Counting what really counts

by niamh on March 26, 2012

I’m just back from a conference in Boston where there was a great deal of discussion about the idea of the ‘social investment welfare state’ which I found really fascinating. Many countries have moved in recent years to go beyond ‘passive’ social transfers and to ‘activate’ their labour force. But there are many different ways of doing this. The interesting thing is that the policies that are the most socially equitable are now turning out to be the most economically effective too. New books (1) by Nathalie Morel, Bruno Palier, and Joakim Palme and by Anton Hemerijck show that the countries that invest heavily in early childhood education, in continuous education opportunity, in high-quality training schemes, and in making it easier for women to take part in the workforce,  have both higher growth and productivity rates and less inequality and poverty. An important part of the package is to have high levels of secure benefits as transition measures when people are not in employment or in training. And it seems we don’t already have to be Sweden or the Netherlands before we can start to do relevant things at all.

However, one of the implications of work in this field is that our standard ways of doing national accounts work against adopting the right priorities. Relevant expenditures are counted as transfer or consumption spending rather than investment spending. So it’s all too easy for governments to cut them back in recessionary times.

Remember Sarkozy’s Commission on the on the Measurement of Economic Performance and Social Progress, prepared by Amartya Sen, Joseph Stiglitz, and others? It opened up the question of what growth is for anyway, and what we count when we measure GDP in ways that prioritized ‘societal well-being, as well as measures of economic, environmental, and social sustainability’. The Institute for New Economic Thinking sponsors lots of interesting initiatives in economic theory and comparative analysis.

In historical terms, we are still in a very early phase of response to the latest global crisis. We don’t yet know if it will prove to be a turning-point in the dominant economic paradigm. Lots of people are starting to do the necessary thinking. They need to get out into the wider political debate.

(1) The first of these book is expensive*, but it should be in paperback edition by summer; the second will be published in the autumn. *Update – the Policy Press website quotes what may be the best price to date.

{ 51 comments }

1

J. Otto Pohl 03.26.12 at 7:53 pm

What and how things get counted can be tricky. Most of the economy here is referred to as “informal.” Which means it is never recorded anywhere by anybody. So that the real figures for things like GDP are always much higher than the official recorded figures. When I go and buy something from a market woman the money disappears from any all accounting until such time as somebody gets it during its circulation and uses it in the smaller “formal” economy.

2

John Quiggin 03.26.12 at 7:58 pm

A very wonky comment, but statistical agencies could take a significant step forward simply by headlining Net National Income rather than Gross Domestic Product when they publish the national accounts they currently compute. GDP is of interest only for short-run macroeconomic analysis, and of dubious value even there. Net National Income is at least relevant to welfare and a starting point for a more comprehensive analysis. As an illustration of the difference, I believe Ireland reports Gross National Product as well as/instead of GDP because it excludes income flowing to (and from) foreigners. More here
http://johnquiggin.com/2010/05/06/the-central-flaw-in-the-henry-review/

3

Ingrid Robeyns 03.26.12 at 8:28 pm

There is the Netherlands before the current government, and the Netherlands which the current government is shaping. And the latter will surely be less supportive for children, mothers (parents) who want to hold jobs, teachers, the unemployed, and those in education at all levels. The worst-hit may well be the disabled and those with mental health problems – we had a generous, autonomy-enhancing system of support for the disabled, but it’s been rapidly broken down. Idem ditto for special needs education, which is being cut quite drastically, because the members of the ruling government believe that there are too many children in special needs education (you know, these kids don’t really have autism, their parents are dramatically failing in their parenting and therefore they seek a label/diagnosis for the kid so that someone else can take over raising them, so obviously we’re wasting our taxpayers money on unnecessary special needs education – that kind of bullshit).
In the meantime the privileges of the better-off (like home owners) are not touched under the arguments that ‘a government needs to be reliable’ or ‘we promised it to our voters’. Too bad that the children in special needs education can’t vote, and that their parents are too tired to get properly organized.
Argh, I need to return to decent blogging to tell you the details, but first I need to finish two dramatically overdue papers and grade a pile of essays. In any case, as of 2012 you can skip the Netherlands from your list of ‘generously caring welfare states’. In empirical studies it will take a few years before those effects emerge, but 2012 will go down in Dutch history as the moment the welfare state lost much of its moral glance.

4

engels 03.26.12 at 8:35 pm

The interesting thing is that the policies that are the most socially equitable are now turning out to be the most economically effective too.

Happy coincidence!

5

Colin Danby 03.26.12 at 10:02 pm

A larger question re investment: in the postwar period when international standardization of national accounting was just beginning, the U.S. gov’t took a hard line against distinguishing an investment component of public spending. Does anyone know why?

6

Tedra Osell 03.26.12 at 11:04 pm

“one of the implications of work in this field is that our standard ways of doing national accounts work against adopting the right priorities. Relevant expenditures are counted as transfer or consumption spending rather than investment spending. So it’s all too easy for governments to cut them back in recessionary times.”

I would love to know more about this, like, with examples and stuff.

7

leederick 03.26.12 at 11:21 pm

“In historical terms, we are still in a very early phase of response to the latest global crisis. We don’t yet know if it will prove to be a turning-point in the dominant economic paradigm. Lots of people are starting to do the necessary thinking.”

I think this would be a great time for those people to shut the fuck up.

Seriously, for the last 6 decades we’ve had assorted malcontents try to wreak the system of national accounts on the basis that it fails to value the contribution of women, or doesn’t properly measure wellbeing, or doesn’t accurately reflect the economic worth of the bunny population. Would it be too much to ask that recent events should give these people cause to reflect on their own position? Lest we forget, national accounts were invented as a means for measuring the paid economy and enabling the sort of government intervention that would help avoid a second great depression. The global crisis has totally validated the dominant economic paradigm in national accounting.

‘Counting what really counts’ is a great example of leftist zombie economics. It’s been completely disproved by recent events, no-one who has any understanding of the last five years should give it any credence. And we should all be very thankful that national accounting focused on the money economy.

8

Colin Danby 03.27.12 at 12:13 am

Measured national income typically includes implicit rents for owner-occupied housing and the implicit value of food consumed by farming households, even though no money changes hands in either case. Money versus non-money is *not* what draws the production boundary. And the “invented for” question is much more complex — go back and read Kuznets some time.

More broadly, preparing additional measures does not mean one stops doing the measures that may be most directly relevant to macro policy — “leederick” is getting all upset about a false choice.

For folks more genuinely interested in these issues, there are several decades of work, now, on the ways activities move across the formal production boundary during macro crises — I’ll just mention one of the most famous, Beneria and Roldan’s 1987 _Crossroads of Class and Gender_, on the way working-class Mexican households coped with the 1982 crisis. This is relevant to how we understand how crises work and what policy does, as well as longer-term effects — part of what the recent DeLong and Summers paper refers to as hysteresis.

9

John Quiggin 03.27.12 at 2:04 am

As indicated in the post, one critical problem is the classification of education and health expenditures as consumption rather than investment. This doesn’t affect aggregates like GDP but it does produce misleading outcomes when applied to long-run macro policy. The money-nonmoney boundary is important here, but not in the obvious way. The difficulty is that while the costs of health and education investment are easily monetised, the benefits are not.

A closely related problem is the classification of full-time students as Not In the Labour Force, and the valuation of their effort at zero (admittedly, for some students I’ve seen that would be about right). We would probably have a better picture of how the labour market was performing, especially in the long term, if we treated full-time students as being employed.

10

Enda H 03.27.12 at 3:04 am

New books (1) by Nathalie Morel, Bruno Palier, and Joakim Palme and by Anton Hemerijck show that the countries that invest heavily in early childhood education, in continuous education opportunity, in high-quality training schemes, and in making it easier for women to take part in the workforce, have both higher growth and productivity rates and less inequality and poverty

Hi Niamh,
The book is $110. Could you give an indication as to what sort of analysis is included please? Is it qualitative, more ‘Spirit Level’/cross-country correlations stuff, or is there more rigorous identification as well?

As an illustration of the difference, I believe Ireland reports Gross National Product as well as/instead of GDP because it excludes income flowing to (and from) foreigners.

Correct. They report both, and the media is aware that GNP is more relevant.

11

niamh 03.27.12 at 3:12 am

leederick, I consider your contribution rude and unhelpful. Consider yourself warned. If you don’t like what you read here, nobody is making you share your ill-mannered thoughts.

Enda H, I haven’t got the Morel/ Palier/ Palme book yet either, but I’ve seen work by contributors to the volume, and this is serious and well-grounded analytical social science. With numbers.

12

John Quiggin 03.27.12 at 4:39 am

@niamh Well said! We at CT have all had enough of this kind of thing. It would have been perfectly possible to defend the usefulness of the standard national accounts without being abusive.

13

Fr. 03.27.12 at 5:06 am

Enda H—I’ve read my fair share of Bruno Palier’s comparative work on pension regimes and health systems, and I can attest that his work is excellently documented and empirically grounded. The same applies to his recent ‘Long Goodbye’ edited collection/book. I obviously can’t say anything about this new title, but given how much I’ve learnt from his past publications, I’m sure to take a look at this one too. You might find a few drafts from the book in recent ESPANET or CES proceedings.

Hope this helps!

14

Peter T 03.27.12 at 6:32 am

Can I connect this to the previous thread? The kind of people under attack there (college teachers) are, inter alia, upholders of the notion that the world has many distinct, incommensurate standards of value, not one. That the worth of knowing Latin, or poetry, is not in what people will pay to be taught them, that the value of a library is not in the cost of the books. People, in short, who find this sort of thing absurd:

http://www.wri.org/publication/content/8381.

Who would observe that this is like noting that breathing is worth $10 a minute, with the implication that if you stop breathing you will be MUCH richer.

The trick is not in counting these things correctly, it’s in insisting that counting them is silly. The pressure to count them comes from people who, finding making things and owning things steadily less profitable, now make their money selling things (more and more, selling money). Eating their own civilisation from the feet up. They are abetted by the numerous teenagers who imagine that they will be ones to profit – just as previous generations of the young imagined that all their wars would be victorious. See Ron Paul and following.

15

Chris Bertram 03.27.12 at 7:06 am

_countries that invest heavily in early childhood education, in continuous education opportunity, in high-quality training schemes, and in making it easier for women to take part in the workforce_

OK, but that sounds like a clip from a New Labour speech circa 1990-something. All of those things were heavily promoted in the UK then, but (I’m guessing here) I doubt that the UK comes across as one of the virtuous countries that has done these things. So why not?

_have both higher growth and productivity rates and less inequality and poverty._

These things are emerging from the analysis as a _consequence_ of the investment. Maybe they are. But my guess is that the reason New Labour’s promotion of these goals has proved so temporary a feature of British life is

(a) that when we hit the growth buffers these things as the first to go, because
(b) we have a lot of inequality and poverty: which means that the political constituency for investment in childcare and education isn’t there in the same way.

So the causal relationship is often the other way round: a prosperous and egalitarian society will invest in these things; a stressed and inegalitarian one will not.

Another point (and this comes from someone who shares your scepticism about the value of standard growth measures and indeed of standard growth) – If I were a wonk in the Treasury being told that we need to make more social investment of this kind (and being shown the studies) I’d be very wary that if we promoted this on growth grounds then pretty soon a bunch of chancers would come along, trying to get their paws on public money by dressing up some schemes as social investment of this very kind. Which doesn’t mean it shouldn’t be done, but noticing the such investment is associated _ex post_ with better outcomes doesn’t easily get you to a policy that actually promotes them.

16

Tim Wilkinson 03.27.12 at 8:51 am

I’m sure all this has already been taken into account by market actors – after all they have perfect information (with notably rare exceptions which can be dealt with piecemeal).

BTW talking of postwar national accounting conventions and money/non-money issues, there is of course the imputed value of financial intermediation (i.e. banking), now described as ‘indirectly measured’ to make it sound better. This is FISIM, and was introduced to resolve ‘the paradox of a prosperous industry showing a negligibly positive, or even negative, contribution to the national product’.

See http://crookedtimber.org/2010/05/12/two-points-in-lieu-of-an-argument/#comment-317479

(A live link to the passage in question, is http://onstest.landmarkgovernment.co.uk/ons/rel/elmr/economic-and-labour-market-review/no–5–may-2007/improving-the-measurement-of-banking-services-in-the-uk-national-accounts.pdf )

17

niamh 03.27.12 at 11:53 am

In my view, the debate about which social programmes are to be prioritized and in what way is only beginning, not closed off because one or other national variant proved too thinly rooted politically or too costly in a downturn. Similarly, the debate about building social coalitions, and generating support for new ways of linking policies on labour market participation, skills acquisition, and social protection, is still an open topic. I’ll return to these topics at a later date.

18

reason 03.27.12 at 11:54 am

“In historical terms, we are still in a very early phase of response to the latest global crisis. We don’t yet know if it will prove to be a turning-point in the dominant economic paradigm. Lots of people are starting to do the necessary thinking. They need to get out into the wider political debate.”

One thing I’ve noticed from several places, that seems to be ignored in many places, is the importance of the current account balance (or to put the same thing another way – the importance of international financial flows). Could it be that the people who make their money from international financial flows, don’t want it to be noticed?

19

reason 03.27.12 at 12:00 pm

leederick
“The global crisis has totally validated the dominant economic paradigm in national accounting.”

Really? I would have thought that “the great moderation” illustrated perfectly that the things we had concentrated on measuring, weren’t the only things of importance.

20

reason 03.27.12 at 12:03 pm

Perhaps I should refine that thought a bit.

“That the things we had concentrated on TARGETING, weren’t the only things of importance”.

21

Enda H 03.27.12 at 1:33 pm

@Niamh

Enda H, I haven’t got the Morel/ Palier/ Palme book yet either, but I’ve seen work by contributors to the volume, and this is serious and well-grounded analytical social science.

@Fr.

I can attest that his work is excellently documented and empirically grounded.

Thanks for the replies, folks.

Empirical foundation is great, but an awful lot of social science lacks an identification/causal slant. I’m not saying cross-country correlations are useless, but I’m not surprised high growth countries have nicer policies. (For example, I don’t believe Ireland’s views on welfare provision changed all that much over the past ten years, but there’s a strong correlation between high growth=generous social policy and low growth=less generous social policy there.)

Chris Bertram says it better than I could:

These things are emerging from the analysis as a consequence of the investment. Maybe they are. But […] the causal relationship is often the other way round: a prosperous and egalitarian society will invest in these things; a stressed and inegalitarian one will not.

If either of the works cited in the OP have a good identification strategy, then I’d certainly sit up and listen more than I otherwise would.

22

Anarcissie 03.27.12 at 2:40 pm

Better regulation will save the plantation.

23

mpowell 03.27.12 at 2:56 pm

Leederick was pretty rude, but I have to agree that it would be a big mistake to change the way national accounting is done. Maybe this would work better elsewhere, but in the US I am certain that it would just open the door to a whole new kind of theft of public wealth. Now via the plundering of the treasure under the guise of ‘social investment’. And despite being a big believer in the economic value of early childhood intervention, healthcare and education, it’s hard to see how you would really do this even without the corruption angle. A corporation might buy a physical building and then balance the cost against the value of the acquisition on their balance sheet and earnings reports, but there is some liquidity and certainty with a physical asset (at least some!). R&D is a real investment but it gets accounted for strictly as a cost, and this is almost certainly for the best. And especially when you are talking about public healthcare- the overwhelming majority of the expense will be for the elderly and this is actually a terrible investment from an economic perspective. It simply represents a public decision to allocate resources to make the lives of the elderly better. I think we need to focus on shifting the terms of the debate without attempting to change the accounting standards. After all, I think this is how the Swedes handle it, isn’t it?

24

Tim Wilkinson 03.27.12 at 3:32 pm

Because of course nothing can ever be done except by a profit-making corporation.

(Perhaps this bizarre assumption is supposed to be covered by the caveat Maybe this would work better elsewhere, but in the US…, the idea being that ‘in the US’ means ‘ in the US as it stands’ – which begs the question what exactly we hold constant and what changes are to be deemed politically possible.)

I don’t really see where the argument is in that post anyway – it seems to be a list of personal opinions with little clue as to why anyone should agree with them. Even the few sentences that do explain themselves, such as And especially when you are talking about public healthcare- the overwhelming majority of the expense will be for the elderly and this is actually a terrible investment from an economic perspective., it’s not clear why they are relevant. Report the investment bit as investment, the pure ‘consumption’ bit only as consumption. At what point in that process do the heavens fall, exactly?

25

Almaz Zelleke 03.27.12 at 3:36 pm

Does the Human Development Index not capture some of these inputs to national prosperity that GDP misses? Or is it too blunt an instrument?

26

Watson Ladd 03.27.12 at 3:59 pm

There’s an issue that counting investment as an asset neglects: the quality of an asset is not equal to the spending on it. Chicago spends 4.86 billion dollars on education each year (in the operating budget), to educate 400,000 students (that’s four hundred thousand for you Europeans). Should we count this as a 12,150 dollar investment in each child, even though West Windsor spends the same amount of money and gets much better results? (Sources chicago, ridgewood)
(If anyone knows if I did the accounting wrong, please tell me)

27

leederick 03.27.12 at 9:18 pm

“leederick, I consider your contribution rude and unhelpful.”

Well apologies, I don’t see where I’ve stepped past the comment policy, but of course your thread your rules.

I also don’t think anyone’s laid a finger on my basic point, and I’m particularly sorry my language helped everyone ignore this. This is that although good chunks of economics have been damaged by the financial crisis (EMH, privatisation, trickle-down), national accounting hasn’t been, it’s instead been absolutely vital in attempts to contain the crisis. So not only do I see trying to use the crisis against national accounting as absolutely misguided, I think the recent events count as a real hit for the theories of the ‘counting what really counts’ brigade. They can’t carry on as they were before the crisis.

“In my view, the debate about which social programmes are to be prioritized and in what way is only beginning, not closed off because one or other national variant proved too thinly rooted politically or too costly in a downturn.”

I think you’re missing just how brilliant Chris’ point is. Labour heavily increased education spending (a good thing!), but are we now seeing the fruits of this investment? Not really, we currently have, what 25% youth unemployment vs 10% in 2000. I think that fact alone shows serious problems with the consumption vs. investment suggestion, things are not panning out the way social investment theory suggested and the proposed accounting treatment would seem in the current light to be somewhat Enronish.

28

Colin Danby 03.27.12 at 9:22 pm

Mpowell, I don’t think anyone is talking about stopping making and publishing the measures of GDP and so forth that gov’ts have been doing for the last 60 years. What you would see would be additional measures. (To be really geeky, it’s worth noting that the methodology of national accounting *has* changed over the years in numerous ways.(1) )

Richard Stone, the key figure in standardizing national accounting in the postwar period, envisioned linking them to a much larger set of social statistics(2), a project consistent with what Niamh is describing. What we have today, as the standard nation-level economic data, is a small part of what we could have.

You bring up an interesting argument that I’ve heard in various forms over the years, which is measuring activities and benefits that are currently not measured could, far from unleashing kinder and gentler policy, actually make it easier for authorities to tighten the screws. For example a finding that austerity gets borne is by shifting burdens onto women could just as well be used by a policymaker looking to impose fiercer austerity. It’s hard to dismiss this concern. But we need a way to talk about this without lapsing into extreme _a priori_ positions about the nature of gov’t.

1. Vanoli, André. 2005. _A History Of National Accounting._ IOS Press.
2. Stone, Richard. 1971. _Demographic Accounting and Model Building._ Organization for Economic Cooperation and Development.

29

John Quiggin 03.27.12 at 10:08 pm

@Leederick, as a hint, suggesting that the poster and/or people she quotes with approval should “shut the f*ck up” is regarded as impolite in certain circles, including here at CT. Don’t ask me why, just one of those funny idiosyncrasies we have.

30

Tim Wilkinson 03.27.12 at 10:15 pm

leederick: I also don’t think anyone’s laid a finger on my basic point, … that although good chunks of economics have been damaged by the financial crisis (EMH, privatisation, trickle-down), national accounting hasn’t been

1. Maybe no-one’s particularly interested in that ‘point’, because lots of things haven’t been ‘damaged’ by the financial crisis which are nevertheless rotten to the core.

2. In fact your claim was rather bolder: The global crisis has totally validated the dominant economic paradigm in national accounting. ‘Counting what really counts’ is a great example of leftist zombie economics. It’s been completely disproved by recent events, no-one who has any understanding of the last five years should give it any credence. And we should all be very thankful that national accounting focused on the money economy. Which is just weird, and like mpowell’s contribution consists of a lot of windy assertion.

3. @16 I mentioned, as is my wont whenever a pretext arises, FISIM, which is, just to clarify, clearly a construct specifically reverse-engineered to make the rents flowing to the bankers look like returns to productive activity. (Albeit that if you begin with certain assumptions this can be seen as a technical problem of ‘balancing the books’. Cf. ‘technocrat’.)

4. Even the ‘Executive Director, Financial Stability’ of the Bank of England, not someone you’d expect to view the banks as bloated parasites feeding on the misery of the masses etc., in 2010 said:

Banking contributed to a Great Recession on a scale last seen at the time of the Great Depression. Yet the official statistics on the contribution of the financial sector paint a rather different picture. (pp. 2-3)

And his conclusions, which given they are written in officialese are positively lurid:

First, given its ability to both invigorate and incapacitate large parts of the non-financial economy, there is a strong case for seeking improved means of measuring the true valueadded by the financial sector. As it is rudimentary to its activities, finding a more sophisticated approach to measuring risk, as well as return, within the financial sector would seem to be a priority. The conflation of the two can lead to an overstatement of banks’ contribution to the economy and an understatement of the true risk facing banks and the economy at large. (pp. 22-3)

Second, because banks are in the risk business it should be no surprise that the run-up to crisis was hallmarked by imaginative ways of manufacturing this commodity, with a view to boosting returns to labour and capital. Risk illusion is no accident; it is there by design. It is in bank managers’ interest to make mirages seem like miracles. (p. 23)

Third, finance is anything but monolithic. But understanding of these different business lines is complicated by the absence of reliable data on many of these activities. There are several open questions about the some of these activities, not least those for which returns appear to be high. This includes questions about the risks they embody and about the competitive structure of the markets in which they are traded. (p. 23)

How’s that for a finger?

31

Watson Ladd 03.27.12 at 10:44 pm

Tim, if the banks had all failed the crisis would have been worse. Recessions are by definition caused by people doing nothing. So I don’t see why the contradiction you cite is really a contradiction: the loaning banks did earned returns, but because they weren’t doing as much we had a recession.

32

leederick 03.27.12 at 11:14 pm

@Tim Wilkinson; most the response to the crisis has been intervention packages guided by figures produced by national accounting systems. I think that’s a pretty strong mark in their favour. I don’t really understand your point about how this is all windy assertion and the accounts are rotten – maybe you don’t think intervention hasn’t done any good, or that we’d be better off without those numbers regardless? Want to spell it out?

@ Colin Danby; maybe we’re reading different literatures. If you read deeply enough in the environmentalist, or feminist, or some leftist literature there certainly are people who want to stopping making and publishing measures of GDP and the like. The whole ‘counting what really counts’ movement (at least the rhetoric and, I feel, certainly some of the intent) is a fairly strong attack on the core concepts and practice of national accounting. It’s certainly not “how can we make marginal incremental improvements to a valuable system” it’s “we’re not counting stuff that is worth counting” and a rejection of the approach.

If it’d had been ‘National accounts have proved incredibly valuable and have helped forstall the financial crisis, here are some suggestions for improvement’ I wouldn’t have responded the way I did. But instead we get rhetoric along the lines of ‘we are still in a very early phase of response to the latest global crisis. We don’t yet know if it will prove to be a turning-point in the dominant economic paradigm.’ Really? In this case the dominant paradigm has a lot to be said for it.

@Tim Wilkinson; I’m not conducting a wholesale defence of every accounting policy and estimate. National accounts have been calculated without FISIM, and could be again. I don’t see FISIM as a weakness which undermines the system – in particular it’s largely an internal debate. The people interested in and critical of topics like that tend to be technical accountants, it’s not something the bunny counters or well-being gurus tend to focus on in their critiques.

33

SamChevre 03.27.12 at 11:35 pm

It seems to me that “counting what really counts” needs to start with a fair valuation of non-market labor.

It also seems to me that the headlined findings completely miss this point; more women in the workforce seems to very strongly suggest that the women are moving from non-market to market production, and the statistics are all counting the gain in market production and not offsetting at all for the loss in non-market production.

34

Tim Wilkinson 03.27.12 at 11:59 pm

Watson Ladd: Those sentences don’t appear to bear any salient relation to any of my comments.

leederick: ditto. To windy assertion I’ll add unconvincing bluster and blatant strawmanning. And I’ll throw in the two-step of terrific triviality too.

35

chris 03.28.12 at 12:05 am

It also seems to me that the headlined findings completely miss this point; more women in the workforce seems to very strongly suggest that the women are moving from non-market to market production, and the statistics are all counting the gain in market production and not offsetting at all for the loss in non-market production.

This seems to me like an excellent point. It is of course somewhat papered over by technology gains, which allow a household to be maintained with much less non-market production (compared to the incredibly labor-intensive ways of making meals, let alone cleaning clothes, let alone MAKING clothes, 100 years ago), but if everyone in the household is working full-time outside the home, then someone who is working full-time outside the home is ALSO doing a substantial amount of non-market production. So we might want to rethink how much time/energy it is reasonable for an employer to expect of a full-time worker.

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Colin Danby 03.28.12 at 1:04 am

Leederick I invite you to follow up on the references that Niamh kindly provided us, and see if they make the arguments that you fear. I’ve read most of the gendered macro literature, for example, and I can think of nothing like that.

Sure, there are more radical critiques e.g. Marilyn Waring’s 1988 _If Women Counted_, a smart book by someone with policymaking experience. I don’t agree with all her arguments, but I think I can discuss those differences without shouting obscenities.

I’m in agreement about the usefulness of macro, but to argue that it could not be improved is not only weird but deeply unscientific. You might have inquired politely about what Niamh means by “the dominant economic paradigm,” but as every reader of Brad DeLong’s blog knows, much of the macro establishment has been pretty obtuse over the last few years. To argue for better paradigms is not to argue that existing knowledge is a complete swindle. Try not to fall into these false binaries.

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niamh 03.28.12 at 2:50 am

What follows are some quotes from Morel/ Palier/ Palme, intro and conclusion (thanks Bruno).

BTW the price on the Policy Press website is lower than that quoted above – see:
http://www.policypress.co.uk/display.asp?ISB=9781847429247&

‘In Peter Hall’s now classic formulation, a policy paradigm is “a framework of ideas and standards that specified not only the goals of policy and kind of instruments that can be used to attain them, but also the very nature of the problems they are meant to be addressing”…

What we measure affects our view of the world and in the end what we do. If our measurements are flawed, decisions may be distorted…

Social policies should be seen as a productive factor, essential to economic development and to employment growth. This represents a fundamental break from the neoliberal view of social policy as a cost and a hindrance to economic and employment growth…
The social policies developed under the Keynesian epoch were mainly ‘passive’ social policies to promote and sustain demand, notably through the development of cash-transfer programmes in the form of social insurance…
Where Keynesian and neoliberal macroeconomic policy share in common a purely quantitative understanding of work and labour (Keynesians aim at creating demand for jobs in general while neoliberal economists aim at increasing the supply of labour in general), the social investment perspective focuses more attention on the processes through which labour is transformed (through upskilling and learning)…

In these times of ‘aftershock’, we need to complement demand-oriented Keynesian measures with supply-side-oriented instruments that go beyond the neoliberal deregulation of labour markets, lowering of labour costs and provision of incentives for the unemployed to take poorly paid jobs, and instead upskill the unemployed by providing them with the necessary learning capacities…

The social investment approach is a ‘package deal’… Equality is a crucial element, and the quality of programmes is of critical importance. Equally important is the understanding that ‘protection’ must remain an important function of the welfare state that works as a necessary complement to activation… Furthermore, the life course perspective suggests that policies can be effective only of the whole chain is maintained, and if it is aimed at the whole population and not reserved for the few…’

38

ajay 03.28.12 at 3:31 pm

R&D is a real investment but it gets accounted for strictly as a cost, and this is almost certainly for the best… I think we need to focus on shifting the terms of the debate without attempting to change the accounting standards.

Setting aside how politically practical this would be, it certainly sounds like the best approach. A lot of spending – at corporate and governmental level – will pay off down the line, but that shouldn’t necessarily mean it gets counted as ‘investment’. Maybe paying your junior employees more makes them more likely to stay, and this benefits the firm by preserving its experienced human capital. But that doesn’t mean that the accounts should show that as investment spending. We should be able to argue “this spending is good and should be preserved because it will have provable long-term benefits”, not just “this spending should not be cut because it falls into the accounting category of ‘INVESTMENT'”. After all, it’s not as though investment doesn’t get cut back as well…

39

ajay 03.28.12 at 3:33 pm

Lest we forget, national accounts were invented as a means for measuring the paid economy and enabling the sort of government intervention that would help avoid a second great depression. The global crisis has totally validated the dominant economic paradigm in national accounting.

National accounts were invented as part of an effort to avoid a second great depression. The current existence of a second great depression shows that they have totally worked!

…wait.

40

niamh 03.28.12 at 3:46 pm

I do think there are two separate issues involved in this debate though, and I wouldn’t like to see them entirely conflated.
One is how national accounts are compiled. This is indeed subject to change over time, but I’m not qualified to comment on the technicalities other than to note that, as in the quote above, ‘What we measure affects our view of the world and in the end what we do’.
The other issue concerns a more general point concerning what it is we need to know about in order to make good policy, so we can make sure we have good measures, whether or not they feature in national accounts or are compiled in some other way.
What I’ve been been flagging here is primarily a set of values about what matters for both growth and justice in the ‘knowledge economy’.
Cutting back on education spending as a means of balancing budgets, for example, seems like a good example of short-term thinking at the expense of longer-term policy-based social ‘investments’.

41

ajay 03.28.12 at 3:57 pm

40 makes a lot of sense. The link between the two is presumably if governments are running policy with the main aim of making the national accounts look better this year, rather than aiming for long-term prosperity. If you have a government like that, then you could in theory address the problem by trying to make the national accounts include valuable stuff as ‘investment’ rather than ‘consumption’, but really the problem is that you have a bad government. If you have a manager who refuses to hire women, one solution to the problem would be to issue false beards to all job candidates, but that’s not exactly addressing the root cause.

42

mpowell 03.28.12 at 6:02 pm

TW, I agree that there is always a problem when discussing this kind of thing in how you talk about what things are more likely achievable than others. I would make my point thusly: the distinction between investment and expense is frequently not clear cut at all. Trying to bury the distinction in an accounting procedure does not help to highlight what is motivating policy. You can always say as political scientist, “well if you account for these expenses as investments and these others as real expenses, you come up with this data set and it looks good to me”, but then you’re just participating in public debate. If you succeed in getting the CBO to treat certain expenses with long term investment like properties as ‘not expenses’ when reporting on bills you just create an enormous incentive to game this process behind the scenes where it is much harder for even highly knowledgeable observers to suss out what you are doing. So I guess it depends on what is being advocated for here. If it just, “well, we need to look at other quality of life indicators”, sure. But if it’s, “we need to change our basic reporting of economic statistics”, I’m much less inclined to agree.

43

mpowell 03.28.12 at 6:04 pm

Okay, having read niamh @ 40, I agree with this approach. It is extremely disappointing that there are no public voices pointing out that cutting budgets for things like education are incredibly dangerous in the long term.

44

gordon 03.28.12 at 11:47 pm

Ah, memories, memories. Back in the early 1990s “Active Labour Market Policy” was the buzzword in Canberra labour policy circles. That approach was very much along the lines apparently adopted by Morel et. al. as summarised by Niamh at 37. I’m sure Prof. Quiggin will remember those exciting days. Here is a report of the time (actually, quite early in the process – 1990) where Active Labour Market Policy gets top billing (Note: .pdf):

http://www.dest.gov.au/sectors/training_skills/publications_resources/indexes/documents/90_10_pdf.htm

The Green Paper “Restoring Full Employment” lays out the new policy rationale in detail (in the Australian context). I don’t know of any download site for that lengthy report. Hard copy was copyright Australian Govt. Publishing Service 1993. Maybe other Australian readers could help.

So we’ve been here before in Australia too, as well as in the UK as Chris Bertram remarks at 15. The overlap isn’t surprising, I think there was a good deal of informal crosstalk between Australian and UK Labour policy people at the time. That history prompts me to wonder (a) whether Morel. et. al. get into discussion about why these ideas were so short-lived, and (b) whether, if they do, they agree with Chris Bertram.

In Australia, the whole thing collapsed with the 1996 change of Govt. The incoming Liberals had old-fashioned union-bashers (hardly to be distinguished from unreconstructed Cold Warriors) as a very significant part of their constituency, and the laying waste of labour market policy was an easy bone to throw them. The multinationals liked it too, for more practical reasons. Memories!

45

niamh 03.29.12 at 12:48 am

Thanks for the comments, people.
As I understand from their conference talks, Morel et al are pretty pessimistic about the extent to which SI priorities have gained policy traction so far, while Hemerijck has a more positive assessment. Both have a lot to say about both economic rationale and political coalition-building.
As Chris at 15 and and Gordon at 44 point out, the British ‘Third Way’ and Australian Labour strategy pushed themes such as preventing child poverty, early education initiatives, active labour market policy. Just because the ideas were knocking about in the past doesn’t mean they might not still be good ideas.
But all too often such measures were constrained by limited budgets, or were tightly means-tested, or they formed part of a more or less coercive policy of pushing people into jobs no matter what the quality or the wage rate, just to get them off benefits.
I gather that what the new wave of SI theorists wish to highlight is the need to think more broadly about the ‘knowledge economy’, about skill formation, and about income security, and to see if we can’t start to do better in the future.

46

John Quiggin 03.29.12 at 2:18 am

@gordon Actually, it only lasted about a year. Labor cut back the Working Nation programs in 1995, as soon as unemployment fell below (IIRC) 10 per cent. The Libs (=Tories) just finished the job

47

gordon 03.29.12 at 3:05 am

Niamh (at 45), certainly age doesn’t equal irrelevance (except after retirement!). But I worry about whether the Young Frankensteins attempting to reassemble and revivify these old ideas will be lured into dressing them in modern garb (eg. the New Economy) in order to pass them off as new. I have heard quite enough about the redundant factory worker being retrained as a systems analyst to last me the rest of my life.

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Katherine 03.29.12 at 9:55 am

if everyone in the household is working full-time outside the home, then someone who is working full-time outside the home is ALSO doing a substantial amount of non-market production.

That’s called the Second Shift, chris @ #35, and it’s done almost exclusively by women. It’s been extensively documented by feminists amongst others, but is not counted.

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James 03.29.12 at 12:17 pm

The original release of The Second Shift had some selection bias issues (excluding work done on weekends, differences in hours worked at the paying job, families with young children vs older children). The actual numbers of hours worked between the genders may be closer than first thought.
http://www.bsos.umd.edu/socy/papers/MilkieRB09.pdf

50

Tim Wilkinson 03.29.12 at 5:22 pm

ajay @41 – The link between the two is presumably if governments are running policy with the main aim of making the national accounts look better this year, rather than aiming for long-term prosperity.

But ‘look better’ here means ‘be better’; you aren’t talking about actually falsifying the figures. And the problem still arises if government is running policy with the main aim of getting ‘good’ results in the national accounts over the long term.

mpowell – but your entire post @42 is all about profit-making corporations, hence ‘gaming the system’. No doubt there is scope for perverse incentives in the public sector as well – but even if we assume that they whole thing is run from top to bottom by politicians with an eye on the next election (which we shouldn’t), that doesn’t come close to rapacious pursuit of profit as a debasing influence.

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John Quiggin 03.31.12 at 5:16 am

My recollection of the Oz data is that, on average, men and women do about the same number of hours of work per week, but that this average conceals a huge variation – among those without young children, employed women do more work (the Second Shift) than employed men , who in turn do more work than women who aren’t employed. Unemployed/NILF men do least. But because more men than women are employed, the hours average out much the same.

Unsurprisingly, parents of young kids do more work than everyone else, and employed mothers of young kids most of all.

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