The Power of Measurement

The Power of MeasurementV5.docx (1006.0 KB)
I want to put my article about the problem of GDP and the sensitivity of measurements up for discussion here. Furthermore I ask Kate Raworth for her approval to publish this article!
:slight_smile: Johannes

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Hi Johannes

You have obviously put a lot of thought into your document, which identifies the first step in making the right information easily available to the public and policy makers.

There are many software “solutions” (as the IT people optimistically call them), and you can find quite a lot relevant to your document if you search online for “Sustainable dashboard”, for example:

https://www.google.com/search?safe=active&client=safari&rls=en&sxsrf=ALeKk02VhEHQuNNuOt-kP9bce5UdwjlttQ:1590085632842&q=sustainability+dashboard&sa=X&ved=2ahUKEwiM_7rKysXpAhUyThUIHfwvBzEQ1QIoAHoECAsQAQ&biw=1440&bih=812

It seems that the business and IT community have settled on the term “dashboard” instead of “cockpit”.

I live in Ireland, and the problem here is that there is quite a lot of information available online, but it is scattered, unorganised, and often incomplete (the UN SDGs for example have all the topics, but zero useful information).

I think each geographical/political/administrative region needs an online green dashboard, organised so that the user can easily navigate and drill down to the relevant information. Kate Raworth’s Doughnut is an excellent visual metaphor of the sets of information needed to assess progress towards sustainability. The set of UN SDGs are not designed to give the impression that they relate to a system in which each part affects every other. Whereas the Doughnut is an excellent visual metaphor of the complex system that is our biosphere.

I would appreciate comments from you and anyone else on the list on my attempt to illustrate graphically how a sustainability dashboard might look. And how it would be used to develop, implement, and monitor policies. And, what the underlying ethical principles are.

I took the Doughnut as my starting point, restructured it so that the major categories would be clear, and added some items that policy makers would need in addition to those in the Doughnut.

It is important to note that I don’t think my graphic replaces the Doughnut. It is a step towards implementation.

Michael

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I have chosen the term “cockpit” to keep the connection with my start comparison aircraft! I think it is well understandable that dynamically complex flying is not possible with one measurement value. The criticism of the GDP in Economy & Ecology is thus more insightful. But my main message as a control engineer is that measurements in all dynamic systems have to be thought through very carefully because of their sensitivity, their low energy level and their easy influence. The GDP causes a lot of harm because this has been ignored!
Johannes

Hi Johannes

Your argument is correct, but I think there is a language problem.

In German “die Cockpit” translates to “the dashboard” and “the cockpit” in English.

However, the English word “cockpit” means the area in which the pilot sits and observes the dashboard. So the English “cockpit” and German “die Cockpit” are what the linguists call false friends: they look the same but don’t have the same meaning.

Interestingly, the English “dashboard” and German “das Dashboard” are not false friends.

This may look like pedantic nitpicking, but I am just trying to anticipate how an English speaker would understand the metaphor you are creating.

For “dashboard” the mapping is straight forward: from physical indicators (dials, readouts, …) to electronic. Most cars and airplanes will have electronic dashboards anyway.

For “cockpit” the English speaker will have to make a mental journey from the place the pilot sits in to the dashboard they look at. Few people have flown a plane so there is another cognitive load in mapping from the multiple measurements needed to fly a plane to the multiple measurements needed to manage a planetary ecosystem.

The discussion of GDP in the document is an oversimplification.
Although economists talk about GDP, governments use a host of related or component measurements. No economist would think of flying a country’s economy without a dashboard of GDP-related measurements.

For example in Ireland:
https://www.cso.ie/en/releasesandpublications/er/na/quarterlynationalaccountsquarter42019/

For example in Germany see das Dashboard VGR:

and see https://www.destatis.de/DE/Presse/Pressekonferenzen/2020/BIP2019/statement-bip.pdf?__blob=publicationFile

I am not an economist, so I have had to do some thinking and research to clarify my own understanding. So, thank you for provoking me into that. I have leaned a lot.

Hi Michael, Hi Johannes,

My name is Brian. I manage a farm in the United States. I am embarking on developing an Excel model to create a dashboard-like presentation of the effect farm management decisions have on the outer and inner aspects of the donut (for example periodic scientific measurement of soil health and business performance). Details about this are on another thread if interested.

It seems this work may be one thread through the your dash board Michael. Specifically a “farmer” actor, through food, health, income and work, water, energy, to climate breakdown, biodiversity chemical pollution nitrogen and phosphorus loading, etc, ultimately through policy (and repeat the cycle).

Anyway, thank you for your larger dashboard picture Michael. Johannes, I have not yet had an opportunity to examine your information on GDP, but look forward to doing so.

Brian

Hi Brian

Good to meet you.

I retired last year to rural Ireland, where farming is a major contributor to the economy - and to environmental damage, not least greenhouse gases from dairy farming. Farming practices have been driven to their present state by misguided subsidies and economic “efficiencies”. Both the big farming organisations and the small independent farmers (like some of my relatives) are very suspicious of “green” policies. I am interested in understanding how a “just transition” could be made (and sold to farmers), and a dashboard would be a necessary tool for this. So, I am curious to learn more about your dashboard. You could email me the link at HMichaelPower@gmail.com.

Thanks

Michael

Hi Brian,
I’m new to this doughnut economics forum, but have been thinking about this sort of thing a long time, more from the point of view of cognitive science and human emotion because the whole system of economics starts and ends with people. What drives the current economic system is greed. Greed is not necessarily a bad thing, but it need to be tempered. Capitalism works as long as it is kept in check by governments, but when governments are driven by the same forces, we get run-away greed taking over. This is not a value judgemenet, it’s just that humans are built that way. There are other systems where human emotions are tempered successfully in order to ensure high quality ideas, such as the scientific process, for example. I liked your basic premise which builds on the idea that people would make the right choices if they had all the information. If that were so, then why do non-free-range eggs still outsell the free-range ones? The problem is that people have many pressures on their daily lives, and environmental and societal responsibility are just too diffuse, and for most people, abstract concepts. The people on this forum are ‘the converted’. So, how do we make people care enough to make the mature choice?

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All
On Michael’s dashboard I wonder whether ‘social equity’ (shown under sustainable development) could be given another and elevated status/category as ‘equality’ seems to influence or cause almost everything else (see Wilkinson and Pickett’s The Spirit Level). I also believe that physical and mental health could have separate mentions? Under ‘stocks and flows’ a separate mention could be given to soil depletion/loss?
Daniel

We are conditioned by the media references to GDP growth to automatically think of this as positive. Rarely does any journalist (or economist, for that matter) explain that GDP is simply to aggregation of dollars spent on all goods and services, regardless of what the spending is for or how the funds were raised or created to enable the spending. As one economist famously wrote, if one is paid to dig a hole and then paid to fill it up again, GDP increases by the amount of both payments. The real challenge is how to actually measure growth that is good for humanity and good for the planet and then push for changes in policy consistent with such growth. Kate Raworth touches on this issue by reference to the analysis of Henry George and other classical economists relating to the benefits of relying on rents (which are unearned to individuals or private entities) as public revenue. The work of Mason Gaffney, emeritus professor of economics at the University of California, provides strong statistical and analytical support for this policy solution.

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Hi Michael
I understand! I am not a native english speaker! I will correct that accordingly. Thank you for the hint.

@Kyberkrat; I’m sure you have thought about this, but it’s always something that nags at me. There is a significant distinction between what you need to measure for the pilot, and what you measure as the engineer. The system manager requires a dashboard. The system designer requires an understanding of how every component of the design affects the balance of the various competing ‘forces’ , and what the preferred performance envelope of the system is. If the designer ends up designing ‘for’ the indicators, they become less effective as indicators. Ask me about the story of a canary in a coal mine getting a self-contained air-pack…
Using your airplane analogy, the dashboard measures all the things that are allowed to change during flight. But the design engineer requires knowing how every design decision is going to affect lift, thrust, drag, and weight, and thus influence acceleration. She starts with things like fuselage diameter, wing area, drag coefficients, length of air craft - these things don’t really get monitored during normal flight, because they tend not to change much. But for the designer, these are critical.
For me to design a sustainable system, I would need measurements that are universal, repeatable objective, independent of but sensitive to: scale, culture, climate, resource availability, technology, and an undefined future. In my work, I have found the only universal units at a community scale have to be the time to meet needs, the scale of ecological impact, and how well needs are being met. We could use Planetary Boundaries or Ecological Footprint - the semantics of the math would change, but the results would be effectively the same.
I agree that GDP is a poor indicator. It is used because it is assumed that if all other things remain equal, a raising GDP indicates a rising quality of life (albeit very non-linearly). The trouble is, we are designing for the indicator (so it’s becoming useless) and not everything else is remaining equal. It is easy to show how a rising GDP that concentrates wealth would increase disparity, and lower the quality of life for all. Yet we wont distinguish between increasing or decreasing disparity, because ‘growth is good’. Which is foolish - good growth is good, and bad growth is bad. And if one’s ecological footprint is bigger than one’s available biocapacity, we have to seriously question what ‘growth’ is good.
I would, instead, use the time that people would use to meet their needs, once all over-consumed resources cease to be available, and as if all needs were being met. And that last bit is where the heart of the matter lies - our communities, families, and individuals have obstructions that prevent needs from being met (tribal fundamentalism, gender fundamentalism, substance abuse, domestic abuse, etc… the list is long and illustrious). To vastly improve quality of life, these obstructions need to be identified and removed. Which isn’t something that either economists or engineers do well, but it’s where the greatest return on investment will come from.

Looks like my article doesn’t convey my intent properly.
I only chose the example of the plane to show the fixation on GDP as crazy!
GDP gets undeserved attention, it distorts our view of the world.
As you can see, this incentive figure has massive consequences. A scoreboard like the doughnut would have it too, but in a positive sense.

The power of measurement depends on its survey and transparency in communication

To All

Governments, of course, use a host of GDP-related or component measurements to take their economic decisions. As a single abstract figure summing up a myriad transactions ‘… GDP is a poor indicator (DougNuttall) and explains nothing, but it is unfeasable to communicate to the population with a host of figures; each of them accompanied with an acronym. The best advice that can be given is the German proverb: ‘In der Beschrenkung zeigt sich der Meister’; one has to come with a limited well chosen and defined selection. The immediate arising question than is of course how to choose the limiting number of indicators that are the same time mostly explaining.
Every citizen experiences wellbeing in its own personal way.

The communicated rise or shrink of the GDP, in the past period, is by no one experienced as such but varies between deplorable shrink and extreme growth of wellbeing. People, however, need and want to know how singular or general their personal experience is, in order to be able to correctly evaluate the possible prospects and to know more or less what their position is on the scale of (in)equality. That is the value of general indicators: beacons.

What is communicated with a limited number of indicators forms only the starting point for the evaluation of the personal situation, because the impact and importance of every indicator is different per person, for individual needs, expectations and possibilities are not standardized.
To define and choose a concise set of indicators the monetized GDP has to be broken down and completed with non-monetized flows to reflect the main categories of flows that influence and determine the individual feeling of wellbeing.

The totality of economic entities that produce the GDP comprises three essentially different groups: the households, the public setor, and the private sector. Households are the central group where people live: ‘… economics starts and ends with people.’ (Roycdavies). Public and private sectors exist for the households.

For an individual it does not matter from which ones of the three groups the inputs of his wellbeing come. The monetized inputs do not originate either from the public or the private sector because there is no strict division and the overlap between the two varies in time. The needs shown inside the doughnutring specify the material and the mental aspects in which we experience wellbeing. It is approximately in those categories that GDP has to be split to reveal data that citizens can link to their personal experiences.

The completion of GDP consists of two groups of flows that are not monetized.

The first group of flows comes from the ecosystem.

  • The climate quality (hours of sunshine, rainfall, air pollution, wind speeds, etc. ) has effect on anyone of us; the more extreme and unpredictable the climate the more living gets disturbed or even threatend.

  • The potential crops from domestic agriculture: the degree of self-sufficiency in feeding the population is an important indicator.

  • The availability of raw materials (including energy): the speed and the way the critical ones are exploited gives an indication of the autharchy
    The second group of flows arise in the family / the society.

  • The care frome parent(s) and other familymembers

  • The support possible in acquiring knowledge and abilities

  • The free care and support offered by related and friendly families /organizations

The GDP – as total sum of the monetized flows – has to be divded into eight parts:

  • The total incomes (earned by labour, transfers, allowances, and financial) of the households (families).
  • The education production: buildings, equipment, plus personnel.
  • The total health production : buildings, equipment, plus personnel.
  • The utilities production: water, energy, communication (infrastructure and supplies).
  • The production of public transport (infrastructure and supplies)
  • The balance of goods (infrastructures) and services produced by the public sector.
  • The housing production (newly build and renovation).
  • The final goods and services produced by the private sector and available via trade.

If we want politicians to improve policies as to really strive for a ‘regenerative and distributive economy’ they have to understand the coherence of these subdivisions of GDP with the non-monetized flows. Only in that perspective can governments communicate with the population in a honnest and clear way, and consequently govern with respect to the democratic empowerment they have obtained from the voters. Besides they have to keep in mind that those flows and their coherence are not the result of material components that react automatically and predetermined but the reactions of economic entities where people with feelings and preferences take right and incorrect decisions.

The macro-economic understanding of the societal system is very poorly worked out in economics. The Layer Cake of Hazel Henderson is too static and shows no flows, and the (aged) Circular Flows Diagram of Samuelson is too incomplete and misleading to bring the necessary insight and survey to economics students and by extension to the population and the politicians more or less at random elected out of them. ‘people will care enough to make the mature choice’ (Roycdavies) if they survey and understand enough the basics of macro-economics.

My flowsapproach in the ‘Economic Reality System’ (ERS) has offered the possibility to develop several schemes that show in an accessible way the macro-economic structure and coherence. It is from that perspective that I have formulated the proposed principled solution to bridge the gap between ‘the doughnutring’ and the GDP.

André Bequé, 21-10-2020.