The purpose of an economy is to meet human needs in such a way that life becomes in some respect richer and better in the process. It is not simply to produce a lot of stuff. Stuff is a means, not an end. Yet current modes of economic measurement focus almost entirely on means. For example, an automobile is productive if it produces transportation. But today we look only at the cars produced per hour worked. More cars can mean more traffic and therefore a transportation system that is less productive. The medical system is the same. The aim should be healthy people, not the sale of more medical services and drugs. Now, however, we assess the economic contribution of the medical system on the basis of treatments rather than results. Economists see nothing wrong with this. They see no problem that the medical system is expected to produce 30 to 40 percent of new jobs over the next thirty years. “We have to spend our money on something,” shrugged a Stanford economist to the New York Times. This is more insanity. Next we will be hearing about “disease-led recovery.” To stimulate the economy we will have to encourage people to be sick so that the economy can be well. Harper's MagazineThere's nothing to disagree with here. There are difficulties in measuring happiness or social wellbeing, but there are far better indicators than abstract, highly aggregated economic variables. Broad indicators of physical and environmental health would be a start, and under a Social Policy Bond regime we could explicitly target them and channel market incentives into improving them. Another critical goal could be the avoidance of catastrophe, whether its cause be social, environmental or military. Again, Social Policy Bonds could be issued that reward people if a catastrophe - which could be defined as a single event that kills 10000 people in any 24 hours - is avoided for a sustained period.
There are not enough incentives directed at such goals, which are both more meaningful to ordinary people and more widely held than those economic aggregates that we do, by default, target. A Social Policy Bond regime could do something to redress the balance.