Measuring What Counts

In "Measuring What Counts: The Global Movement for Well-Being" (2019), Stiglitz, Fitoussi and Durand build upon the work that was conducted following a 2009 commission to re-think what measures are used to assess the health of the economy (particularly GDP). The financial crises forced reflections on how the vulnerabilities were not understood; to which these authors say that most "fundamentally, policy-makers ignored these warning signals because of the ideological blinders that prevented them (and their economic advisors) from seeing the dangers ahead" (p. 6). The 2009 work was led by Stiglitz, Fitoussi and Sen and the results were published in the book "Mismeasuring Our Lives" (2010). Nearly a decade later, this book broadens the areas of work, summarizes progress made, and highlights areas that require much more work / research.

On metrics: "That GDP didn't do all that was hoped of it shouldn't be a surprise: no single number can summarize anything as complex as the economy" (p. 9). Yet, there is a slippery slope in metrics, some are usefully contextualized, but then not globally relevant, or vice versa. "There is some tension, though, between the desire to have metrics that reflect the particular situation within a country and the need to have metrics that enable cross-country comparisons, i.e., to give a picture of how a country is doing relative to others. Both perspectives are important: we all want to know how well we are doing (in one dimension or another) relative to our past or relative to what is occurring everywhere" (p. 19). The authors conclude, on this tensions that "more needed to be done at the international level" (p. 19).

On inequality: First, we need to do a better job understanding the multiplication / layering of vulnerability, rather than as stand-alone metrics: "Many of these inequality indicators are correlated, with the same households or individuals experiencing disadvantage in many of these dimensions. The report argued that one should focus on the household (or even better, the individual) as the unit of analysis, looking at all the dimensions that affect well-being at the same time" (p. 67). Second, we do not have the data, nor even the definitions for the data, to provide a basis for these understandings: "Some of the criteria for comparing horizontal inequalities across countries also lack well-established statistical conventions and definitions. An example is provided by disability status where, despite decade-long discussions, no generally accepted definition applied across official surveys exists yet. In other cases, no statistical criteria exists simply because these types of horizontal inequalities (for example, those linked to sexual orientation) have only recently entered public discussions" (p. 83-84). Even more challenging, they are, is assessing inequality of opportunity, not only outcomes (p. 88). How to do that? The authors recommend that: "Data should be disaggregated by age, gender, disability, sexual orientation, education, and other markers of social status in order to describe group differences in well-being outcomes; and metrics to describe within-household inequalities, such as those related to asset ownership and the sharing of resources and financial decisions within the household, should be developed." (p. 156)

On trust: "If the measures we rely on are out of sync with how citizens experience their lives, a lack of trust in government will develop" (p. 9). Later, they continue, "trust is negatively correlated with income inequality. And rising income inequality has also been related to lower trust in institutions. High-trusting societies have lower levels of income inequality, measured by Gini coefficients, while low-trusting societies show typically higher levels of income inequality. Trust is undermined by things that run against people's sense of fairness. Since, at least in many countries, there is a general sense that income is inequitably distributed, it is not a surprise that economic equality is consistently identified as one of the strongest predictors of generalized trust, and that countries with highest levels of trust rank highest on economic equality (e.g. Nordic countries, the Netherlands, Canada; OECD, 2018a)." (p. 126)

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People, Power, and Profits: Progressive Capitalism for an Age of Discontent

In 2019, Joseph Stiglitz published "People, Power, and Profits: Progressive Capitalism for an Age of Discontent." The book covers a wide range of topics, largely on contemporary American policy while also highlighting their histories - and is overtly political (Trump comes up frequently, throughout). The author provides an analysis of the challenges as well as potential pathways for the future. Some of the policies that are recommended include new regulations, such as regulating corporate business and money in politics. Other recommendations include introducing new services in the areas of social protection and safety nets as well as ensuring full employment, equality of opportunity and greater investment in education and research. Many of the recommendations will be common to readers familiar with economic arguments on the left-of-centre political spectrum. Very few, with the exception potentially of a universal basic income scheme, are radical or new. Nonetheless, this is worth a read, or at least the scan, to understand the economic arguments behind these recommendations. 

Some context on why regulations are called for and the barriers to change:

"Adam Smith's invisible hand (the notion that the pursuit of self-interest leads as if by an invisible hand to the well-being of society) is perhaps the single most important idea in modern economics, and yet even Smith recognized be limited power of markets and the need for government action. Modern economic research - both theory and experience -has enhanced our understanding of government's fundamental role in a market economy. It is needed both to do what markets won't and can't do as well as make sure that markets act as they are supposed to." (p. 24)

"The truly greedy and short-sighted in the 1 percent have come to understand that globalization, financialization, and other elements of the current economic rulebook are not supported by the vast majority of Americans, and understandably so. For these, this has one deeply disturbing implication: if we let democracy run its course, and if we believe in a modicum of rationality on the part of voters, they will choose an alternative course. In their pursuit of their naked self-interest, these super-rich have thus formulated a three-part strategy: deception, disenfranchisement, and disempowerment. Deception: they tell others that policies like the 2017 tax bill to further and enrich the rich will actually help ordinary Americans, or that a trade war with China will somehow reverse deindustrialization. Disenfranchisement: they work hard to make sure that those who might vote for more progressive policies can't or don't, either by making it hard for them to register, or by making it difficult for them to vote. And finally, disempowerment: they put sufficient constraints on government so that, if all else fails and a more progressive government were elected, it couldn't do what is needed to reform our politics and economy. One example: the constraints imposed by an increasingly stacked and ideological Supreme Court." (p. 27)

"A particularly invidious example of market power is the oligopoly in academic publishing. Chapter 1 highlighted the central role of knowledge in increases in our well-being. Advances in knowledge, in turn, require the dissemination of ideas. But in our market-based economy, this has been entrusted largely to the market, and the form that has taken is a highly concentrated and highly profitable oligopoly, with some five publishers accounting for more than half of all papers published, and for 70 percent of those in the social sciences. The irony is that the publishers get the articles for free (in some cases, they even get paid to publish them), the research reported is typically funded by the government, the publishers get academics to do most of the editorial work (the review of the articles) for free, and educational institutions and libraries (largely government-funded) then pay the publishers. Their high prices and excess profits, of course, mean that there is less money to fund research." (p. 76)

"Right now, on balance, our economy needs more regulations, at least in certain key arenas. Our economy has been changing fast, and our regulations need to keep pace. Twenty years ago, for instance, we didn't realize the dangers posed by carbon emissions; we now do, and we need regulations to reflect that. Twenty years ago, obesity was not the problem it is today. Now, we need to protect our children from the sweet and salty foods, designed to be addictive, that are contributing to this epidemic. Twenty years ago we didn't have the opioid crisis that has in part been manufactured by the pharmaceutical industry. Twenty years ago we didn't have a rash of for-profit educational institutions exploiting their students and the government loans for which they qualify. The conflict over net neutrality provides a vivid example of the need for regulation and the ways in which corporate interest manipulate the system for their own advantage." (p. 146)

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The Price of Inequality

Joseph Stiglitz is one of the most respected economists of our times and a person who has also held positions of significant influence, including chief economist of the World Bank and chairman of the Council of Economic Advisors for the US President (Clinton). In 2012 he authored "The Price of Inequality: How Today's Divided Society Endangers Our Future," which preceded other important works on the topic, such as the English version of Piketty's Capital (2014) and Milanovic's "Global Inequality" (2016) and Reich's related book "Saving Capitalism" (2015). Stiglitz was not the first to raise the issue of inequality, but he did raise the level of importance and changed the nature of the debate.

This book is about American inequality. The problem, as many others have stated, is not the market but the rules (not) regulating the market and policies that ensure the benefit is not only distributed but invested to enable future growth: "the inequality is cause and consequence of the failure of the political system, and its contributes to the instability of our economic system, which in turn contributes to increased inequality – a vicious downward spiral into which we have descended, and from which we can only emerge through concerted policies" (p. xi). The contribution made by Stiglitz in this book is to challenge the myths about inequality, and in particular to argue how inequality is bad for everyone: "we are paying a high price for our inequality – an economic system that is less stable and less efficient, with less growth, and a democracy that has been put into peril. But even more is at stake: as our economic system is seen to fail for most citizens, and as our political system seems to be captured by moneyed interests, confidence in our democracy and in our market economic will erode along with our global influence" (p. xi).

The book is replete with examples about how the powerful use their power to create and change the "rules of the game" in their favour (see p. 201, for example). The answers, or way forward proposed by Stiglitz, compose many recommendations, beyond summary here. They include making the tax system fairer, raising taxes on the top, reducing military spending, removing subsidies for major corporations, eliminating loopholes, ensuring resources are paid for appropriately, and introducing and enforcing regulations (particularly on the financial sector). He also calls for greater investment in education, technology, infrastructure, and social security. Doing so "would simultaneously increase economic efficiency, fairness, and opportunity" (p. 268). More fundamentality, Stiglitz argues the very core of America and American values are at stake "America is no longer the land of opportunity" (p. 265).

Stiglitz frames inequality as the issue of our times. Although, inequality is not simply about inequality. The debates "rest on broader ideas about human rights, human nature, and the meaning of democracy and equality" (p. 155). It is often these deeper, sometimes value-based, positions that result in policies that create inequality. "There is a real battlefield of ideas. But it does not, for the most part, involve a battle of ideas as academics would understand it, where evidence and theory on both sides are carefully weighed. It is a battlefield or "persuasions," of "framing," of attempts not necessarily to get to the truth of the matter but to understand better how ordinary citizens' perceptions are formed and to influence those perceptions" (p. 162-163).

He concludes: "Maintaining the kind of society and the kind of government that serve all people – consistent with the principles of justice, fair play, and opportunity – doesn't happen by itself. Somebody has to look after it. Otherwise our government and our institutions get captured by special interests. At the very least, we need countervailing powers" (p. 281). A call to action.

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