Better Social Investment Part 2: Actuarial Models that Measure What Really Matters

Social investment aims to be a powerful tool for tackling complex, intergenerational, social issues. But to make a difference, we need models that use data that is comprehensive and captures what really matters - not just data that is easy to model.?

To be fair, social investment is about a number of things: outcomes data; cost benefit ratios; and avoiding welfare costs over the longer term. But the kaupapa near to my heart is the fact that we're trying to identify, and invest in the stuff that really matters, and will make a real difference in the lives of Whānau!

Actuarial modelling is essential to this model. It is a cornerstone of the social investment approach, aiming to optimize resource allocation and improve program design by predicting future costs and long-term individual outcomes.

But there's a few challenges with this.

Part of this is the uncertainty. I mean, it’s hard enough to predict what will happen next year, or to explain a year later, why an event really occurred. Imagine trying to model 10 - 25 years?

Moreover, these models will miss the mark if they are overly simplistic or incomplete. Models are only as good as the data they're built on. Imagine if we only focus on the easily quantifiable, and ignore other stuff that is just as important, if not more, to whānau? For example, compare the:

• Easy to measure: Hemi got a job, Hine is studying, or the Tibbles got secure housing; versus
• Hard to measure:?Kaea feels in control of his life…(and this helps him get a job); Salli is experiencing whānau stability….(and so she goes off the benefit to study at the wānanga);?Manaaki has gained a strong sense of cultural identity… (and with his newfound passion, has enrolled to become a kura teacher).

But here's the cool news! The hard to measure social and cultural outcomes have been measured - at least some key ones! Thanks to innovative data collection efforts over the past 15 years, particularly Te Kupenga and the General Social Survey, over the past 15 years, we have the info needed to build more comprehensive and effective social investment models. So we can use this data to create actuarial models that measure what truly matters.

(A wee note on Te Kupenga. I led theproject at Stats NZ back in the 2010s. It is informed by Si Prof Mason Durie's Whare Tapa Whā, and the late Whetu Werata and her Māori Statistical Framework. After 2 x in the field, we have data in the IDI of over 10,000 whānau. Members of whānau were surveyed and their voices were captured on kaupapa that matters to Māori e.g. whānau wellbeing, connectedness to and visits to their marae, ability to speak te reo and where they use it, and various activities related to their identity including pepeha knowledge etc. In short, we have actual quantitative Māori measures of wellbeing! If you need to know more, click here)

But better data is not enough! We need robust understanding! Māramatanga!

To properly model this data, we need to bridge the gap between actuarial expertise and the deep science of understanding of social and cultural dynamics. Actuaries are skilled in finance and risk assessment, but they will not have the specialized knowledge needed to fully grasp the complex interplay of social, cultural and economic factors that drive better outcomes. Hence collaboration is crucial. The Social Investment Agency needs to bring together actuaries with others who are experts in social policy, Māori development, and other relevant fields. This collaboration is needed to ensure that actuarial models incorporate a comprehensive understanding of better outcomes, leading to more effective and culturally responsive social investment strategies.

New Zealand has the opportunity to create truly transformative change. By embracing a more comprehensive approach to social investment, and levelling up our actuarial models, we can move beyond measuring simple outcomes and focus on what the evidence tells us drives real outcomes. This will enable us to invest in programs that not only address immediate needs, but also build stronger, more resilient communities for generations to come.

Atawhai Tibble, November 6, 2024: Note I was the Subject Matter PM responsible for developing Te Kupenga 2013.