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Pricing the Priceless — an interesting read for all of us struggling with measures, metrics and madness.

By Phil Verghis on July 9, 2012

As we struggle with the move from ‘easy’ measures and metrics to outcome-based measures, it is very interesting to see how smart people are trying to define and articulate similarly difficult-to-measure measures on a macro level.

Gross Domestic Product (GDP) is the traditional proxy for how well off a country is. However, it is a measure of economic production or income (not wealth), and it doesn’t help with figuring out how sustainable the growth is.

A new study from a United Nations team lead by Sir Partha Dasgupta of Cambridge University has proposed a new measure — the Inclusive Wealth Index. It puts a monetary value on three areas: Physical Capital (manufactured assets), Human Capital (education and skills) and Natural Capital (land, fossil fuels etc.).

As the Economist notes: By putting a dollar value on everything from bauxite to brainpower, the UN’s exercise makes all three kinds of capital comparable and commensurable. It also implies that they are substitutable. A country can lose $100 billion-worth of pastureland, gain $100 billion-worth of skills and be no worse off than before. The framework turns economic policymaking into an “asset-management problem”, says Sir Partha.

Full report:

http://bit.ly/MV7bVC

Highly readable Economist article – where does *your* country stack up in this new way of measuring?

http://www.economist.com/node/21557732

Sir Partha also states the measures are illustrative, not definitive, and that much more work needs to be done to properly refine and develop these concepts. Sound familiar?

Does anyone have access to researchers doing work in this field? It would be great to invite them to join in the discussion and discovery process.


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