Finding our longitude when investing public money in events

A rather extraordinary thing happened in the world of economics recently.

Angus Deaton, a Nobel prize winner for economics, widely recognised as one of the field’s most pre-eminent thinkers, launched an extraordinary salvo against his own profession. And of all places, he published that salvo via the IMF. You can read it in full here.

Whilst the article as a whole is a remarkable piece of self-reflection and questioning of economics as we know it, the phrases that really got my eyebrows going were…

“We (economists) get little training about the ends of economics, on the meaning of well-being—welfare economics has long since vanished from the curriculum”

“Keynes wrote that the problem of economics is to reconcile economic efficiency, social justice, and individual liberty. We are good at the first, and the libertarian streak in economics constantly pushes the last, but social justice can be an afterthought.”

“…our (economist’s) recommendations become little more than a license for plunder.”

In digesting those words, I couldn’t help but be reminded of the analogy currently being used by many in the world of social impact, that being the need for us as a society to “find our longitude”. It refers back to a time where we didn’t know how to accurately measure our longitude, particularly at sea. In the early 1700s, a number of maritime disasters cost nations many lives and fortunes, most of which were attributable to the folly of navigating purely based on latitude.

As the end of World War II approached, the Bretton Woods conference was held, and international financial institutions such as the World Bank and the International Monetary Fund were established. Also born from this gathering was the use of Gross Domestic Product (GDP) as the primary indicator of a nation’s economic health. Given the hardship that had been endured by many during the Great Depression preceding the war, GDP was almost immediately adopted as a proxy for a society’s wellbeing.

Today, we find ourselves in a society where, amongst a few other things, inequality is rising, political polarisation is rife, and mother nature is giving us plenty of signs that not all is well. Acknowledging that we must start working to right the ship, an ever-increasing number of Governments are putting wellbeing budgets forward alongside the classical GDP and financially driven budgets. In other words, they’re having a crack at finding and measuring their community’s longitude.

As I’ve previously opined, for nigh on 30 years our governments here in Australia have predicated their investment in major events primarily based on economic measures. Social impact measures have, at best, been given lip service. As a broader society, we are slowly recognising that we’re on a trajectory towards an undesirable destination. As a means to help rectify our direction, we’re adding longitudinal measures centred around subjective wellbeing to those traditional financial measures we’ve used for so long. For mine it’s time that we in the world of major events did a little Angus Deaton style reflection and prioritised adding social impact to our consideration set when measuring success.

It’s time we found our longitude.