Broader Measures of Progress J. Steven Landefeld, Director “Response to the Rio+20 Mandate for Broader Measures of Progress” High Level Forum Event for the UN Statistical Commission Meeting February 25th, 2013

Broader Measures of Economic Progress? ▪ Recent Impetus for Broader Measures:  Rio +20  Housing and financial crisis  Great recession and slow recovery  Fiscal crisis  Increasing concentration of income  Stiglitz report ▪ How Broad?  “ National accounts should include elements that reflect economic welfare that can be brought directly or indirectly into relation with the measuring rod of money” –Pigou  He emphasized that can might mean anything from can easily to can with violent straining. ▪ Progress on broader measures have waited too long (over 75 years!) ▪ We need to set ambitious, but achievable goals 2

Broader Measures of Economic Progress? ▪ Long-Standing List to Choose From:  Energy and Natural Resource Accounts  Environmental Accounts  Distribution of Income, Consumption, and Wealth  Alternative Measures of Sustainability  Medical Care and Health Accounts  Education  Real Government Output  Household Production ▪ Choices will depend on country priorities and resources, but some degree of standardization and comparability (SNA/SEEA, etc.) important 3

Broader Measures of Economic Progress? ▪ Challenges include:  Gaps in data  Lack of consensus on estimating methods  Fiscal crisis  Economic crisis  This stuff is really important with large economic and political implications ▪ Big Bang or Incremental Approach?  Current environment may suggest incremental approach with extensions in key areas (w/double bang for the buck)  What are some of these areas? 4

Growing or Shrinking Living Standards? 5 Source: BEA, Census

6 Growing but Slower Source: BEA, Census

Alternative Measures of the Purchasing Power of Households 7 Source: BEA

8 How Did We “Miss” the Housing Bubble? Source: BEA, Federal Reserve Board, Standard & Poor’s

9 How Did We “Miss” the Stock Price Bubble? Source: BEA, Standard & Poor’s

10 Where’s the Debt? Total liabilities/total financial assets Source: BEA

Investing For the Future of Just Keeping Up? 11 Source: BEA

12 Human Capital Source: BEA, Christian (2012)

What is the Value of Household Work? 13

Feeling Rich on Capital Gains Source: BEA, Federal Reserve Board

Long-Term Happiness and Real GDP 15 Source: BEA, University of Michigan, Veenhoven, R., World Database of Happiness, Distributional Findings in Nations

16 Happiness & the Financial Crisis Gallup Well-being Index Unemployment rate Source: BEA, Gallup