The Economics of Enough_ How to Run the Economy as if the Future Matters - Diane Coyle [96]
The difficulties of measuring intangible output have been exercising statisticians for some years. Meanwhile, the intangible share of the economy has grown enormously. Around two-thirds of GDP in most OECD countries is accounted for by services, not amenable to easy measurement. Since 1980, although GDP in these economies has increased enormously, its (literal) weight has not, so broadly speaking all of the growth for the past thirty years has been weightless or intangible.17 The proportion of stock market values of major companies accounted for by intangibles, or “goodwill,” as accountants describe it, has grown to stand at about 75 percent of the S&P 500.18 As described in chapter 1, it has been difficult enough to make any attempt at accounting for quality improvements in physical goods such as computers and cameras in GDP. The problems of accounting for intangibles in the GDP statistics are in a different league.
What’s more, intangibles span a wide range of services from entertainment to nursing. These share some of the same economic characteristics. Although in the past services of the former type were protected by technology from the difficulty of measuring productivity and matching reward to value, that is changing rapidly. So, bizarrely, many previously highly profitable businesses are looking quite a lot like public services in some respects. The zero marginal cost of conveying the song or movie to another user makes it harder to charge anything, but that in turn is undermining the provision of the service. Many businesses are scrabbling to find what it is they can charge for in order to cover their costs and sustain profit margins.
This all points toward the conclusion that our conceptual framework for understanding economic value hasn’t kept up with the way the economy has changed.
INNOVATION IN STATISTICS
Economists and statisticians certainly understand the problem. Questions of measurement have not only reached the public policy debate, they have been explored extensively within the profession.
One type of innovation has been the challenge to the monopoly of GDP over policy debates, and the development of either alternative or supplementary indicators. This was covered in chapter 1. The commission set up in France by President Sarkozy, chaired by Nobel laureates Amartya Sen and Joseph Stiglitz, has been perhaps the most high-profile and certainly the most recent detailed effort to set out a suite of indicators in addition to GDP. The final report called for a “dashboard” of indicators. This must be right. More governments should follow the example of the Australian government, which publishes each year an array of indicators—selected after a public consultation—including those favored by the Sen and Stiglitz Commission. (The Australian project is described in chapter 1.)19
The statistics the Sen and Stiglitz Commission advised governments to monitor—specifically including wealth of all types, financial, human, and natural, and the distribution of income and wealth—go some way toward measuring comprehensive wealth. As discussed earlier in the book, this is the measure necessary to ensure that we will pass onto later generations at least as many natural and human resources as we inherited from our predecessors. But although the commission emphasizes the importance of measuring balance sheets as well as flows of output and income, it underplays the need for policy to acknowledge what will be left of posterity. Responsibilities to future generations are implicit