The problem of dysfunctional socio-economic metrics

The development of Community Analytics (CA) has been motivated by the dysfunction of modern socio-economic metrics, and the idea that this is a very serious matter. It is widely appreciated that: (1) what gets measured gets done; and, (2) that the way the game is scored determines the way the game is played.

Where the preponderance of metrics have a singular focus on profit without giving much consideration to other matters that affect a sustainable quality of life, then there are going to be undesirable consequences.

In the past several decades the dominant metrics about socio-economic performance have been (1) the profits in the private sector; (2) the performance of the stock market; and, (3) the growth of GDP.

For a corporate business the profit metric serves the interests of the owners very well, and this is leveraged in public companies by the way stock prices multiply based on profit and profit growth. This works well for the allocation of resources within a company ... but that is as far as it goes.

The performance of the stock market is a reflection of profit performance, together with a lot of other indicators all of which equate with big is better. Not the least of these is the GDP indicator.

Gross Domestic Product (GDP) is a complex and confusing indicator. The way it is calculated means that there is a mix of bad things being treated as good, and good things ignored or reflected as bad. The high cost of good health in the USA appears in the GDP as a "good thing" ... that is the GDP is bigger. High consumption is always considered a good thing in the GDP calculation. This is good when people are moving from poverty to satisfying reasonable needs ... but less good when it is merely producing waste or when the consumption is driving international trade imbalances.

The problem is not only about what is measured, but more so with what does not get measured. There are no widely accepted systems for measuring the value of economic activities, yet it is value that can serve as a good measure of quality of life. Value is subjective, and it is not easy to quantify. But because value is key to quality of life it is important that value is included in the system of metrics.

If value can become central to socio-economic metrics, there can be a paradigm shift in how decisions and made, and how this feeds into accountability.