From my latest essay.
I propose that, instead of using GDP or overall subjective happiness, we should use occupational satisfaction as the broad indicator of economic performance. Occupational satisfaction is the core economic component of happiness. Unlike GDP, which is rooted in a materialistic understanding of value, occupational satisfaction reflects the understanding that value is subjective.
Before you raise all of your objections, let me explain where I am coming from.
1. I think that mainstream economics is pretty much at a dead end. We need new approaches.
2. In physical science, new observational tools often lead to new discoveries. Think of the microscope and the telescope.
3. If I had the funds for a large research institute in economics, I would focus on giving grants to researchers who develop new methods of observing the economy. These could be new indicators, such as the one described in the essay, or new ways to classify and to categorize economic activity.
4. I would not expect any new observational approach to be perfect. I would not expect every new observational system to be useful. But I do think that bright research talent will produce more powerful insight by attempting to create new lenses through which to view the economy than by sticking to the current approach of formulating and testing individual hypotheses.
Perhaps the only way that GDP is “fundamentally flawed”, is its (present) lack of ability to use individual time preference as a valid, tangible economic unit- hence as an aggregate measure of subjective preference. Consequently, the potential time use and preference of all participants has no aggregate representation. Meanwhile, intangible valuations of skill, are limiting the compensation of human capital potential.
If time value (personal priorities in relation to local groups for services) were utilized as an economic unit, time preferences, which of course include subjective values such as happiness and job satisfaction, would be measurable via tangible means. Even though we “know” certain skills have more value than what could be achieved via everyone’s time, when we pursue that path too far, groups lose their ability to coordinate time preferences with one another.
A marketplace for time value (which I regularly promote) would make high skill services generation – everything from group research to basic maintenance functions – measurable in relation to itself. Since mutual time preferences in the form of mutual employment are immediate reciprocity, they can also provide immediate wealth creation. The result could be tangible wealth which reduces the present day intangible problem of services generation that is dependent on previous wealth and redistribution. Tangible services generation would make the measure of GDP, and its monetary equivalent, more reliable during times of services dominance in mature economies. Eventually, services could be generated that are less subject to political divisions.
One of the problems I see is that so much of economic activity does not create any real wealth. If someone is paid to build a wall, then that wall is tangible wealth. However if people are paid to produce all sorts of reports for the planning police as to whether the wall meets all sorts of (often spurious) criteria, then that isn’t adding any value to anything.
The tradesman’s time for building the wall is not differentiated from the paper pushers’ time to get permission to build it. They are all part of a measure of a gross domestic product.
I think there are already amazingly powerful tools for observing the economy in extreme detail. Unfortunately for most researchers, the data is private and extremely sensitive and valuable, and so exclusively in the hands of a few corporations , insurance companies, and various government agencies. Chetty got all those tax records, but on the one hand, no one knows if he has the ability to identity people and leak private filings, and on the other hand, almost no one can scrutinize his findings.
The complement to this would be that tax policy would largely be irrelevant.
Redistributive taxation would be irrelevant, too, guy!
I doubt Arnold is a hobgoblin of consistency.
“mainstream economics is pretty much at a dead end” << because so much of paid economist work is to generate economic growth with gov't programs.
Adam Smith was more right than most current (gov't paid/ subsidized) economists: all that is needed is private property, a free market, light taxes, and small gov't to maintain these. (paraphrase)
No country which follows this advice since WW II has failed to make significant economic progress.
GDP/ GNP is not a great measure, but seems better for economic growth comparisons than any other single metric — certainly no majority of economists have proposed and supported any other single metric as better.
In your Occupational Satisfaction essay you implicitly agree: “It would take a lot of trial and error to develop an effective job satisfaction survey”
I would like to see some companies do that. Our Big Multinational company is now creating a Net Promoter Score, given by our customers, rating 0-10. With optional comments. Our VPs think tracking and improving the NPS will result in the internal magic — More Sales.
But such scores will never replace revenue and profit as measures for the company; tho as another number it is a good alternate perspective.
My own guess as to the socially optimal single number is the participation rate, which has dropped despite the safety & health improvement of the last 25 years.
In any case, gov’t measures that result in more jobs is an excellent target.
Republicans & conservative should be favoring a Full Employment policy, including providing subsidies to very low skill work so that low paid workers are “overpaid” to a no-job market price. All humans who can leave their homes can do some actual work, even if there is no market job offer. Gov’t work is better than no work.
I suggest you are measuring the following question: is it meaningful for me the employee to create this offering and does the customer confirm the offering is meaningful to them as demonstrated by their willingness to pay.
Csikszentmihalyi weighed in on “Good Business” questions based on his widely accepted understanding of human motivation and needs (i.e., autonomy, mastery and purpose), but he unfortunately concludes that our ultimate purpose is selflessness (an economic dead-end). I would suggest a very helpful contribution comes from Victor Frankl when he emphasized how critical it is to get the sequencing right: power and pleasure are derivative from meaning fulfillment (power is a means to the end, and pleasure is an effect). Trying to measure leisure time or pleasure would get the sequencing wrong. For instance, a widely cited factor in job satisfaction and the decision to leave a job is the relationship with one’s supervisor. Measuring whether we find our work meaningful, e.g., whether we think we are creating value for a customer, is key to creating economic value.
The occupational satisfaction of the median American lawyer is equivalent to the the GDP of Papau New Guinea.