP’ when, in fact, we’re at a watershed as we climb the human hierarchy of needs, especially we who live in the G7:
    • There are basic goods and services, private and public, we ‘need to have’ which we obtain via countable transactions using money – but aggregation makes national GDP data nigh on useless e.g. the statistics have it that Japan has been the least productive of all G7 nations for at least the last 30 years, so our gloomy experts prefer to compare the UK versus France whose productivity seems better, but only because their public sector costs are so much more
    • There are also many other activities ongoing in global economies which add to overall well-being but go uncounted – the white and black economies – so a huge error (15%?) is introduced here alone
    • And, nowadays, there’s enormous extra value from stuff we ‘like to have’ to enhance our lives which is uncountable – much we even obtain for free – e.g. vastly better communications, closer personal contacts, more knowledge, wide variety of entertainment – what % GDP error here?
  • Last, it’s unclear what you plan to do with any new ideas/ measures that emerge – especially given the ONS will hardly be enthusiastic to change and yet their support is vital, and all other G7/ G20 nations will also need to follow suit if useful inter-national comparisons are to be made

 

Overall, it is surely better not to measure whatever one can and use the results as a guide when such measures end up being deeply flawed and cannot be used to compare with others, quantify performance gaps, prompt action or monitor trends

Better to build the true economic performance picture much like a jig-saw, and assemble just enough pieces to be able to see the whole

Hopefully your winners will think much the same way

Whatever, I’d be most grateful if you’d let me have details of the winning ideas n.b. I’ve already signed up for your newsletter

Many thanks in anticipation

Dick Smythe

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They kindly and quickly replied – see below

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Dear Dick,

Thanks for your email and for your thoughts on the prize and the best way of finding a new economic measure – or measures, as you suggest.

We will be publishing the winning entries of the prize. Please keep an eye on our website and the mailing list for updates.

Thanks again,

The Indigo Prize Team

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Hopefully, something useful will emerge

 

 

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