Dear Editor,
Professor Kean Gibson wrote that “Very often economic figures might indicate a tendency but they often obscure the social reality. A case in point is that good economic figures for economic growth do not often capture the social condition of a society” (SN, 28 June 2019). This position is fundamental to her claim that tolerance of corruption under the PPP was motivated by Hindu religious beliefs, but it is a wrong-headed position. This letter argues that economists have recognized the centrality of the entire environment, natural and built, to human flourishing.
Economist are not obsessed with growth; politicians are. Just look at the US or even Guyana. We have known for over five decades now that the fruits of growth are not fairly and justly distributed and that growth is not the panacea for human development: growth ¹ human development. Instead, the norm is to supplement GDP growth with a range of other indices, including infant mortality, under-5 mortality, maternal mortality, life expectancy at birth, gender inequality, the headcount poverty index, Gini coefficient (a measure of inequality), several metrics for corruption, et cetera. These and other measures are intended to take account of the social and cultural context of societies. If Gibson has developed an alternative index that does not “obscure social reality,” I would be happy to hear about it and about how it can be used to uplift the human condition.
Over the last several decades economists have produced a mountain of path-breaking research on the link between social issues such as education, nutrition, corruption and development, and the centrality of child development to human progress. Several economists have been awarded the Nobel Prize for their work to identify and stitch together the various strands of human development. The very term calls attention to the fact that human progress is a multifactorial business that requires a multi-disciplinary approach. Sir Arthur Lewis, the 1979 economics Nobel Laureate (jointly with Theodore Schultz), was unhappy about how history was marginalized by economics and the mainstream lack of interest in the persistence of poverty around the world. They were awarded the Prize for their pioneering work on economic development with particular consideration of the problems of developing countries. Robert Fogel, who was also a practicing medical doctor, won the 1993 Nobel Prize in economics for his studies of slavery in the United States and the role railroads played in the development of the economy, which entailed seminal work on the role of nutrition in human height, slave diet and its nutritional compositions, the importance of nutrition to human flourishing, among others.
Amartya Sen was awarded the 1998 Nobel Prize in economics for his research on fundamental problems in welfare economics, studies of social choice, welfare measurement, and poverty. Joseph Stiglitz – and two other economists – won the 2011 Nobel Prize in economics for “their analyses of market with asymmetric information.” The latter concept centres around a situation in which there is unequal knowledge between each party to a transaction, that one party has better information than the other the party. This type of asymmetry creates an imbalance in a transaction. Shortly after, the September terrorist attacks, Stiglitz said: “The receipt of a prize like this is tinged by the fact many innocent people have died in recent days.” He added that “economics can make a difference” in improving people’s lives by “focusing on the difference between the haves and have-nots … Our global system is characterized by a lot of inequities … It seems increasingly important to try to redress these inequities.”
In February of 2008, amid the looming global financial crisis, President Nicolas Sarkozy of France asked Stiglitz and Amartya Sen, along with the distinguished French economist Jean Paul Fitoussi, to establish a commission of leading economists to study whether GDP—the most widely used measure of economic activity—is a reliable indicator of economic and social progress. The Commission was further charged with the task of laying out an agenda for developing better measures. Mismeasuring Our Lives is the result of this major intellectual effort, which is a must read for anyone engaged in assessing how and whether an economy is serving the needs of its people. The authors offer a sweeping assessment of the limits of GDP as a measurement of the well-being of societies—considering, for example, how GDP overlooks economic inequality and does not factor environmental impacts into economic decisions. In place of GDP, Mismeasuring Our Lives introduces a bold new array of concepts, from sustainable measures of economic welfare, to measures of savings and wealth, to a “green GDP.” Angus Deaton, was awarded the 2015 Nobel Prize in economics “for his analysis of consumption, poverty and welfare.” He has done pioneering work on health, poverty, consumption, nutrition and inequality. The understanding of these relationships, which encompass socio-economic and cultural issues, is crucial for designing economic and social policies.
Then there is the well-known and widely used Human Development Index, launched in 1990 by UNDP, and based on the idea that national development should be measured not only by income per capita but also by health and education achievements. Over the years UNDP has developed additional indices to capture other dimensions of human development. Together these indices help to identify groups falling behind in human progress and to monitor the distribution of human development. In 2010 three indices were launched to monitor poverty, inequality and gender empowerment across multiple human development dimensions: the Multidimensional Poverty Index, the Inequality-adjusted Human. Development Index and the Gender Inequality Index. In 2014 the Gender Development Index was introduced.
Beyond the above, there is a large body of research on culture, including religion, and on happiness and how they relate to development. The little Asian country, Bhutan, has an index called Gross National Happiness (GNH). The term was coined by the 4th King of Bhutan, King Jigme Singye Wangchuck in 1972 when he declared “Gross National Happiness is more important that Gross Domestic Product.” The GNH Index, developed with the aid of economists, did not become operational until decades later. It is made up of 33 indicators and 9 domains (psychological wellbeing, health, education, time use, cultural diversity and resilience, good governance, community vitality, ecological diversity and resilience, and living standards). In 2011, The UN General Assembly passed a Resolution “Happiness: towards a holistic approach to development” urging member nations to follow the example of Bhutan and measure happiness and well-being and calling happiness a “fundamental human goal.”
Culture, religion, corruption and other facets of the social context are not ignored by economists. To posit that this is the case is to accuse economists of having a mechanistic approach to human flourishing. Such a position ignores the fact that economics has sub-fields such as health economics, behavioral economics and neuroeconomics, all of which take in the social and cultural dimensions of human flourishing. Human progress would be impeded without an adequate understanding of the political, economic and cultural specificities of a country and economists know this. Economists do not subscribe to a mismeasure of man.
Yours faithfully,
Ramesh Gampat
