tag:theconversation.com,2011:/us/topics/indicators-17764/articlesIndicators – The Conversation2022-05-18T14:30:35Ztag:theconversation.com,2011:article/1831502022-05-18T14:30:35Z2022-05-18T14:30:35ZCanaries in the coal mine: why birds can tell us so much about the health of Earth<figure><img src="https://images.theconversation.com/files/463917/original/file-20220518-11-oiplcp.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C5472%2C3645&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A Eurasian jay (_Garrulus glandarius_) sighting suggests a productive oak tree is nearby.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/eurasian-jay-perched-on-log-1751672576">Andy Jenner/Shutterstock</a></span></figcaption></figure><p>Following a deadly explosion in a Welsh coal mine in 1896, an engineer called John Haldane invented a type of bird cage that allowed canaries to accompany miners into the depths. The small songbirds are much more sensitive than humans to the deadly carbon monoxide gas found underground. </p>
<p>A sudden halt to their singing would warn workers to evacuate the pit – and rescue the canary by closing its cage door and opening a valve to pump oxygen inside. Remarkably, it was only in 1986 that canaries were <a href="http://news.bbc.co.uk/onthisday/hi/dates/stories/december/30/newsid_2547000/2547587.stm">relieved</a> of their duties detecting noxious gases in UK coal mines.</p>
<p>As rising temperatures and habitat loss degrade the natural world, bird species everywhere play the role of mine canaries for the whole planet. Trends in the size of their populations inform us of the extent and patterns of environmental change, providing a kind of early warning system.</p>
<p>There are a number of reasons why birds are excellent indicators of the status of other wildlife groups and the health of the wider ecosystem. For one, birds are found all over the world, in all countries and in nearly all habitats. From ivory gulls and emperor penguins on the polar ice caps to birds of paradise in tropical rainforests, and from albatrosses cruising the remote open ocean to desert larks in the Sahara. </p>
<p>Birds are found on the highest mountains and some fly to extraordinary heights: a Rüppell’s vulture <a href="https://sora.unm.edu/sites/default/files/journals/wilson/v086n04/p0461-p0462.pdf">collided with an aircraft</a> at an altitude of 11,300 metres. Certain seabirds feed at remarkable depths: one emperor penguin was recorded <a href="http://www.avesmarinhas.com.br/1%20-%20Mergulho%20em%20penguins%20imperador.pdf">diving to 564 metres</a> where it is almost completely dark and the pressure is 50 times stronger than at the ocean’s surface. </p>
<p>There are enough bird species that the patterns in their distribution and numbers closely reflect variation in the environment, with over 11,000 species in total, and over 400 species on average in each country. </p>
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<img alt="A vulture about to take off." src="https://images.theconversation.com/files/463919/original/file-20220518-21-sj69yl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/463919/original/file-20220518-21-sj69yl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=487&fit=crop&dpr=1 600w, https://images.theconversation.com/files/463919/original/file-20220518-21-sj69yl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=487&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/463919/original/file-20220518-21-sj69yl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=487&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/463919/original/file-20220518-21-sj69yl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=612&fit=crop&dpr=1 754w, https://images.theconversation.com/files/463919/original/file-20220518-21-sj69yl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=612&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/463919/original/file-20220518-21-sj69yl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=612&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Higher flyers: a Rüppell’s vulture (<em>Gyps rueppelli</em>) in Nairobi National Park, Kenya.</span>
<span class="attribution"><a class="source" href="https://en.wikipedia.org/wiki/R%C3%BCppell%27s_vulture#/media/File:Gyps_rueppellii_-Nairobi_National_Park,_Kenya-8-4c.jpg">Snowmanradio/Wikipedia</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
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<p>Birds make good indicators because of their biology. Typically feeding towards the top of food webs, bird populations are an eye-catching gauge of changes further down the food chain, such as declines in the abundance of the things they eat. Fewer bug-eating birds like flycatchers may be a tell-tale sign of shrinking insect populations, something more difficult to measure but itself indicative of deteriorating natural habitats. </p>
<p>Birds also tend to move in response to environmental changes, with their local abundance reflecting changes in the climate or how land is used. Bird population trends often mirror those of other species. </p>
<p>For example, other groups of organisms such as butterflies, dung beetles and reptiles (which may be more difficult to study than birds) have mirrored the <a href="https://royalsocietypublishing.org/doi/abs/10.1098/rstb.2004.1602">declines</a> in abundance of farmland birds in the UK since the 1970s. This has been driven largely by the intensification of food production such as the increased use of pesticides. </p>
<p>Similarly, distribution patterns for birds broadly reflect those of many other wildlife groups, meaning that conservation efforts targeted at birds can typically be trusted to benefit a wider array of species.</p>
<h2>One million records a month</h2>
<p>There are also not so many species as to make identifying birds too difficult. The taxonomy, distribution, ecology and life history of birds are well understood. Over 16,000 scientific papers on bird biology are <a href="http://datazone.birdlife.org/sowb/casestudy/birds-are-very-useful-indicators-for-other-kinds-of-biodiversity">published each year</a>. </p>
<p>Being relatively large, conspicuous, and generally easy to identify, birds are popular and engage the public. It has been estimated that 20% of people <a href="https://digitalcommons.unl.edu/cgi/viewcontent.cgi?article=1163&context=usfwspubs">in the US</a> and 30% <a href="https://fatbirder.com/world-birding/europe/united-kingdom/">in the UK</a> watch or feed birds regularly. </p>
<p>An army of birdwatchers worldwide collects data on birds, whether on an ad hoc basis, or as part of more formal surveys and monitoring schemes. <a href="https://ebird.org/home">The eBird platform</a>, where people can log their bird records, now holds more than one billion observations from over 200 countries, with over one million checklists submitted each month. </p>
<p>And some datasets on bird trends go back many decades, rendering them valuable for tracking environmental trends over time. Birds act as ambassadors for nature, capable of symbolising complex ecological communities while managing to resonate with most people.</p>
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<img alt="A woman in a grey coat watches a bare tree with binoculars in winter." src="https://images.theconversation.com/files/463921/original/file-20220518-14-jsfpht.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/463921/original/file-20220518-14-jsfpht.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/463921/original/file-20220518-14-jsfpht.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/463921/original/file-20220518-14-jsfpht.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/463921/original/file-20220518-14-jsfpht.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/463921/original/file-20220518-14-jsfpht.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/463921/original/file-20220518-14-jsfpht.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Citizen scientists keep us abreast of changing ecosystems with their bird observations.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/woman-binoculars-birdwatching-looking-tree-172124180">DJTaylor/Shutterstock</a></span>
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<p>Of course, birds tend to be less specialised within very specific types of habitats, such as coastal dunes or lake margins than insects or plants. They are less representative of freshwater and marine habitats than land-based ones, and are scarce or totally absent from some environments, such as the deep ocean or cave systems.</p>
<p>Nevertheless, it is still hard to beat birds as living indicators of environmental change. We must listen to the message they are sending us about the state of nature, and the pressures upon it. Like canaries in the coal mine, they tell us that it is time to act. Our lives may depend upon it.</p>
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<p class="fine-print"><em><span>Stuart Butchart is Chief Scientist at BirdLife International. He receives funding from the Aage V. Jensen Charity Foundation for work on BirdLife's State of the World's Birds assessments.</span></em></p>Want to understand your local environment better? Look to the birds.Stuart Butchart, Chief Scientist, BirdLife International & Honorary Research Fellow, Department of Zoology, University of CambridgeLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1660122021-08-24T12:19:52Z2021-08-24T12:19:52ZSafety net policies are helping reduce the number of Americans below the poverty line – but that’s not the whole story<figure><img src="https://images.theconversation.com/files/417085/original/file-20210819-17-29cusx.jpg?ixlib=rb-1.1.0&rect=298%2C224%2C5931%2C3773&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Food insecurity appears to have grown in 2020 despite the decline in poverty.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/people-arrive-at-west-kensington-ministry-for-a-food-pantry-news-photo/1308934225">Spencer Platt/Getty Images</a></span></figcaption></figure><figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/416842/original/file-20210818-23-1w49crl.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/416842/original/file-20210818-23-1w49crl.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/416842/original/file-20210818-23-1w49crl.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=255&fit=crop&dpr=1 600w, https://images.theconversation.com/files/416842/original/file-20210818-23-1w49crl.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=255&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/416842/original/file-20210818-23-1w49crl.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=255&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/416842/original/file-20210818-23-1w49crl.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=321&fit=crop&dpr=1 754w, https://images.theconversation.com/files/416842/original/file-20210818-23-1w49crl.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=321&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/416842/original/file-20210818-23-1w49crl.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=321&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>The share of Americans living in poverty shrank to an estimated 9.2% in 2020, according to <a href="https://www.urban.org/research/publication/2020-poverty-projections">the Urban Institute</a>, a think tank that closely tracks this rate with a <a href="https://www.cbpp.org/research/poverty-and-inequality/economic-security-programs-reduce-overall-poverty-racial-and-ethnic">widely used model</a>. There were 29.3 million Americans living <a href="https://aspe.hhs.gov/topics/poverty-economic-mobility/poverty-guidelines">below the poverty line</a>, the institute’s researchers found. Another 10.3 million appear to have been kept out of poverty through government efforts to cushion the blows from <a href="https://theconversation.com/covid-19-recession-one-of-americas-deepest-downturns-was-also-its-shortest-after-bailout-driven-bounceback-164816">massive economic upheaval triggered by the COVID-19 pandemic</a>.</p>
<p>This new estimate <a href="https://theconversation.com/americans-still-need-a-lifeline-despite-trillions-in-coronavirus-aid-155106">contradicts many</a> <a href="https://www.washingtonpost.com/business/2020/12/16/poverty-rising/">prior predictions</a> and is significantly lower than the <a href="https://www.census.gov/library/publications/2020/demo/p60-270.html">10.5% of the U.S. population</a> the U.S. Census Bureau said was in poverty in 2019, the most recent official data available. If confirmed when the government agency <a href="https://www.census.gov/newsroom/tip-sheets/2021/tp21-16.html">releases official 2020 numbers in September</a>, it would signal that that the coronavirus didn’t interrupt a <a href="https://www.census.gov/data/tables/time-series/demo/income-poverty/historical-poverty-thresholds.html">gradual decline in poverty</a>. The rate has been falling since 2010, when it stood at 15.1%. </p>
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<p>It makes sense if you find this news surprising.</p>
<p>There were <a href="https://theconversation.com/latest-jobs-report-shows-why-the-unemployment-rate-needs-fixing-154695">massive job losses when coronavirus-related lockdowns began in 2020</a>, particularly among workers without a college degree, who typically <a href="https://tracktherecovery.org/?nosplash=true">earn lower incomes</a>. And as of July 2021, the U.S. jobless rate was 5.4%, <a href="https://www.bls.gov/news.release/pdf/empsit.pdf">well above the 3.5% rate seen in February 2020</a>. </p>
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<p>Poverty declined even though <a href="https://www.bls.gov/oes/tables.htm">fewer people were employed</a> because the government stepped up, strengthening the safety net. It <a href="https://www.aarp.org/politics-society/government-elections/info-2020/cdc-halts-evictions-coronavirus.html">halted evictions</a>, gave workers who lost their jobs <a href="https://theconversation.com/yes-most-workers-can-collect-more-in-coronavirus-unemployment-than-they-earn-but-that-doesnt-mean-congress-should-cut-the-600-supplement-143788">larger unemployment benefits</a>, <a href="https://theconversation.com/new-steps-the-governments-taking-toward-covid-19-relief-could-help-fight-hunger-152520">bolstered the Supplemental Nutrition Assistance Program</a> and adopted other policies to assist people facing economic hardship.</p>
<p>Notably, the Internal Revenue Service began to distribute a series of <a href="https://www.irs.gov/coronavirus/economic-impact-payments">COVID-19 relief and stimulus payments</a> to all but the wealthiest Americans. </p>
<h2>Not so straightforward</h2>
<p>While on the surface this appears to be good news, <a href="https://scholar.google.com/citations?hl=en&user=LA4-pCYAAAAJ&view_op=list_works&sortby=pubdate">as a scholar who researches poverty</a>, I believe the situation is much more complex than it appears.</p>
<p>First, the way <a href="https://www.brookings.edu/testimonies/why-the-united-states-needs-an-improved-measure-of-poverty/">the government measures poverty</a> is <a href="https://theconversation.com/poverty-in-2021-looks-different-than-in-1964-but-the-us-hasnt-changed-how-it-measures-whos-poor-since-lbj-began-his-war-163626">outdated</a>.</p>
<p>It does adjust the poverty line for inflation, but <a href="https://theconversation.com/new-data-paint-an-unpleasant-picture-of-poverty-in-the-us-101069">poverty today looks very different</a> from what it was like back when statistician <a href="https://www.ssa.gov/policy/docs/ssb/v68n3/v68n3p79.html">Mollie Orshansky</a> based the government’s initial poverty calculation in the early 1960s on 1950s data that suggested people spend one-third of their budget on food. She was figuring out not how much money people needed to thrive, but rather the point below which people would starve. Nor was she trying to devise an <a href="https://www.nytimes.com/2007/04/17/us/17orshansky.html">indicator to be used in policymaking</a>.</p>
<p>There were <a href="https://www.jstor.org/stable/30225902">issues with this formula </a> from the beginning. For one thing, food prices vary from place to place, causing regional differences in how much it costs to put food on the table. For another, families differ in terms of what they need to eat.</p>
<p>Many <a href="https://www.childtrends.org/indicators/children-in-poverty#_edn2">researchers have found</a> that any family of four living on less than about <a href="https://doi.org/10.2202/1944-2858.1088">twice the poverty threshold, which stood at $25,750 in 2019</a>, would have trouble making ends meet. The Census Bureau itself calculates a <a href="https://www.census.gov/library/publications/2020/demo/p60-272.html">Supplemental Poverty Measure</a>, which finds somewhat more people living in poverty than through its original method. The Department of Health and Human Services sets its own <a href="https://aspe.hhs.gov/topics/poverty-economic-mobility/poverty-guidelines">federal poverty guidelines</a>, which are about the same as the official poverty thresholds. <a href="https://www.thebalance.com/federal-poverty-level-definition-guidelines-chart-3305843">Eligibility for SNAP and other benefits for low-income people</a> is often pegged well above this minimum.</p>
<h2>Food insecurity grew</h2>
<p>Another reason to not get too excited about a lower 2020 poverty rate is that the share of Americans experiencing <a href="https://theconversation.com/what-is-food-insecurity-152746">food insecurity</a>, meaning that they couldn’t get enough of the food needed for a balanced diet, rose to an estimated <a href="https://theconversation.com/the-pandemic-recession-has-pushed-a-further-9-8-million-americans-into-food-insecurity-157016">13.9% in 2020 from 10.9% in 2019</a>.</p>
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<p>This increase could be unrelated to income. Many people had new <a href="https://doi.org/10.1371/journal.pone.0242476">transportation challenges</a>, and numerous families had a hard time replacing the <a href="https://www.npr.org/2020/09/08/908442609/children-are-going-hungry-why-schools-are-struggling-to-feed-students">food their children would ordinarily consume at school</a>, despite <a href="https://frac.org/pebtfaq">government efforts to avoid that problem</a>.</p>
<p>It could also indicate that many people scrimped on food to meet other basic needs.</p>
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<p>That’s because <a href="https://www.consumerreports.org/food/americans-turning-to-food-banks-during-the-pandemic/">more low-income Americans</a> get assistance through a <a href="https://theconversation.com/how-food-banks-help-americans-who-have-trouble-getting-enough-to-eat-148150">food bank</a> or food pantry as opposed to programs that help them <a href="https://www.cbpp.org/blog/rental-assistance-cuts-homelessness-and-poverty-but-doesnt-reach-most-who-need-it">pay their rent</a> or keep up with their <a href="https://apnews.com/article/north-america-auto-loans-business-ap-top-news-us-news-33ea7b9fe25c4a648b53575d7f17c5af">car loans</a>. </p>
<p>This discrepancy is another reason I believe the government needs to improve how it measures poverty. Something doesn’t add up when there are more Americans who cannot get enough of the food they need than there are living below the poverty line.</p><img src="https://counter.theconversation.com/content/166012/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Elena Delavega does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Early estimates US poverty rate estimates indicate that policies intended to soften the blow of economic upheaval made a big difference.Elena Delavega, Associate Professor of Social Work, University of MemphisLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/872812017-11-16T20:46:00Z2017-11-16T20:46:00ZDesigning local well-being indicators: the case of the Grenoble metropolitan area<figure><img src="https://images.theconversation.com/files/194847/original/file-20171115-19845-16kyb62.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Grenoble, France.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/djou/24117770708/in/photolist-CKcSYU-f5uEVt-Tvx5WH-f5uCDB-qLvejX-UuNwsj-uRa45-YLs1Au-cW873C-51SMBZ-aVW5t-pEKQGu-87Rpnc-hazDCn-51SMye-4qg1jt-cW86NL-UuTcCq-cW87ES-51X1NJ-bTJW5i-aC1pNw-cW87ud-TvBaZk-cW8485-9dnv9n-UxCEET-a5j9bB-UFv5iC-UuRmy5-TsBZXJ-Ua5zrw-9iHSLt-UuShtj-UFuMjh-7rnbDg-TvBSZM-9iHTTK-YLrZiE-r9Mhzz-2DerA-bN81G4-cW82Su-cW84Pm-f5uCcr-TvCpEp-4gLjQU-JAp56-TsBQwE-4qg1J8">Julien/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>Across <a href="http://ec.europa.eu/environment/beyond_gdp/download/oecd_istanbul_declaration.pdf">international</a>, European, <a href="http://ec.europa.eu/eurostat/documents/118025/118123/Fitoussi+Commission+report">national</a> and local scales, the emergence of new socio-environmental indicators highlights the need to develop appropriate measurement strategies.</p>
<h2>A local experimentation to design indicators of well-being</h2>
<p>In France, the limitations of existing data for assessing and planning public initiatives led a number of professionals in the Grenoble metropolitan area to look at what could be hidden from existing data, notably for social and environmental aspects.</p>
<p>A collective of urban-policy stakeholders and researchers from Grenoble University came together to question conventional local observation tools and develop a new approach. The Grenoble project’s sustainable territorial social indicators – <a href="http://creg.upmf-grenoble.fr/production-scientifique/operations-de-recherche/projet-ibest-174980.htm?RH=1292575133845"><em>Indicateurs de bien-etre sociaux territorialisés</em></a> (IBEST) in French – are now being tested in select regional municipalities.</p>
<h2>A bottom-up approach</h2>
<p>The Grenoble project opted for a bottom-up approach. It was based on data on individual-level living conditions so as to arrive to a collective expression of what the common good represents. The IBEST experimentation used two coordinated methodologies:</p>
<ul>
<li><p>Quantitative survey: A survey of individual well-being and achievements from a <a href="https://www.youtube.com/watch?v=PDgmVbWtkIc">capabilities standpoint</a>. It provides an understanding of people’s living conditions and their aspirations on a personal level.</p></li>
<li><p>Participative approach: A forum for discussions between the stakeholders on the aspects relating to the common good.</p></li>
</ul>
<p>Three arguments support the complementarity of the two methodologies. First, we need to provide a sound basis for collective discussions. Second, social and environmental sustainability aspects are <a href="http://journals.sagepub.com/doi/abs/10.1177/0042098011403015">highly political questions</a>. Although social sustainability involves social-justice considerations, it is also related to types of social interactions and everyone’s ability to participate in the forum. Finally, an expert cannot unilaterally decide on the relevant categories given that the purpose of the approach is to draw up indicators that collectively make “sense” to the various stakeholders (elected officials, residents, voluntary organisations, professionals and researchers).</p>
<h2>The quantitative survey: the individual well-being</h2>
<p>The quantitative survey was presented to 1,000 people in the Grenoble urban area by telephone in November 2012. They were asked about the social dimensions of their living conditions so as to highlight factors that influence their well-being. The sample was distributed in eight standard urban districts, and included 28 towns. The sample was representative in terms of gender, age and socio-professional group at the scale of each sector.</p>
<p>The data produced can be used for a variety of processes and interpretations, which imply theoretical and methodological choices that are not neutral. One of the advantages of the survey is to avoid the division between subjective and objective approaches, by focusing on the coordination of “subjective” data regarding individuals’ perception of their situation and environment with “objective” data relating to their social situation.</p>
<p>The wide range of opinions expressed cannot supplant political debate with citizens, however, despite their social roots. One of the arguments in favour of this stance is that preferences are social constructions and that the issues of well-being and participation are political. Accordingly, a participative methodology is more appropriately conceived to administer this collective discussion.</p>
<h2>The participative approach: the common good</h2>
<p>The participative approach aims to establish a transition from an individual concept of well-being to a collective concept of the common good focused on social and environmental sustainability. It was intended encourage the stakeholders to better understand the intermediary results of the quantitative survey.</p>
<p>Two factors explain this methodological and conceptual sequence. On one hand, the idea that you need to rely on empirical materials and start from each person’s experience of well-being to further involve people in the process, rather than being limited to “hollow” generalities. On the other hand, the need to articulate a design in terms of well-being, common good and sustainability.</p>
<p>Overall, the participative approach that was divided into three separate stages.</p>
<ul>
<li><p><strong>The European Council’s <a href="https://www.coe.int/t/dg3/socialpolicies/socialcohesiondev/source/GUIDE_en.pdf">SPIRAL methodology</a></strong>, which was launched among local stakeholders in at the start of 2013, enabled us to disseminate a review of well-being among those stakeholders, and make them want to be involved in reviewing the alternative indicators.</p></li>
<li><p><strong>Three workshops</strong> for, respectively, members of the public, professionals and elected officials, were organised during the autumn of 2013. The aim was to enable each group to issue a collective opinion on what matters and has an influence on their well-being, based on the intermediary results. The first workshop included 16 area residents from a range of social and geographical backgrounds. The second consisted of 15 professionals and people working with volunteer organisations. The workshop for elected officials provided individual opinions rather than a collective response; the spring 2014 elections were undoubtedly an important factor in this case.</p></li>
<li><p>All these stakeholders were brought together as part of a <a href="https://mitpress.mit.edu/books/acting-uncertain-world"><strong>hybrid forum</strong></a> in early December 2013. It allowed each of the three groups to present their findings, and was followed by a period of collective discussion.</p></li>
</ul>
<p>The results of the quantitative survey were reworked on the basis of the entire participative approach. The aim is that the statistical categories, on the basis of which the indicators were designed, are not just simply produced by the experts. Including the “social categories” that emerged during the collective discussion periods is essential.</p>
<h2>Eight dimensions of sustainable well-being</h2>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/194303/original/file-20171113-27607-qjvwig.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/194303/original/file-20171113-27607-qjvwig.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=449&fit=crop&dpr=1 600w, https://images.theconversation.com/files/194303/original/file-20171113-27607-qjvwig.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=449&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/194303/original/file-20171113-27607-qjvwig.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=449&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/194303/original/file-20171113-27607-qjvwig.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=565&fit=crop&dpr=1 754w, https://images.theconversation.com/files/194303/original/file-20171113-27607-qjvwig.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=565&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/194303/original/file-20171113-27607-qjvwig.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=565&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Ottaviani (2016).</span>
</figcaption>
</figure>
<p>Eight dimensions were derived: (1) work and employment, (2) assertiveness and commitment, (3) democracy and living together, (4) natural environment, (5) health, (6) access to and use of public services, (7) time and the pace of life and (8) sustainable access to subsistence goods.</p>
<p>The dashboard of sustainable well-being is composed of 28 indicators. They originate from both administrative sources (income inequality, air quality index, water quality, rate of soil erosion, proportion of empty homes) and data from the IBEST study. The use of two different data sources adds value to the research, but at the same time it may constrain the possibilities for analysis. The use of administrative data is justified in order to acquire information about some aspects that are missing in the investigation, including some sustainability elements.</p>
<p>Some indicators are common with other experiments conducted around alternative indicators. The comparison of the selected indicators as part of the construction IBEST is based on: (1) the quality-of-life indicators designed by INSEE; (2) capability indicators in Lorraine region; (3) new indicators of wealth in the Loire region; (4) the social health indicator from the Nord-Pas-de-Calais region.</p>
<p>No indicator is shared with the <a href="http://www.gouvernement.fr/en/new-indicators-of-wealth">ten recently proposed by France Strategy</a>, which were cited in the discussion on wealth indicators that took place in the French National Assembly.</p>
<p><strong>Comparison of IBEST indicators with other alternative indicators</strong></p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/194168/original/file-20171110-29328-1uctzpz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/194168/original/file-20171110-29328-1uctzpz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=778&fit=crop&dpr=1 600w, https://images.theconversation.com/files/194168/original/file-20171110-29328-1uctzpz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=778&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/194168/original/file-20171110-29328-1uctzpz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=778&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/194168/original/file-20171110-29328-1uctzpz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=978&fit=crop&dpr=1 754w, https://images.theconversation.com/files/194168/original/file-20171110-29328-1uctzpz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=978&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/194168/original/file-20171110-29328-1uctzpz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=978&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Ottaviani (2015).</span>
<span class="attribution"><span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>Comparing these four experiments with those of IBEST reveals that 13 out of 28 indicators have been used in similar or identical releases in other alternative-indicator experiments. IBEST also shares at least four indicators with each of these. IBEST shares the most common indicators with the Loire region’s wealth indicators. Furthermore, these two experiments include a participatory approach. Therefore, the influence of the participatory approach on conformation indicators, rather than the mobilised concepts, can explain such proximity.</p>
<p>However, three kinds of indicators appear specific to IBEST, and demonstrate the contribution of its dashboard:</p>
<ul>
<li><p>Indicators on the perception that people have of their environment (trust in others, trust in institutions) are rarely encountered in other experiments, regardless of how essential they are to understanding the non-monetary resources and obstacles to the achievement of individuals and environmental conservation;</p></li>
<li><p>Indicators related to social sustainability (social action, restrictions, etc.) are often assimilated to the offer of services in the territory, without taking into account the needs of the populations;</p></li>
<li><p>Indicators dedicated to environmental sustainability (air quality, water quality, etc.) are often studied independently of the social aspects of sustainability.</p></li>
</ul>
<p>The fact that these kinds of indicators end up in some other experiences of alternative indicators demonstrate the persistence in France of a separation between the so-called objective and subjective approaches, as well as approaches that take into account the social dimensions and others that are focused on the environmental dimension.</p>
<p>These separations appear problematic, as they tend to obscure the interactions between the perception that people has of their environment and the state of their social situation. It overlooks the link between social sustainability and environmental sustainability. In this sense, the dashboard of sustainable territorialized well-being is a synthesis of these different approaches and delivers a synoptic vision of sustainable well-being in the urban area.</p><img src="https://counter.theconversation.com/content/87281/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Les auteurs ne travaillent pas, ne conseillent pas, ne possèdent pas de parts, ne reçoivent pas de fonds d'une organisation qui pourrait tirer profit de cet article, et n'ont déclaré aucune autre affiliation que leur organisme de recherche.</span></em></p>In France, research on local indicators’ inadequacies led a group of stakeholders and researchers in Grenoble to develop an alternative that focuses on social well-being and sustainability.Fiona Ottaviani, Enseignante-chercheuse en économie - Chaire Mindfulness, Bien-être au travail et Paix économique - Political Economy and Sustainable Competitiveness Initiative - Chercheuse associée au CREG - UGA, Grenoble École de Management (GEM)Anne Le Roy, Enseignante chercheuse en Economie au CREG à l'UGA, Université Grenoble Alpes (UGA)Licensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/838212017-10-09T17:26:03Z2017-10-09T17:26:03ZWhy capitalism wins. And how a simple accounting move can defeat it<figure><img src="https://images.theconversation.com/files/189504/original/file-20171010-4256-ytkggd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Blazing remnants of the off shore oil rig Deepwater Horizon, off Louisiana, in 2010. The losses produced by polluting companies should cost as 'negative' for a country's growth.
</span> <span class="attribution"><span class="source">Reuters/US Coast Guard/Files</span></span></figcaption></figure><p>Notwithstanding its many flaws and centuries of criticisms, capitalism is still the dominant economic system globally. What made it so resilient? </p>
<p>Without denying the importance of entrenched interests among ruling classes, I believe the real strength of capitalism stems from the theory of value it has imposed on society. The theory can be summed up as follows: value is only created through market transactions, which are always positive for the economy. The rest - like social costs and ecological impacts - doesn’t matter. </p>
<p>Classical sociologists and economists like Max Weber, Joseph Schumpeter and Werner Sombart saw the adoption of a specific form of accounting for measuring performance in industries - so-called <a href="https://books.google.co.za/books/about/Double_Entry_How_the_Merchants_of_Venice.html?id=FbHqak5_okIC&redir_esc=y&hl=en">double-entry bookkeeping</a> - as a critical factor to explain the rise of capitalism before and after the industrial revolution. Since then, we have simply assumed that what is good for the firm must be good for society. </p>
<p>As I show in my book <a href="https://www.amazon.com/Gross-Domestic-Problem-Politics-Controversies/dp/1780322720"><em>Gross Domestic Problem</em></a>, even socialist systems largely accepted capitalism’s accounting approach, ultimately failing to beat capitalism at its game. </p>
<p>But the global debate is shifting. The <a href="https://sustainabledevelopment.un.org/?menu=1300">Sustainable Development Goals</a> recognise that real value is only created when economic development leads to improvements in social and environmental dynamics. I argue that, by changing our headline indicators of prosperity in line with this new thinking, we can show capitalism’s inefficiencies and contribute to its demise. </p>
<h2>Change accounting, change the world</h2>
<p>Accounting is not a neutral exercise. As the term suggests, indicators “indicate” the path to follow to improve performance. In the end, governments, companies and societies at large strive to achieve what is counted, while disregarding what is not. </p>
<p>Of all accounting tools, the most powerful is the gross domestic product (GDP), the headline indicator of economic performance. GDP fully endorses the capitalist theory of value: it views market transactions as the only drivers of development, as opposed to non-market exchanges; it considers as positive all forms of production and consumption, regardless of their impact on economic welfare; and it neglects social and environmental impacts. For as long as our approach to economic growth is determined by GDP, capitalism will continue having the upper hand. </p>
<p>The good news is that, for the first time in almost a century of national income accounting, there is now a window of opportunity for change. A growing number of global institutions, including influential actors like the <a href="https://www.weforum.org/focus/beyond-gdp">World Economic Forum</a> are calling for a shift beyond GDP. </p>
<p>When we apply any of these new indicators, which integrate social and environmental impacts into the concept of economic performance, the alleged efficiencies of capitalism disappear. For instance, the <a href="http://www.sciencedirect.com/science/article/pii/S0921800913001584">genuine progress indicator</a> shows that the global economy has massively under performed since the early 1980s, at the same time as free market reforms were boosting GDP. The genuine progress indicator deducts costs of environmental damage and social ills from economic performance.</p>
<p>Using a similar approach, <a href="http://www.unep.org/newscentre/new-study-shows-multi-trillion-dollar-natural-capital-risk-underlining-urgency-green-economy">UN-sponsored studies</a> conclude that some of the world’s largest corporations actually generate more costs to society than profits. This is particularly true of fossil fuel and commercial food companies. The negative environmental effects of their operations are estimated to be in excess of <a href="http://www.huffingtonpost.com/natural-capital-coalition-/can-businesses-generate-p_b_10371184.html">USD$7 trillion a year</a>.</p>
<p>The Organisation for Economic Cooperation and Development, the club of the world’s richest countries, has developed a “<a href="http://www.oecdbetterlifeindex.org/">better life index</a>”. It underlines how prosperity is determined more by factors like community engagement, work life balance, health and the environment than by income. </p>
<p>The organisation <a href="http://www.oecd-ilibrary.org/social-issues-migration-health/cooking-caring-and-volunteering-unpaid-work-around-the-world_5kghrjm8s142-en">estimates</a> that value generated for the economy by families and communities through self-production and informal exchanges – notoriously neglected by GDP – is equivalent to over 50% of everything the market produces. </p>
<p>And what about the non-monetary activities performed by civil society? According to the <a href="http://documents.worldbank.org/curated/en/249031468195550873/pdf/WPS7707.pdf">World Bank</a>, associations have a massive impact on the economy by building the interpersonal trust – a precondition for a functioning market. In money equivalent, their contribution would be over 20% of the value of all goods and services produced by businesses. </p>
<p>These are the real ‘invisible hands’ supporting the economy. </p>
<h2>A new world</h2>
<p>By portraying corporations as the sole creators of value and by hiding their social and environmental costs, GDP has further entrenched the capitalist grip on power. But as we move beyond GDP, we begin to realise that the emperor has no clothes. A new accounting approach linking economic, social and environmental dynamics – what I call ‘wellbeing accounting’ – can indeed have game-changing effects. </p>
<p>Take fossil fuels. After the recent hurricanes in the US, <a href="http://edition.cnn.com/2017/09/15/opinions/climate-justice-is-coming-sachs/index.html">several experts</a> rightly argued that oil companies should be taken to court and charged with covering the costs of damage. </p>
<p>New accounting would make such an approach automatic. The losses produced by polluting companies would count as ‘negative’ for the country’s growth. This, in turn, would force policy makers to push renewable energies if they want to improve their economic performance. </p>
<p>The alleged virtues of globalisation rest almost entirely on GDP’s blindness to global trade’s environmental and social impact. But <a href="http://www.pnas.org/content/112/20/6271.abstract">new accounting methods</a> do the opposite: they reveal global trade’s negative effects and highlight the more efficient value creation of local and regional exchanges. </p>
<p>Our perception of global leadership would change too. The US and China may look “big” in GDP terms, but the real champions of social progress are some middle powers. These include <a href="http://foreignpolicy.com/2015/06/02/a-post-gdp-world/">Costa Rica to New Zealand</a> which have built strong economies while improving the quality of social and natural dynamics. </p>
<p>Moving away from GDP would also benefit developing nations, especially in Africa. It would put an end to the traditional capitalist approach that equates prosperity with exploitation of people and nature, This in turn would allow countries to experiment with new forms of development. </p>
<h2>Wellbeing accounting</h2>
<p>GDP accounting is what keeps capitalism on life support. As I discuss in two recent books <em><a href="http://politybooks.com/bookdetail/?isbn=9781509511341">The World After GDP</a> _and _<a href="http://panmacmillan.co.za/catalogue/wellbeing-economy/">Wellbeing Economy</a></em>, a shift to new forms of accounting would eliminate the statistical foundations on which capitalism’s credibility rests. </p>
<p>In the end, this is precisely what Adam Smith did with the founding book of capitalism,<em><a href="http://www.econlib.org/library/Smith/smWN.html">The Wealth of Nations</a></em> He questioned the traditional approach to value creation. Smith argued that the real creators of wealth were not the kings and knights that dominated the political scene, but the captains of industry who steered the new industrial market. By shifting the accounting approach, he reinforced the demand for power that would soon lead to the modern revolutions and the dominance of capitalism. </p>
<p>Similarly, well-being accounting shows that an economy promoting the public good and the commons can generate more wealth than the capitalist market. Through new numbers, it aims to embolden all those actors marginalised by the capitalist theory of value. Above all, it equips them with new tools to demand more power and a radically different approach to growth and development. It’s a smart way to beat capitalism by stealth, once and for all.</p><img src="https://counter.theconversation.com/content/83821/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Lorenzo Fioramonti does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A new accounting system that goes beyond the capitalist understanding of value is bubbling under and could topple capitalism itself.Lorenzo Fioramonti, Full Professor of Political Economy, University of PretoriaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/757772017-04-20T02:46:53Z2017-04-20T02:46:53ZBudget explainer: if you want to know about the economy, look past the budget forecasts<p>When the federal government releases its annual budget it provides an economic outlook that includes forecasts and key indicators of the state of the economy. But we should be critical of some of these numbers. Many either don’t tell the entire story or provide more of an indication of where we have been rather than where we are heading.</p>
<p>The unemployment rate is a <a href="http://www.budget.gov.au/2016-17/content/bp1/download/bp1.pdf">key figure in the federal budget</a>, but it doesn’t capture the full extent of slack in the labour force. The rate of growth of Gross domestic product (GDP) is <a href="http://www.budget.gov.au/2016-17/content/bp1/download/bp1.pdf">another important figure</a>, but it also doesn’t really say much about the state of the economy.</p>
<p>Here are some things behind these broad indicators that you would need to get a fuller picture of the economy.</p>
<h2>The labour force</h2>
<p>According to the Australian Bureau of Statistics, the unemployment rate is currently <a href="http://www.rba.gov.au/publications/smp/2017/feb/pdf/06-economic-outlook.pdf">5.9%</a>. This <a href="http://www.abs.gov.au/AUSSTATS/abs@.nsf/0/FBE517ECA9B07F63CA257D0E001AC7D4?OpenDocument">means</a> that 5.9% of people in the labour force did not work for more than one hour in the week the survey was conducted. </p>
<p>The labour force consists of those older than 15 who actively looked for work in the four weeks prior to the survey, were available to work during the survey week, or were waiting to start a new job and could have worked sooner if the job had been available.</p>
<p>The last budget <a href="http://www.budget.gov.au/2016-17/content/bp1/download/bp1.pdf">forecast</a> that the unemployment rate would remain steady over the next four years.</p>
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<p>There is a problem with this very tight definition of unemployment. It excludes part-time workers who would like more hours of work. This group are called <a href="http://www.rba.gov.au/publications/smp/2017/feb/pdf/box-b-underemployment-and-labour-market-spare-capacity.pdf">underemployed</a> workers. The underemployment rate is currently <a href="http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/6202.0Feb%202017?OpenDocument">8.8%</a> of the labour force. Underemployment isn’t an indicator highlighted in the budget documents. </p>
<p>Altogether, 14.7% (the 5.9% unemployed plus the 8.8% underemployed) of the labour force is underutilised. This is arguably a more accurate picture of the labour market than the unemployment rate. </p>
<p>What makes this distinction even more important is that the trends are diverging. Since 2014 the underemployment rate has been trending up while the unemployment rate has been trending down. This difference is in part explained by the <a href="http://www.rba.gov.au/publications/smp/2017/feb/pdf/box-b-underemployment-and-labour-market-spare-capacity.pdf">rise in the share of part-time workers</a> working fewer hours than they would have liked, which pushes unemployment down but underemployment up.</p>
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<p>On top of this, the unemployment rate tells us where the economy has been more accurately than where it is going – it is a lagging indicator. In Australia, changes in employment growth lag changes in output of goods and services <a href="http://www.abs.gov.au/ausstats/abs@.nsf/featurearticlesbytitle/09CA2BE34A12A670CA2570EE00193A49?OpenDocument">by six to nine months</a>. </p>
<p>So by itself at least, the unemployment rate also doesn’t tell us much about the state of the labour market or where it is heading.</p>
<h2>Economic growth</h2>
<p>Australia is <a href="http://www.rba.gov.au/publications/smp/2017/feb/pdf/06-economic-outlook.pdf">currently growing at 2%</a> per annum and this is forecast to increase to 3% by the end of this year. </p>
<p>But as with the unemployment rate, there are <a href="https://theconversation.com/how-and-why-we-are-moving-beyond-gdp-as-a-measure-of-human-progress-68672">shortcoming in GDP growth as a measure of economic progress</a> and the importance of growth to our national living standards is overplayed. The prices of our commodity exports have a bigger impact on fluctuations in our living standards than growth in GDP.</p>
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<p>The prices of our commodity exports <a href="http://www.rba.gov.au/publications/smp/2017/feb/pdf/06-economic-outlook.pdf">doubled</a> during the mining boom from early 2000’s to 2010, driving up the nation’s income, boosting the stock market and government’s revenue. Commodity prices have since <a href="http://www.rba.gov.au/statistics/frequency/commodity-prices/2017/icp-0317.html">fallen substantially</a>. These fluctuations swamp any effect of changes in growth on our living standards – and the fluctuations are entirely out of our hands.</p>
<p>We need to look behind the growth number at the drivers of GDP to get a better picture of the state of the economy, as well as where it is headed.</p>
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<p>Consumption activity is one such driver and has a range of indicators. One of them is retail turnover, which <a href="http://www.abs.gov.au/ausstats/abs@.nsf/mf/8501.0">has recently been flat</a> in real terms (adjusted for inflation). Retail turnover is another measure not found in the budget documents, but shows revenue from a survey of large and small businesses and gives an idea of the demand in the economy. </p>
<p>Another good indicator is sales of new motor vehicles, <a href="http://www.abs.gov.au/ausstats/abs@.nsf/mf/9314.0">which have also been flat</a> recently. </p>
<p><a href="https://theconversation.com/why-and-how-do-we-measure-what-consumers-feel-68804">Consumer confidence</a> is also a good indicator of consumption. This attempts to measure optimism (or pessimism) about the state of the economy. Depending on which indicator you consult, consumer confidence has either <a href="http://www.roymorgan.com/morganpoll/consumer-confidence/roy-morgan-business-confidence">declined</a> or <a href="http://www.tradingeconomics.com/australia/consumer-confidence">increased</a> slightly over the past few months.</p>
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<p>As consumer confidence relates to consumption, business confidence is a good leading indicator of investment in the economy. This is often <a href="https://www.rba.gov.au/publications/bulletin/2009/dec/pdf/bu-1209-3.pdf">driven by</a> expectations about future profitability, which is in turn driven by expectations of demand by households, firms and foreign buyers. </p>
<p>There are a few business confidence indicators to choose from, and they have been <a href="http://business.nab.com.au/nab-monthly-business-survey-december-2016-2-22311/">steady</a> in recent months, indicating that investment will be flat in the coming three to six months. </p>
<p>Finally, export expenditure is driven by both growth in our major trading partners and Australia’s competitiveness, the latter being determined by our costs of production and the Australian dollar. Growth of our trading partners has <a href="http://www.rba.gov.au/publications/smp/2017/feb/pdf/statement-on-monetary-policy-2017-02.pdf">picked up</a> in recent months, particularly in China, and is around 4% on average.</p>
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<p>Flat investment and government expenditure means that the predicted 3% GDP growth would have to come from consumption and export expenditure. Consumption currently is flat and exports tend to be volatile and uncertain. So take this number with a grain of salt.</p>
<p>In the end, if you are looking for a picture of the economy, the data in the federal budget is not much help. The data behind the forecasts of broad macroeconomic variables such as economic growth and unemployment are too aggregated to be of much use as indicators of future interest rates, household living standards or prospects for employment and growth in particular industry sectors.</p>
<p>When the budget is released, place the forecasts in the context of the other indicators we have about the economy.</p><img src="https://counter.theconversation.com/content/75777/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ross Guest has previously received funding from the ARC but has no current ARC projects.</span></em></p>The budget is full of forecasts about where the economy is going, but other indicators are often more helpful.Ross Guest, Professor of Economics and National Senior Teaching Fellow, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/702032016-12-12T01:13:38Z2016-12-12T01:13:38ZIt’s not just a drop in GDP that should worry us<p>It seems like we haven’t had much good economic news lately. This was neatly summarised in the drop in national output (GDP) of <a href="http://www.abs.gov.au/ausstats/abs@.nsf/mf/5206.0?opendocument&ref=HPKI">0.5%</a> due to weak investment, both private and public. </p>
<p>Private investment is <a href="http://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/5206.0Main%20Features2Sep%202016?opendocument&tabname=Summary&prodno=5206.0&issue=Sep%202016&num=&view=">unexpectedly weak across most categories</a>. New building investment fell by 11.5%, construction investment fell by 3.6%, while mining investment fell for the 12th consecutive quarter. </p>
<p>This was all reflected in <a href="http://business.nab.com.au/wp-content/uploads/2016/11/2016m10-NAB-business-survey.pdf">a drop</a> in business confidence and business conditions in the September quarter.</p>
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<p>This is not what’s meant to happen when you have interest rates at record lows. Last week the RBA held the cash rate at the lowest ever rate of 1.5%. </p>
<p>The cash rate has been <a href="http://www.rba.gov.au/statistics/cash-rate/">falling steadily</a> from 4.75% since October 2011 – it has not risen once during this time. Falling interest rates are supposed to stimulate business investment and also consumer spending, yet this is weak too, growing at <a href="http://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/5206.0Main%20Features2Sep%202016?opendocument&tabname=Summary&prodno=5206.0&issue=Sep%202016&num=&view=">below trend</a>.</p>
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<p><strong>Mining and non-mining investment</strong></p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/149523/original/image-20161211-31375-1uica1y.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/149523/original/image-20161211-31375-1uica1y.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=378&fit=crop&dpr=1 600w, https://images.theconversation.com/files/149523/original/image-20161211-31375-1uica1y.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=378&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/149523/original/image-20161211-31375-1uica1y.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=378&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/149523/original/image-20161211-31375-1uica1y.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=475&fit=crop&dpr=1 754w, https://images.theconversation.com/files/149523/original/image-20161211-31375-1uica1y.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=475&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/149523/original/image-20161211-31375-1uica1y.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=475&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Mining and non-mining investment.</span>
<span class="attribution"><span class="source">Australian Bureau of Statistics</span></span>
</figcaption>
</figure>
<p>The puzzle can be explained. When interest rates get very low they start to have the opposite to their intended effect on both households and businesses. </p>
<p>Households that are either in or approaching retirement have to save more to achieve their target nest egg of savings. This depresses consumption spending. No other than the RBA governor at the time, Glenn Stevens, acknowledged in a <a href="http://www.rba.gov.au/speeches/2016/sp-gov-2016-04-19.html">speech</a> in April that low interest rates were a big problem for savers. </p>
<p>The arithmetic is simple. If you as a couple want to generate a <a href="https://www.superannuation.asn.au/resources/retirement-standard">comfortable income</a> of $60,000 in retirement, you will need about $900,000 at an annual net return of 5% (after fees), if you are willing to run your capital down to zero after 25 years. You would obviously need more than that if you want to leave some capital at the end. </p>
<p>But 5% annual return is now looking very unlikely on a sustainable basis, given a low-risk asset allocation and a world of ultra low interest rates. About 3% (net) is more likely. In that case you will need roughly $1.1 million even if you are prepared to run your capital down to zero in 25 years. This isn’t even including any extras like a short overseas holiday once a year.</p>
<p>People understand this and are saving more to build a bigger nest egg, given such low returns. Other households that are building their wealth are tending to use lower interest rates to borrow in order to buy property. </p>
<p>Their consumption spending is more in the form of interest payments on their debts, rather than purchases of goods and services. The ratio of housing debt to household income has increased over the past three years from <a href="http://www.rba.gov.au/statistics/tables/">166% to 186%</a>. </p>
<p>And lower interest rates keep the Australian dollar lower than it would otherwise be. That makes overseas purchases more expensive, such as holidays and cars.</p>
<p><strong>New building investment</strong></p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/149521/original/image-20161211-31367-1wmpun2.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/149521/original/image-20161211-31367-1wmpun2.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=381&fit=crop&dpr=1 600w, https://images.theconversation.com/files/149521/original/image-20161211-31367-1wmpun2.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=381&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/149521/original/image-20161211-31367-1wmpun2.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=381&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/149521/original/image-20161211-31367-1wmpun2.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=479&fit=crop&dpr=1 754w, https://images.theconversation.com/files/149521/original/image-20161211-31367-1wmpun2.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=479&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/149521/original/image-20161211-31367-1wmpun2.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=479&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">New building investment.</span>
<span class="attribution"><span class="source">Australian Bureau of Statistics</span></span>
</figcaption>
</figure>
<p>As for businesses, why should they feel more confident about future sales revenue when the RBA thinks the economy needs stimulating, and when they see weak household consumption and other businesses reluctant to invest?</p>
<p>The apparently good news to come from the September quarter national accounts is actually dangerous. Australia’s terms of trade rose by <a href="http://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/5206.0Main%20Features2Sep%202016?opendocument&tabname=Summary&prodno=5206.0&issue=Sep%202016&num=&view=">4.5%</a>, due to mineral price rises such as iron ore. This feeds into export income and in turn eventually into company profits and tax revenue. Therein lies the danger. </p>
<p>The last terms-of-trade boom, from 2000 to 2010, released rivers of tax revenue. This is not what Australia needs right now because it will not last. It will only allow our politicians to postpone the necessary long-term cuts in government spending. Even worse, it might encourage them to hardbake new spending programs that we can’t afford in the long run.</p>
<p>Instead, we need to remember what Nobel-prize-winning economist Paul Krugman famously <a href="http://www.oecd.org/std/productivity-stats/40526851.pdf">said</a>:</p>
<blockquote>
<p>“Productivity isn’t everything, but in the long run it is almost everything.”</p>
</blockquote>
<p>Sustained improvements in average living standards can only come from improvements in productivity. We know how to improve productivity, we just can’t muster the political will to do it. </p>
<p>We have become far too concerned with how to share a national economic pie that is in danger of shrinking, particularly in per capita terms, than in growing the pie.</p><img src="https://counter.theconversation.com/content/70203/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ross Guest has in the past received funding from the Australian Research Council.</span></em></p>Australia’s economic indicators are showing worrying signs, with business confidence falling in the face of continued low interest rates.Ross Guest, Professor of Economics and National Senior Teaching Fellow, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/465042015-09-01T04:44:47Z2015-09-01T04:44:47ZWhat the science and technology index tells us about development in Africa<figure><img src="https://images.theconversation.com/files/92787/original/image-20150824-17765-1jb57xl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The African continent is embracing technology in varying degrees. Swimmers use a selfie stick to take a picture of themselves in shallow waters of the River Nile outside Khartoum, Sudan.</span> <span class="attribution"><span class="source">REUTERS/Mohamed Nureldin Abdallah</span></span></figcaption></figure><p>In 2001, the RAND Corporation’s Science and Technology Policy Institute <a href="http://www.rand.org/content/dam/rand/pubs/monograph_reports/2005/MR1357.0.pdf">created</a> an index of science and technology capacity for the World Bank. They ranked 150 countries based on their potential to innovate and work with more scientifically advanced nations.</p>
<p>Have these changes had an effect on African nations’ scientific and technological capacity? My <a href="http://www.academicjournals.org/journal/JASD/article-abstract/99DEFF453599">study</a> replicated the RAND Index in 2011 to answer this question and suggest which African nations might be best poised to move forward technologically in coming decades.</p>
<p>The index ranked most countries in the world, according to their science and technology capacity, into:</p>
<ul>
<li><p>scientifically advanced countries;</p></li>
<li><p>scientifically proficient countries;</p></li>
<li><p>scientifically developing countries; and</p></li>
<li><p>scientifically lagging countries. </p></li>
</ul>
<p>Various indicators have been developed in an attempt to quantify science and technology capacity across countries. Examples of this are the OECD’s <a href="http://www.oecd.org/sti/scoreboard.htm">Science, Technology and Industry Scoreboard</a> or the <a href="http://ec.europa.eu/growth/industry/innovation/facts-figures/scoreboards/index_en.htm">European Innovation Scoreboard</a>.</p>
<h2>What are the measurables?</h2>
<p>The RAND index selected seven components for which national level data were available for most countries for 2001 or an immediately preceding year. </p>
<p>The variables were: </p>
<ul>
<li><p>Gross national product (GNP) per capita.</p></li>
<li><p>The number of universities and research institutions in the nation, per million people, as a representation of science and technology infrastructure.</p></li>
<li><p>The number of scientists and engineers per million people.</p></li>
<li><p>The number of a nation’s students studying in the United States. </p></li>
<li><p>The proportion of GNP spent on research and development. </p></li>
<li><p>The number of academic science and technology journal articles published by citizens of the nation. </p></li>
<li><p>The number of patents registered by citizens of the nation with the US Patent and Trademark Office and the European Patent Office.</p></li>
</ul>
<p>To combine these different components into a single index, the RAND index standardised the numbers to show national performance. The value of each national characteristic was compared to the international average. </p>
<p>Performance was ranked based on the number of standard deviations of the national value away from the international mean. The indicators were then weighted according to points for each criteria.</p>
<h2>What we learnt from the 2011 study</h2>
<p>A number of countries on the African continent are poised to reap the <a href="http://www.consultancyafrica.com/index.php?option=com_content&view=article&id=1765:scientific-research-in-africa-more-than-an-economic-boost&catid=57:africa-watch-discussion-papers&Itemid=263">economic</a> benefits of increased investment in science and technology.</p>
<p>Science has helped stimulate <a href="http://www.scienceprogress.org/wp-content/uploads/2011/07/rnd_funding_FINAL.pdf">economic</a> growth in regions investing in innovative solutions around the world. </p>
<p>The African <a href="http://www.atpsnet.org/Files/the_african_manifesto_for_st&i.pdf%20Pg16">Manifesto</a> is a vision for a renaissance in science, technology and innovation for Africans, by Africans, in Africa. </p>
<p>South Africa, Egypt, Tunisia, Morocco, Algeria, Nigeria and Mauritius are among the front runners in this group poised to do well because of the investment in science, technology and innovation. </p>
<p>In sub-Saharan Africa, the countries with the greatest promise apart from South Africa and Nigeria are Benin, Botswana, Uganda, Mozambique, Ethiopia and Sudan. </p>
<p>The countries that ranked rather low but show some promise for joining the others in the future are Liberia, Guinea, Namibia, Cote d´Ivoire and Cameroon.</p>
<h2>Tertiary foundation</h2>
<p>To benefit from the science and technology, tertiary education must fulfil the role as a driver of growth and technological capability. </p>
<p>Countries like Japan, Finland, Sweden Korea, Taiwan and South Korea have shown how efforts to raise tertiary education standards can yield benefits for technological innovation.</p>
<p>Many experts in Africa acknowledge the crucial role of higher education in development as a key strategy to boost performance across economic sectors. </p>
<p>Among other benefits, higher education also provides the capacity to understand and use global knowledge in science and technology. An example of this is in agriculture and other sectors. Investment in higher education can speed the rate of technology catch-up in Africa and boost income. </p>
<h2>Enrolment challenges</h2>
<p>But Africa’s tertiary education enrolment rates are among the lowest in the world. The African average is 7.1%, compared to 25.1% elsewhere in the world. Others on top of the African ranking and above the average enrolment rate on the continent are Tunisia, Egypt, Algeria, Mauritius, Morocco and Cape Verde. Botswana, Gabon and Senegal are also high on the rankings. </p>
<p>A small group of sub Saharan African nations is showing above average enrolment rates in tertiary education, but still lagging behind in science and technology capability. </p>
<p>These are: </p>
<ul>
<li>Liberia (17%) </li>
<li>Nigeria (10%) </li>
<li>Guinea (around 9%)</li>
<li>Namibia (around 9%)</li>
<li>Cote d´Ivoire (8.4%) </li>
<li>Cameroon (7.8%)</li>
</ul>
<p>If higher education is a key determinant of future science and technology capacity, these nations could progress in the coming years. </p>
<h2>How Africa ranks</h2>
<p>While African nations are still far behind in the latest study – and most remain near the bottom of the list – countries like Morocco, Algeria, Nigeria, Botswana, Mozambique, Ethiopia, Sudan and Libya had advanced in the ranking by 2011.</p>
<p>Out of the African nations in the original RAND index, South Africa was on top, followed by Mauritius, Benin, Egypt, Uganda, Togo and Tunisia. Mozambique, Chad and Eritrea were at the bottom.</p>
<p>Morocco and Algeria showed the most progress, the former going from 116th to 62nd in the world and the latter from 123rd to 68th. In sub-Saharan Africa, Nigeria moved to 77th from 104th. Botswana, Mozambique, Ethiopia and Sudan also improved. </p>
<p>In contrast, African leader Mauritius declined in the 2011 index, from 58th to 79th – as did Benin, Uganda, Libya, Togo, Congo and others. A decade later, most nations on the continent show a drop in the global ranking. </p>
<p>Because of their large populations South Africa, Morocco, Egypt, Algeria and Nigeria fell. Tunisia moved up and tiny Seychelles went from 98th to 87th. Gabon and Libya moved up but remained below the average. </p>
<p>The countries lagging the furthest behind were the same as in the first index: Mauritania, Tanzania, Niger, Sierra Leone, Liberia, Comoros, Eritrea, Chad and Somalia.</p>
<p>The widest differences, as could be expected, are in the indicators that reflect science and technology output. In the number of scientific and technological articles published in academic journals, every African nation was below the sample average. Tunisia, South Africa, the Seychelles and Botswana were listed as the best performers on the continent.</p>
<p>In patents, only Seychelles was above the world average, with other nations lagging seriously behind. The human resource indicators also were substantially lower than for the rest of the world.</p>
<p>As African countries advance in science and technology capability, their chances of orienting their economies toward sustained and sustainable growth are greatly enhanced. Hence this becomes a key indicator for the future.</p>
<p><em>This piece was based on a <a href="http://www.academicjournals.org/journal/JASD/article-abstract/99DEFF453599">study</a> by Gayle Allard, PhD, Professor of Economics, IE Business School in Spain in the Journal of African Studies and Development in June.</em></p><img src="https://counter.theconversation.com/content/46504/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Gayle Allard does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Science and technology is seen as a key driver of a nation’s economic fortunes. How is the African continent faring a decade after the first major global survey on countries’ performance?Gayle Allard, Professor of Managerial Economics , IE UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/430652015-06-17T04:36:07Z2015-06-17T04:36:07ZExplainer: how indicators have the power to shape our world<figure><img src="https://images.theconversation.com/files/84514/original/image-20150610-6793-1tfd6pw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The production of indicators, such as the World Economic Forum's ranking of economies on competitiveness, is a political process.</span> <span class="attribution"><span class="source">Reuters/Victor Ruiz Garcia</span></span></figcaption></figure><p>With the turn to evidence-based governance, the reliance on statistical data along with its synthesis into the kinds of scales, ranks, and composite indexes we refer to as indicators has become essential for policy formation and political decision-making. </p>
<p>The use of indicators in governance has expanded from economic and sector-specific quantitative data to the measurement of almost every phenomenon. Our <a href="http://www.cambridge.org/us/academic/subjects/law/socio-legal-studies/quiet-power-indicators-measuring-governance-corruption-and-rule-law">recent book</a> focuses on indicators of governance itself, specifically governance through law. These are indicators purporting to measure practices or perceptions of good governance, the rule of law, corruption, regulatory quality, and related matters. </p>
<p>The underlying theoretical framework of this book is the linkage between knowledge and power. Indicators are both a form of knowledge and a technology for governance. </p>
<p>Like other forms of knowledge, indicators influence governance. They do this when they form the basis for political decision-making, public awareness, and the terms in which problems are conceptualised and solutions imagined. </p>
<p>Conversely, the kinds of information embodied in indicators, the forms in which they are produced and disseminated, and how they function as knowledge, are all influenced by governance practices. </p>
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<span class="caption">Indicators helps us make sense of the messy social world, manage and govern it.</span>
<span class="attribution"><span class="source">Cambridge</span></span>
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<p>The production of indicators is itself a political process. It is shaped by the power to categorise, count, analyse and promote a system of knowledge which has effects beyond the producers. </p>
<p>In these respects, indicators are comparable to law. Law as a technology of governance can have very substantial effects on knowledge. For instance, the legal processes and legal forms of trials, investigations, inquests, legislative hearings, statutes and treaties can all be important sources of information that shape wider understandings of the world. </p>
<p>Like law, indicators order the buzzing array of actual behaviour into categories that can be understood universally. They not only make sense of the messy social world but also help to manage and govern it. </p>
<h2>Use of indicators over time</h2>
<p>We distinguish four phases of the development and use of indicators over time. </p>
<p>The first phase is the conceptualisation of the indicator. The indicator is named and its underlying theory of social change established. This requires a theoretical position, the development of categories for measurement, and modes of analysing the data. </p>
<p>When an indicator is formulated and labelled as measuring, for example, the rule of law or corruption, it builds on a theory of what constitutes a good society. It builds also on what constitutes a problem or pathology to overcome in the course of improving the national society and polity. </p>
<p>Influences on the conceptualisation of indicators can be analysed under four headings. First, the actors and institutions who develop an indicator determine which concepts are being deployed, for what purposes, and with which theoretical orientation. It matters who the actors and institutions are that create an indicator.</p>
<p>A second feature of indicator conceptualisation is the relevant expertise. For example, Freedom House began with the work of an academic with political science expertise. Many of the development indicators were developed by economists. </p>
<p>A third feature is the temporality of the process. Many of the successful indicators have been many years in the making. They have also acquired visibility based on their past reputations as well as their ability to adapt as situations changed. For example, Freedom House was born in the era of anti-Nazi activism of the 1930s, shifted to a Cold War orientation, and emphasised civil and political rights. </p>
<p>A fourth feature is resources. Conceptualising indicators and linking them to data, even if there is no additional data collection process, is an expensive and time consuming process. It requires significant input from governments, international organisations, wealthy advocacy groups, businesses hoping to turn a profit, or academics using existing data sets. </p>
<p>Which indicators are formed and what they measure depends in large part on where the financial support for the initiative comes from. </p>
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<a href="https://images.theconversation.com/files/84518/original/image-20150610-6798-x2678v.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/84518/original/image-20150610-6798-x2678v.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/84518/original/image-20150610-6798-x2678v.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=364&fit=crop&dpr=1 600w, https://images.theconversation.com/files/84518/original/image-20150610-6798-x2678v.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=364&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/84518/original/image-20150610-6798-x2678v.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=364&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/84518/original/image-20150610-6798-x2678v.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=457&fit=crop&dpr=1 754w, https://images.theconversation.com/files/84518/original/image-20150610-6798-x2678v.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=457&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/84518/original/image-20150610-6798-x2678v.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=457&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">The Freedom in the World Index uses the standard technique of interactive maps with countries coded in different colours depending on their performance.</span>
<span class="attribution"><span class="source">Freedom House</span></span>
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<h2>The dependence on data</h2>
<p>The second phase of an indicator’s trajectory is production, in which the conceptualisation of the indicator is married to available or created data. During this phase, those who know about available data search for appropriate or useful databases that either measure the desired phenomenon or serve as a proxy.</p>
<p>Indicators depend on data. Where the supply of data depends on widely dispersed individuals or entities to collect and supply it, indicator production depends on a degree of buy-in from these participants. Many of the participants may have incentives to under- or over-report or to reconstruct categories. </p>
<p>Resources matter, since data collection is very expensive. Some forms are less expensive, such as expert opinion surveys, while indicators that can use administrative data already collected by state agencies such as the police or the courts are clearly less expensive. </p>
<p>The interaction between conceptualisation and data collection is critically important, since each shapes the other. The order matters. If the indicator must rely on existing data, its definition is limited to what has already been measured or what can be interpreted from it. To move into new territory, it may be necessary to develop new data, which requires funding to collect it and even more funding to collect it over time. </p>
<p>A key element of production of an indicator is its presentation, packaging and dissemination. If an indicator is intended for a wide audience, there is likely to be a premium on formats that are clear and easy to use, conceptually simple and visually attractive. One such standard technique is the use of interactive maps with countries coded in different colours depending on their performance.</p>
<h2>A basis for decision and action</h2>
<p>The third phase is the one in which the indicator is treated as a source of knowledge. This means that it is used to form background beliefs or understandings, develop or test scientific hypotheses. It can also be used to form conclusions that provide a basis for decision and action. </p>
<p>The influence of a focal point on behaviour is heightened if use of the indicator becomes sufficiently embedded that they result in network effects. </p>
<p>The system of ratings sovereign bonds is so embedded in legal rules and market practices, including requirements that some entities invest only in bonds rated as investment grade, that network effects result. This makes major changes to the system more costly and less likely.</p>
<h2>Effects and impact</h2>
<p>The fourth phase is about assessment. Assessing the causal effects of indicators is almost impossible to do with any precision, as their influence can seldom be isolated from a myriad of other confounding causes or distortionary factors. The effects of indicators within individual organisations are the easiest to track, especially when those organisations are committed to transparency in decision-making. </p>
<p>Macro knowledge effects are more difficult to isolate, but there have been some notable efforts. For example, <a href="http://www.nyudri.org/wp-content/uploads/2012/04/indicatorsasatechnologyofglobalgovernance.pdf">case studies</a> show that there is significant indicator-influenced acceptance, fostered by the news media, that the concept of “development” is well articulated by the United Nations Development Programme’s <a href="http://hdr.undp.org/en/content/human-development-index-hdi">Human Development Index</a>. </p>
<p>Indicators vary in their influence. Some become well-established and remain influential while others receive little uptake or decline in importance. </p>
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<img alt="" src="https://images.theconversation.com/files/84515/original/image-20150610-6790-11s8n2f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/84515/original/image-20150610-6790-11s8n2f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=394&fit=crop&dpr=1 600w, https://images.theconversation.com/files/84515/original/image-20150610-6790-11s8n2f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=394&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/84515/original/image-20150610-6790-11s8n2f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=394&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/84515/original/image-20150610-6790-11s8n2f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=495&fit=crop&dpr=1 754w, https://images.theconversation.com/files/84515/original/image-20150610-6790-11s8n2f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=495&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/84515/original/image-20150610-6790-11s8n2f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=495&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">World Bank President Jim Yong Kim. Indicators that prevail are often sponsored by powerful organisations such as the World Bank.</span>
<span class="attribution"><span class="source">Reuters/Mariana Bazo</span></span>
</figcaption>
</figure>
<h2>Powerful backers make a big difference</h2>
<p>Indicators exist in a complicated ecology characterised by relations of symbiosis, co-existence or competition and in environments that may change rapidly. Different indicators that express divergent theories compete in the same social field.</p>
<p>Those that prevail are often sponsored by powerful organisations such as the World Bank. However, some acquire visibility through their simplicity and the appeal of their underlying theory, such as Freedom House and Transparency International, an effect proponents of other ideas may seek to emulate through new indicators.</p>
<p>Indicators smuggle theories of corruption, rule of law, and development into apparently neutral systems of measurement. Some achieve such hegemonic worldwide acceptance that they shape legal consciousness while others are ignored. </p>
<p>Indicators and theories work together. An indicator is more acceptable if its implicit theory is accepted, while a theory may receive wider support if it is expressed in a clear and widely used indicator. </p>
<p>Indicators that become dominant persuade decision makers to follow their models. They also affect governance when they specify a standard such that decision making becomes an assessment of performance with relation to the metrics of that standard.</p>
<hr>
<p><em>This article is an excerpt from <a href="http://www.cambridge.org/us/academic/subjects/law/socio-legal-studies/quiet-power-indicators-measuring-governance-corruption-and-rule-law">The Quiet Power of Indicators: Measuring Governance, Corruption, and Rule of Law</a>, which is edited by the authors.</em></p><img src="https://counter.theconversation.com/content/43065/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sally Engle Merry receives funding from the US National Science Foundation..</span></em></p><p class="fine-print"><em><span>Benedict Kingsbury receives funding from the US National Science Foundation</span></em></p><p class="fine-print"><em><span>Kevin E. Davis receives funding from US National Science Foundation</span></em></p>Governance indicators have become essential for policy formation and political decision-making, helping us make sense of the messy social world, manage and govern it.Sally Engle Merry, Professor of Anthropology, New York UniversityBenedict Kingsbury, Professor of Law and Director, Institute for International Law and Justice, New York UniversityKevin E. Davis, Vice Dean and Professor of Business Law, New York UniversityLicensed as Creative Commons – attribution, no derivatives.