Wednesday 13 December 2017

Stephen Kinsella: Shake-up needed so we measure what's important

Stephen Kinsella

Stephen Kinsella

What matters is what is measured. The late Bobby Kennedy was no fan of gross national product, one of the measures we use to see whether the economy is faring well or not. Senator Kennedy said in 1968 that gross national product "measures neither our wit nor our courage; neither our wisdom nor our learning; neither our compassion nor our devotion to our country; it measures everything, in short, except that which makes life worthwhile."

Kennedy was right. We use imperfect statistical indicators like gross national product to help design assess policies, ostensibly aiming at advancing the progress of society. The idea is that when people are consuming more, investing more, the government is spending more, and net exports are up, things must be getting better. So policies should be put in place to make these things happen -- like cutting taxes, increasing social welfare, or investing in research and development.

In fact, these very measures may end up hurting us more than helping us. Imperfect measures make for imperfect decisions. According to the Department of Finance, when you account for inflation, Ireland's gross national product fell by 7.1pc year on year. Our unemployment rate is up around 14.9pc. How closely connected are these two numbers? Is there a conflict between the sets of policies used to affect these numbers?

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