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Home made but global: ANDI will measure the future Australians want

September 11, 2014
by Guest author

BLIToday’s post is from Mike Salvaris, Director, Australian National Development Index (ANDI) Ltd

The Australian National Development Index (ANDI) could fairly be described as ambitious. It’s a five year national project to engage half a million citizens and a large team of university researchers in developing a new set of national progress measures. ANDI has evolved organically over time, and its present form reflects both its local origins and Australia’s participation in the larger global movement to develop societal progress measures “beyond GDP”.

How ANDI developed

Australian work in this field goes back at least 20 years. In 1993, a group of researchers and community groups successfully petitioned the Australian Parliament to set up an enquiry into new measures of national well-being. A Senate report in 1996 approved the idea and recommended that the Australian Bureau of Statistics (ABS) work with researchers, policy makers and community groups on this task. Two years later, Australia saw its first national conference on measuring progress which drew together several hundred researchers, policy makers and citizens from many different fields of social progress. In 2002 the ABS became the world’s first National Statistics Organisation to develop a new statistical model for measuring national progress; rather than simply putting existing data together in a new combination, it was based firmly on the idea that to measure a society’s progress, you must first be able to describe and define clearly what social progress looks like. (Sadly this pioneering project was discontinued this year due to agency budget cuts.)

Fast forward to 2008: a newly elected Labor government decides to convene the nation’s first ‘National Ideas Summit’, seeking new projects and new thinking for Australia’s next decade. The idea of an Australian National Development Index based on extensive community engagement and research was highly rated. Two years later, ANDI became a national, not-for-profit, citizen-owned company with a Board of Directors that included a number of eminent Australians.

Mike Salvaris explains the Australian National Development Index (ANDI) in The Zone.

In the last decade, the quest for better measures of progress and well-being has truly become a “new global movement”, as the OECD described it, noting some seventy current projects around the world. And while the OECD has played a crucial leadership role in the process through the Better Life Initiative, the movement itself has built up from the convergence of many different streams over perhaps forty years. Environmentalism, the women’s movement, the local community well-being movement, the UN Development Program and the example of world leading projects like the UN Human Development Index, Bhutan’s Gross National Happiness Index and the Canadian Index of Wellbeing and the OECD’s own earlier work on social indicators in the 1980s – all of these have played a part in the journey.

Australia has been both a contributor and a major beneficiary in this worldwide movement, so vigorously championed by the OECD. Australian researchers, policy makers and community leaders have been part of most of the key OECD forums and meetings, but also kept in touch with colleagues and projects all over the world: not just those in our part of it (Thailand, Japan, Bhutan, New Zealand etc), but in Europe, Canada, USA and Latin America.

In trying to design the best national model we can for Australia, we are very conscious of learning from global ‘best practice’. Today, with so many ideas and so many different projects in this field, there is much to choose from. But perhaps we should start with the common values and the shared experience that underlies most of these various endeavours.

What have we learned?

Two years ago at the Delhi World Forum, I tried to identify what I thought were the key conclusions and agreements that have emerged from this decade of intensive global work and thought about redefining society’s progress, and I’ve listed them below. These are now largely embodied in research articles and reports (like the Stiglitz-Sen-Fitoussi commission’s) but also in broader formal declarations like the Istanbul Declaration of 2009 and the Delhi OECD World Forum Communiqué in 2012.

  • GDP may be a good measure of economic output but it is a poor measure of the quality and wellbeing of society as whole, and using it this way can distort policy outcomes in practice.
  • A new model of societal progress is needed, not just new measures. True progress is an increase in equitable and sustainable wellbeing, not just in economic production.
  • Measures of true societal progress must integrate the economic, social, cultural, environmental and governance dimensions of progress; and they must consider the subjective wellbeing of people and the qualities of the society, such as justice and sustainability, not just the material outcomes.
  • The task of developing new progress measures is one that must engage citizens, scientists and policymakers. The process can be an important new tool to strengthen democracy, reverse the growing alienation of citizens, and create new shared visions of national progress.
  • It is now time to apply these new measures and processes in practice, to planning, policy-making and government, in the media and the community.

ANDI’s innovations

ANDI has taken all these lessons very seriously. And while we want to build the best features of all these models into our Australian index (allowing for own special priorities and culture) we have chosen to give special emphasis to two features that will make us a little different from our colleagues (I would never say “competitors” in the present context, although it is a term Australians naturally favour).

The first difference will be in the scale and range of ANDI’s community programme (and thus, hopefully, in its contribution to the larger democratic process). ANDI will aim to engage 500 000 Australians from all walks of life and all corners of the nation in a conversation addressing the central question: “What kind of Australia do we want?”. The programme will be carried out over 2 years, through a wide array of platforms and programmes: surveys, focus groups, town hall and kitchen table meetings, social media and blogs, school curricula, film and video. It will be funded from philanthropic, corporate and community sources, and will fully utilise the extensive networks of ANDI’s 60 partner organisations and their two million members.

A second difference is in the index itself: ANDI will produce each year an index of overall national well-being, but also twelve separate indexes and status reports in each key component domain of progress. These domain indexes will be released in different months, in order to maximise publicity, discussion and policy relevance, and aggregated into the national well-being index. The aggregate index will be weighted according to the relative priorities accorded to each of the 12 component domains. This is similar to the weighting process that is possible with the OECD’s Better life Index but in ANDI’s case, the weighting will be based on a national survey rather than the preferences of self selected individuals. Collectively these features will make for a more sophisticated policy-diagnostic tool, with the capacity to identify the key driver of change in progress and wellbeing, not just at the level of broad domains, but within each domain.

Useful links:

OECD Better Life Index

How’s life? 2013 – Measuring well-being

Australian National Development Index (ANDI)

Commission on the Measurement of Economic Performance and Social Progress

In my view: The OECD must take charge of promoting long-term investment in developing country infrastructure

September 10, 2014

LogoReDefine3Today’s post from Sony Kapoor, Managing Director, Re-Define International Think Tank, is one in a series of ‘In my view’ pieces written by prominent authors on issues covered in the Development Co-operation Report 2014: Mobilising resources for sustainable development.

The world of investment faces two major problems.

Problem one is the scarcity – in large swathes of the developing world – of capital in general, and of money for infrastructure investments in particular. Poor infrastructure holds back development, reduces growth potential and imposes additional costs, in particular for the poor who lack access to energy, water, sanitation and transport.

Problem two is the sclerotic, even negative rate of return on listed bonds and equities in many OECD economies. The concentration of the portfolios of many long-term investors in such listed securities also exposes them to high levels of systemic – often hidden – risk.

Most long-term investors would readily buy up chunks of portfolios of infrastructure assets in non-OECD countries to benefit from the significantly higher rate of return over the long term, and to diversify their investments. At the same time, developing economies, where neither governments nor private domestic markets have the capacity and depth to fill the long-term funding gap, are hungry for such capital.

So what’s stopping these investments?

Financial risks in developing countries are well known and often assumed to be much higher than in OECD economies. Also, investing in infrastructure means that investors will find it hard to pull their money out on short notice, and therefore such investments pose liquidity risks.

Despite these easy answers, however, there are three significant caveats:

First, the events of the past few years have demonstrated that on average, political risk and policy uncertainty in developing countries as a whole have fallen, especially in the emerging economies.

Second, OECD economies are also exposed to serious risk factors, such as high levels of indebtedness and demographic decline. As the financial crisis demonstrated, they are also likely to face other “hidden” systemic risks not captured by commonly used risk models and measures.

Third, the kind of risks that dominate in developing countries, such as liquidity risks, may not be real risks for long-term investors (e.g. insurers or sovereign wealth funds). Given that the present portfolios of these investors are dominated by OECD-country investments, any new investments in the developing world may look more attractive and may actually offer a reduction of risk at the portfolio level.

So I ask again: Why aren’t long-term investors investing in developing country infrastructure in a big way?

The biggest constraint is the absence of well-diversified portfolios of infrastructure projects and the fact that no single investor has the financial or operational capacity to develop these. Direct infrastructure investment, particularly in developing countries, is a resource-intensive process.

The G20, together with the OECD and other multilateral institutions such as the World Bank, can facilitate the development of a diversified project pipeline on the one hand, together with mechanisms to ease the participation of long-term investors on the other. This work will involve challenges of co-ordination, more than commitments of scarce public funds.

In my view, the OECD – which uniquely houses financial, development, infrastructure and environmental expertise under one roof – must take charge.

Useful links

OECD work on institutional investors and long-term investment

OECD work on financial markets

The haves and have-nots of education

September 9, 2014
by Brian Keeley

Education at a glanceIf you cling to the ideal of higher education as a force for building fairer societies, these are not encouraging times. Over the past few months, there’s been a wave of criticism suggesting that, rather than driving social mobility, higher education is tending to reinforce social divisions.

Strikingly, some of this criticism has come from people in the heart of higher education. Take William Deresiewicz, who taught for 10 years at the prestigious Yale University. He describes the American higher education as a system that is “exacerbating inequality, retarding social mobility, perpetuating privilege, and creating an elite that is isolated from the society that it’s supposed to lead”. He’s not alone: Suzanne Mettler, who teaches at Cornell, another top U.S. university, argues that “college-going, once associated with opportunity, now engenders something that increasingly resembles a caste system”.

It wasn’t supposed to be like this. Over the course of the 20th century, higher education went from being an elite to a mass phenomenon. As we’ve noted before, it’s estimated that in 1900 there were only around half a million students in higher education worldwide. By 2010, the number had risen to an estimated 177 million.

In the developed countries of today, the expansion of tertiary education, especially after World War II was accompanied by the emergence of a strong middle class – two trends that were not unconnected. A university education was associated with opportunity and social mobility. When the British political leader Neil Kinnock referred to himself in the 1980s as “the first Kinnock in a thousand generations” to go university, he was speaking not just for his own family but for millions of others.

But, today, it seems clear that the benefits of higher education are no longer making their way down through society in quite the same way. The latest evidence comes from the OECD’s Education at a Glance 2014, which looks at the relationship between the education levels of young people and their parents. In basic terms, if you have at least one graduate parent you’re very likely yourself to go to university. But if your parents didn’t go to university, and especially if they didn’t finish secondary school, the odds are much lower.

This relationship between the education levels of parents and their children is key to determining social mobility. Unfortunately, in OECD societies, the relationship seems to be getting stronger, not weaker. The OECD’s adult skills survey found that about 43% of people aged between 45 and 55 had higher levels of education than their parents. Among those aged between 25 and 34, the proportion was just 32%. (Of course, these are averages, and the situation can vary greatly between countries.)

The concern is that this relationship will become even harder to break in the future. That’s because having a college education increasingly determines your earning ability. On average, more than 80% of graduates have a job compared with less than 60% of people who haven’t completed secondary education. And even though too many young graduates are unemployed today, they still have better job prospects than young people with lower levels of education. The income gap between graduates and non-graduates is growing, too.

So, a vicious circle develops. Families where parents are graduates have higher incomes, and relatively more to invest in the education and development of their, who, in turn, are likely themselves to go on to be graduates. By contrast, families where parents don’t have a tertiary qualification are slipping further behind, bringing up children who are less likely to make it to higher education. The result, say some, is that a “bachelor’s degree is the closest thing to a class boundary that exists today.”

But is higher education to blame? In reality, it can only do so much. If pre-school, primary and secondary schools have failed to meet the needs of children from poorer families, it’s unrealistic to ask higher education to leap in and save the day once a young person hits 18.

The real work to make access to tertiary education more equitable has to begin much earlier. To start, education systems need to ensure that students from poorer families have the qualifications they need to go to university. As the OECD’s PISA programme has shown, some countries do a much better job than others of minimising the impact of social background on how well students do in school.

School systems also need to do a better job of raising students’ expectations, regardless of their family background. And they need to ensure that young people with the potential to be the first in their family to go to college have the information they need to make the right education choices.

Useful links

Education at a Glance 2014 (OECD, 2014)

Find out more about Education at a Glance 2014 at the OECD educationtoday blog and follow the launch on Twitter.

PISA 2012 Results: Excellence through Equity – Giving Every Student the Chance to Succeed (OECD, 2014)

OECD Education GPS – data on education policies and practices, opportunities and outcomes.

 

From a mechanical study of static equilibria to a science of human behavior?

September 8, 2014
tags:
by Guest author

1914 2014To mark the centenary of The First World War, we will be publishing a series of articles looking at what has changed over the last century in a number of domains. In today’s post, Professor K. Vela Velupillai of Trento University and The New School, New York, discusses economic theory.

When Archduke Ferdinand was assassinated on 28th June, 1914, economic theory was very much a European “monopoly” – with only a few isolated contributions by great American economists – notably Irving Fisher – to the lasting development of the subject, none of whom would reach the pioneering status of a Walras, Pareto or the young Schumpeter. So this is very much a Eurocentric narrative, for that was the way the story of economic theory in 1914 seemed, even at that time, to the pioneers of the field. It was to Vienna, Lausanne and Cambridge that the narrator of the origins of neoclassical economic theory turned, or to France, England and Scotland, for the pioneering work of the classical economists.

That being said, the most important event on the eve of August 1914 from the point of view of monetary theory and policy, was the establishment of the US Federal Reserve system, with the Federal Reserve Act of 23rd December, 1913. It far exceeds in significance the creation of the European Central Bank and the Euro Currency area, from every point of view, but particularly in the monetary policy ramifications in this era of so-called globalization of currency markets (even if not of labour markets and, to a lesser extent, commodity markets).

The Federal Reserve Act of December, 1913 and the birth of modern macroeconomics – especially at the hands of Knut Wicksell, were the result of the bimetallist controversy in the US in 19th century (using both silver and gold in the monetary standard), and the 20-year period of deflation from 1873 to 1893. Thus, the golden era of the gold standard – with its close ‘cousin’, the gold exchange standard – came to occupy the seemingly impregnable institutional framework for the conduct of monetary policy in almost all the (then) advanced industrial countries. It was to take the monetary dislocation and disorientation caused first by the hyperinflation in the immediate post WWI years and then the Great Depression before these golden fetters were discarded. But they would always hover in the wings of orthodoxy and its eternal extolling of the virtues of monetary neutrality.

Back to the one or two of the broader arenas of theory, in those halcyon, pre-WWI years. A.N. Whitehead and Bertrand Russell’s monumental Principia Mathematica had been completed in 1913, the same year, Diederik Korteweg vacated the Chair of Mathematics at the University of Amsterdam in favour of Luitzen Brouwer, whose inaugural lecture on Intuitionism and Formalism was to throw down the gauntlet to the Logicism of Principia Mathematica (the view that some or all of mathematics can be reduced to formal logic) and the Formalism David Hilbert. In April of the following year Wittgenstein began writing what eventually came to be the Tractatus Logico-Philosophicus, working on it all through the war while on active service and a prisoner.

Just as the hostilities started, Dennis Robertson submitted A Study of Industrial Fluctuation (note: Fluctuation – not Fluctuations!) for a Fellowship election at Trinity College Cambridge. There is not a single mathematical equation or formula in this wonderfully “modern” book, with a message that is still relevant – although there are graphs, charts and tables galore. The one graph was prefaced with the characteristic Robertsonian wit: “Diagrammatic representation, though not completely satisfactory, will perhaps be found useful by some.”

There are no mathematical equations in Keynes’ first published book either, Indian Currency and Finance, published in 1913[1], and there is no evidence whatsoever in the 600 or so pages of Wesley C. Mitchell’s Business Cycles that such a thing was even envisaged by that great founding father of the NBER (and of my own New School University!). What, alas, many at the so-called frontiers of research in economic theory and behavioural economics missed was the exceptionally prescient Human Behavior and Economics: A Survey of Recent Literature by Mitchell a year later in (1914) that ends by saying: “[I]n embracing this opportunity [to profit by and to share in the work of contemporary psychologists] economics will assume a new character. It will cease to be a system of pecuniary logic, a mechanical study of static equilibria under non-existent conditions, and become a science of human behavior.”

It is particularly pleasing to remember that this classic by Mitchell is succeeded in the same issue of the Quarterly Journal of Economics, by Maynard Keynes’s own nascent contribution to a field in which he was to stride like a colossus, in the interwar period: an institutional analysis of monetary experiences.

Mitchell’s plea for an economic theory, underpinned by a theoretically sound psychology, seems to have been answered by the practitioners – and claims – of a version of behavioural economics, without sacrificing their homage to the altar of the neoclassical triptych: preferences, endowments and technology. Thorstein Veblen’s passionate advocacy of an evolutionary approach to economic theory – to which Marshall was not unsympathetic – has become a new orthodoxy at the hands of evolutionary game theory.

The supreme dominance of the so-called fundamental theorems of welfare economics would, I am sure, induce discomfort in Marshall and Pigou. The “old” welfare economics they carefully (even lovingly) developed, so that the economic theory they fashioned as a development of Ricardian equilibrium economics could serve as a basis for enlightened policy, became the “new” welfare economics at the hands of Kaldor and Hicks. This was basis for the development of the fundamental theorems of welfare economics – although the mathematical framework in which it was encapsulated, primarily by Arrow and Debreu (but not in their fundamental joint paper of 1954) – which is the basis for the nihilistic policy frameworks of every kind of orthodoxy, from Hayek to Lucas, via Friedman.

How much of the economic theory that is being taught, and practiced, via an underpinning of economic policy – both monetary and real – couched in monumentally irrelevant mathematics, would be strange and unfamiliar to our neoclassical masters? To Jevons and Marshall, to Walras and Pareto, to Menger and Wicksell, to Edgeworth and Pigou? None of them may well be sure-footed in the non-computational, uncomputable, undecidable, unsolvable mathematics that encapsulates the formal economic theory they fashioned, in the golden decade culminating in the tragic year of 1914.

But they would be eminently comfortable in the safely ensconced orthodox economic theory of today – although Marshall may be an outlier and Wicksell a dissenter!

Useful links

If you’d like to find out which famous painter was interested in the non-Euclidean geometry of relativity in Einstein’s physics, or who invented purchasing power parity, download the pdf of the unabridged version of Vela’s article here.

OECD work on economics

 

[1] Any serious understanding of the changing monetary stances adopted by Keynes, both in the foundations of the monetary theory he continued to fashion, and re-fashion, and – more importantly – on the monetary policy frameworks he developed, with imaginative flair and theoretical audacity, in the whole interwar period, can best be understood via his intensive work, in the two years in the India Office.

Is happiness a woman ?

September 5, 2014
by Guest author

BLIToday’s post is by Gaël Brulé, PhD student at Erasmus University Rotterdam, Scientific Director of Spinoza Factory

Is happiness a woman ? That is at least what Nietzsche wrote in Thus spoke Zarathustra, a philosophical poem in which Zarathustra (the Persian name of Zoroaster, the founder of Zoroastrianism, an old Iranian religious philosophy) ironically says “Happiness runs after me, because I do not run after women. Happiness is the woman itself”.

This may seem a bit opaque, especially when you know the complicated relationship Nietzsche had with women, but nonetheless it is interesting to observe that in the scientific literature, the vast majority of happiness studies seem to indicate that women are happier than men, even if recent studies show that this gap in gender happiness has eroded in the last decades. They are happier married, happier when single, at work and pretty much throughout their life; only retired and divorced men seem slightly happier than their feminine counterparts.

If the results seem to go pretty much all in the same direction, it is thus legitimate and interesting to wonder why this is the case and, going a bit further, to see if we can give happiness a sex or a gender. Let’s see if values can shed light on this difference in happiness. Sociologist Geert Hofstede has defined a range of indicators to compare cultures in countries according to several criteria, such as power distance, individualism, uncertainty avoidance and masculinity /femininity values. Arrindell and Veenhoven have shown that feminine values are more conducive to happiness than masculine values.

Hofstede defined the masculine values as linked to action, hierarchy, duty, power and nationalism, whereas feminine values encompass collaboration, intuition, community and egalitarianism. These criteria are very commonly used and at the same regularly criticized. The way they are measured can, indeed, be seen as ethnocentric with western criteria. The way the indicators are built can easily be questioned and the fact that they can overshadow local differences has been highlighted.

Furthermore, the actual labeling of the indexes might be debated and in particular the masculine/feminine one. Unless it is proven otherwise, these values seem mostly socially constructed, not “natural”, but these labels seem to indicate that there is something natural in the values attributed to men and women. As Georges Orwell famously wrote in his book 1984, ‘if thought corrupts language, language can also corrupt thought’. Therefore, it might be relevant to change the labels of the two sets of values: the “feminine” cohesive values might be called horizontal values whereas the differentiating, comparative, “masculine” values could be seen as vertical values. After this semantic reflection, let’s explore what these values can reveal in terms of happiness.

The scientific literature shows that too much hierarchy isn’t a good basis for happiness to flourish. Too much competition has also been shown to hinder happiness, whereas the positive effects of collaboration on happiness have largely been proved. The “masculine” values are also linked to external values such as social status and materialism, which are negatively correlated with happiness (money is positively correlated with happiness, up to a point, but actively seeking it is not). The “feminine” societal matrix seems, therefore, a more fertile ground for happiness than the masculine one. Thus, the difference in happiness between the two sexes might be due to a difference in happiness between genders.

A macro-study shows a particularly revealing view: when comparing the countries on Hofstede’s male/female scale, one realizes that all the happiest countries are those whose structure is the most horizontal (Sweden, Denmark, Iceland), while countries endorsing vertical, “masculine” values (for instance Japan) are typically much lower in terms of happiness.

At first sight, men seem to largely benefit from a system that has been built by the patriarchate. Men are overrepresented in big companies, governments, prestigious positions. Iin brief, they largely occupy practically every high position and keep the key positions of the current economic system. Then how could men be less happy than women? Would men be the first victims of a system created by the patriarchate? One could wonder. Indeed, for instance, the very DNA of capitalism is largely anchored in “masculine” values: maximization of profits, struggle for prestige, competition.

By strictly separating gender roles – production roles for men, support roles for women – on top of keeping women away from the highest positions, has the patriarchate forced men to endorse values that handicap them in terms of happiness? It seems so. At a micro level, structures that leave the most space for women see not only their level of happiness rising, but also men’s level of happiness. From a certain “masculine” (as socially constructed) point of view, happiness is a zero-sum game, a win-lose situation. From a “feminine” point of view it is rather an expansive resource that can increase when shared.

This could encourage people who are afraid of gender studies to follow the path of leveling differences between genders. Down the path, more happiness for men and women. Letting go of the framework of the past can be hard and might hurt, but gentlemen, let us express our feminine side, it’s probably the best way towards happiness, for women, for us, for society.

Useful links

OECD Better Life Index

OECD work on gender

 

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