Europe EU - Are people happy in EU?

In February 2008, the President of the French Republic, Nicholas Sarkozy, unsatisfied with the present state of statistical information about the economy and the society, asked, Joseph Stiglitz (President of the Commission), Amartya Sen (Advisor) and Jean Paul Fitoussi (Coordinator) to create a Commission, subsequently called “The Commission on the Measurement of Economic Performance and Social Progress” (CMEPSP). The Commission’s aim has been to identify the limits of GDP as an indicator of economic performance and social progress, including the problems with its measurement; to consider what additional information might be required for the production of more relevant indicators of social progress; to assess the feasibility of alternative measurement tools, and to discuss how to present the statistical information in an appropriate way. The Commission regards its report as opening a discussion rather than closing it. The report hints at issues that ought to be addressed in the context of more comprehensive research efforts. Other bodies, at the national and international level, should discuss the recommendations in this report, identify their limits, and see how best they can contribute to this broad agenda, each from its own perspective.

 The Commission believes that a global debate around the issues and recommendations raised in this report provides an important venue for a discussion of societal values, for what we, as a society, care about, and whether we are really striving for what is important.At the national level, round-tables should be established, with the involvement of stakeholders, to identify and prioritise those indicators that carry to potential for a shared view of how social progress is happening and how it can be sustained over time. The Commission hopes that this Report will provide the impetus not only for this broader discussion, but for on-going research into the development of better metrics that will enable us to assess better economic performance and social progress.

Before going beyond GDP and tackling the more difficult task of measuring well-being, it is worth asking where existing measures of economic performance need improving. Measuring production – a variable which among other things determines the level of employment – is essential for the monitoring of economic activity. The first main message of our report is that time has come to adapt our system of measurement of economic activity to better reflect the structural changes which have characterized the evolution of modern economies. In effect, the growing share of services and the production of increasingly complex products make the measurement of output and economic performance more difficult than in the past. There are now many products whose quality is complex, multi-dimensional and subject to rapid change. This is obvious for goods, like cars, computers, washing machines and the like, but is even truer for services, such as medical services, educational services, information and communication technologies, research activities and financial services. In some countries and some sectors, increasing “output” is more a matter of an increase in the quality of goods produced and consumed than in the quantity. Capturing quality change is a tremendous challenge, yet this is vital to measuring real income and real consumption, some of the key determinants of people’s material well-being. Under-estimating quality improvements is equivalent to over-estimating the rate of inflation, and therefore to under-estimating real income. The opposite is true when quality improvements are over- stated. Governments play an important part in today’s economies. They provide services of a “collective” nature, such as security, and of a more “individual” nature, such as medical services and education. The mix between private and public provision of individual services varies significantly across countries and over time. Beyond the contribution of collective services to citizens’ living standards, individual services, particularly education, medical services, public housing or public sports facilities, are almost certainly valued positively by citizens. These services tend to be large in scale, and have increased considerably since World War II, but, in many cases, they remain badly measured. Traditionally, measures have been based on the inputs used to produce these services (such as the number of doctors) rather than on the actual outputs produced (such as the number of particular medical treatments). Making adjustments for quality changes is even more difficult. Because outputs are taken to move in tandem with inputs productivity change in the provision of these services is ignored. It follows that if there is positive (negative) productivity change in the public sector, our measures under (over)- estimate economic growth and real income. For a satisfactory measure of economic performance and living standards it is thus important to come to grips with measuring government output. (In our present, admittedly flawed, system of measurement based on expenditures, government output represents around 20% of GDP in many OECD countries and total government expenditure more than 40% for the OECD countries.)

Recommendation 1: When evaluating material well-being, look at income and consumption rather than production

Recommendation 2: Emphasise the household perspective

Recommendation 3: Consider income and consumption jointly with wealth

Recommendation 4: Give more prominence to the distribution of income, consumption and wealth

Recommendation 5: Broaden income measures to non-market activities

Recommendation 7: Quality-of-life indicators in all the dimensions covered should assess inequalities in a comprehensive way

Recommendation 8: Surveys should be designed to assess the links between various quality- of-life domains for each person, and this information should be used when designing policies in various fields

Recommendation 9: Statistical offices should provide the information needed to aggregate across quality-of-life dimensions, allowing the construction of different indexes.

Recommendation 10: Measures of both objective and subjective well-being provide key information about people’s quality of life. Statistical offices should incorporate questions to capture people’s life evaluations, hedonic experiences and priorities in their own survey.

Recommendation 11: Sustainability assessment requires a well-identified dashboard of indicators. The distinctive feature of the components of this dashboard should be that they are interpretable as variations of some underlying “stocks”. A monetary index of sustainability has its place in such a dashboard but, under the current state of the art, it should remain essentially focused on economic aspects of sustainability.

Recommendation 12: The environmental aspects of sustainability deserve a separate follow- up based on a well-chosen set of physical indicators. In particular there is a need for a clear indicator of our proximity to dangerous levels of environmental damage (such as associated with climate change or the depletion of fishing stocks.)

as we can see from reading this excellent report organized by the team in question, I realize that our governments are in total ignorance about the happiness of their peoples and their economic and social state, for although they are aware of the study that reports to 2008 , the situation has been worsening in several countries of the economic community, particularly in France and in the eastern European countries.

The crisis of emigration, the brexit, the resurgence of the far right forces and the social tendency towards the protectionism of societies, demonstrate that the recommendations made in the study were put in the drawer for individualistic reasons in their generality

Origin of the text info: FITOUSSI COMISSION REPORT

Report by the Commission on the Measurement of Economic Performance and Social Progress.

Professor Joseph E. STIGLITZ, Chair, Columbia University Professor Amartya SEN, Chair Adviser, Harvard University Professor Jean-Paul FITOUSSI, Coordinator of the Commission, IEP