18 March 2009

The meaninglessness of abstract economic variables

Andrew Gelman asks 'What is Russia's GDP per capita?'
$7,600 (World Bank 2007)

$9,100 (World Bank 2007)

$14,700 PPP [Purchasing Power Parity] adjusted, World Bank 2007)

$4,500 (World Bank 2006)

$7600 or $14,400 (gross national income: "Atlas method" or "purchasing power parity," World Bank 2007)

$12,600 (IMF 2008), $9,100 (World Bank 2007), or $12,500 (CIA 2008)

$2,637 in 2000 US dollars (World Bank 2007); that's $3,200 in 2007 dollars

$2,621 (World Bank 2006) or $8,600 (IMF)
I've posted before on the uselessness of Gross Domestic Product as an indicator of societal well-being. The disparity that Mr Gelman depicts is another reason why I think we should as far as possible target meaningful outcomes themselves, rather than indicators that might be, or might in the past have been, strongly correlated with wellbeing. In large, complex societies such indicators will be hard to find, but we can make the attempt. Take physical health: in the rich countries we could use broad health indicators such as longevity and infant mortality. In the poorer countries we might encounter problems gathering reliable longevity data, but objective sample data on, for instance, infant mortality, weights of young children, nutritional intake, could be available and useful. Refinement by experts, and aggregation into something like the Human Development Index, would see the creation of much targets that would be both more sound and more meaningful than the current array of indicators such as GDP per capita which, in the absence of sensible targets, has become the de facto over-arching target of governments everywhere.

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