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THE CURRENT ECONOMIC CRISIS DUE PARTLY TO OUTDATED STATISTICS
GROSS DOMESTIC PRODUCT AS ECONOMIC INDICATOR NOT EFFECTIVE
Los Angeles, CA (May 16th, 2011) - The current economic mess can be blamed on many things, but it was caused, in part, by the limitations of economic metrics that have been relied on since the era of the Great Depression, according to a recent article in the World Policy Journal (published by SAGE).
Greedy bankers, over-generous Chinese lenders, financially illiterate home buyers, and oblivious regulators all contributed to the crisis, acknowledge the authors, Matthew Bishop and Michael Green. At the same time, our reliance on outdated economic metrics, especially Gross Domestic Product (GDP), helped blind us to the economic risks being taken. What is actually needed, they argue, are statistics that contribute to a richer debate about the broader economic state of society, not singular measurements that distort reality.
Today’s crisis has demonstrated that GDP and many other old economic performance indicators, which ushered in dramatic improvements in economic policy, are unreliable in the context of the 21st century’s globalized economy, and can’t be expected to reflect general quality of life. New kinds of statistics are needed to understand the increasingly complex relationship between economic growth and social progress.
Yet it’s not only macroeconomic metrics that need to be updated. Current methods of measuring the success if individual firms are also flawed and must be overhauled. Companies do not create just financial value alone. They also generate (or destroy) social and environmental value, which needs to be included in any evaluation of corporate success.
“Rewriting the rules about what we value and how we value it is not going to be easy. We will all have to engage with a world of blurred statistical lines and uncertain judgments,” write the authors in the article. “Since we are, to a large degree, what we measure, we will only build stronger economies and healthier societies if we start to measure what we want to be.”
The article, “We Are What We Measure,” in World Policy Journal, is available free for a limited time at: http://wpj.sagepub.com/content/28/1/11.full.pdf+html.
World Policy Journal, founded in 1983, is the flagship publication of the World Policy Institute, a leading global think tank. The Journal publishes lively, intelligent writing from both distinguished and emerging thinkers around the globe, challenging conventional wisdom and offering new perspectives on crucial world issues. Covering such issues as geopolitical and economic shifts, global security, conflict and peace building, immigration, resource scarcity, and cultural and social change, the journal is read by policy and thought leaders at the highest levels. http://wpj.sagepub.com
The World Policy Institute, a non-partisan global think tank based in New York City since 1961, engages fresh ideas and new voices from around the world to address critical shared challenges. Through policy analysis and public debate, it seeks and promotes cooperative policy solutions in support of an inclusive and sustainable global market economy, effective and fair global governance, and collaborative approaches to security. www.worldpolicy.org
SAGE is a leading international publisher of journals, books, and electronic media for academic, educational, and professional markets. Since 1965, SAGE has helped inform and educate a global community of scholars, practitioners, researchers, and students spanning a wide range of subject areas including business, humanities, social sciences, and science, technology, and medicine. An independent company, SAGE has principal offices in Los Angeles, London, New Delhi, Singapore and Washington DC. www.sagepublications.com