• Choose a category
• All
• Classic-Fiction

By Root 1536 0

less consumption out of current resources than has been the case for at least the past two decades. This will slow down growth unless the economy’s potential improves thanks to productivity increases. What’s more, faster growth is going to be essential in order to repay much of the mountain of debt incurred by governments on behalf of their citizens. In most OECD countries, long-term economic potential did improve during the 1990s and early 2000s, thanks to the technological revolution. However, that wasn’t enough to prevent overconsumption, the depletion of natural resources, and a massive buildup of debt to be repaid by future taxpayers. So somehow policies that are likely to limit economic growth in the short term must be implemented even though voters will continue to expect a growing economy, not one that is contracting or stagnant as it has been throughout the recent recession.

BUILDING BLOCKS FOR THE ECONOMY OF ENOUGH

How can a better balance between the present and the future be brought about? There are three elements needed to answer the challenge: measurement, values, and institutions.

The first of these is an acknowledgment that all economies lack the kinds of statistics needed to ensure that policies take due account of their legacy for future generations. A number of recent initiatives have emphasized the need to supplement GDP with an array of other indicators of the current state of the economy, and some countries—notably Australia—do this already. In addition, better measures of economic wealth, in its widest sense, are needed: the economy’s natural resources, and the human and social capital available to it. Looking at the wealth or stock of assets in an economy as well as the flow of income each year is vital to lengthening the time horizon over which policies are aimed. However, initiatives of this kind only address one kind of statistical shortfall. Harder challenges arise from the way the structure of the leading economies is changing. The impact of the new technologies, and increasing affluence, mean that the great majority of the additional growth in economies such as the United States is intangible. Services account for a rising share of output, and so do servicelike aspects of manufactured goods, such as the research and design that went into them or the customization of after-sales care. Conventional statistics have not kept up with the challenge of measuring an intangible economy, although there are some interesting innovations.

There is a particular problem in not having an adequate statistical framework for measuring intangible value, which is that much of it consequently gets undervalued. There are large and growing swaths of the economy where productivity as it is conventionally measured simply cannot grow. In fact it’s not clear what “productivity” means when there is no tangible product. In an intangible service-based economy, we need to be measuring something else entirely. But because an inappropriate definition of productivity is what gets measured, and doesn’t in fact increase, large and increasing parts of the economy are systematically undervalued, as are the people who work in those jobs. For example, performing artists only have a maximum of 365 nights a year on which they can do a show, and can’t become more “productive.” Nurses become arguably less, not more, productive in a meaningful sense if they treat more patients but the statistics work the opposite way. In the online economy, digital products can show infinite productivity—they can be duplicated essentially for free—but if they’re priced for free, they will perhaps not be produced in the desirable quantities. In these varied examples, the conceptual framework of measurement isn’t up to assessing the things we value (in a noneconomic sense), which in turn actually makes it hard to value them in the monetary sense.

This leads directly to a second requirement, which is clarity about the values and aims of economic policy and political choices. There is a fundamental set of trade-offs—a “trilemma,” or three-way dilemma