It takes two to tango, for economists too

Inclusive Economy09 Jul 2013Evert-jan Quak

The three-day conference Economics for a Better World has come to an end. In the future, we should invite more non-economists, like environmentalists and behavioural and social scientists.

Economists love measuring. They know all kinds of tricks to measure things and express the results in numbers on a spreadsheet. The happiness factor of households after new rail infrastructure opened in China’s capital Beijing, the economic impact of envy, the pace of poverty reduction, or the correlation between social capital and smoking – they have all been converted into quantifiable statistics.

During the three-day OECD-Universities Research Conference Economics for a Better World, the participants presented and debated many such results of economic research on wellbeing and welfare.

Put economists together in one place and the debate will soon turn to measurement and modelling. Economic modelling has improved rapidly in recent years and it is very important to continue debating these improvements. However, if economists want to help achieve a better world, they have to cooperate and discuss their progress not only with each other, but with non-economists too. And occasions like this conference offer a chance for them to invite academics from other disciplines to reflect on their work. I believe that this does not happen enough.

This attitude was reflected in a comment by Jonathan Fisher, one of the few participants at the conference who does not purely work on economics. During one session he was asked if he could use the presented models and frameworks of wellbeing in his own work for the British Environmental Agency. He replied that it was difficult for him to see the specific added value of wellbeing measurement for environmental studies as for him the debate on wellbeing was not linked with environmental values. This shows the disconnection between economists and environmentalists, and vice versa. I can imagine a behavioural or cognitive development scientist giving the same answer. Nevertheless, to build an alternative framework for analysing economic development in which the concept of wellbeing is included, a more multidisciplinary approach is necessary.

Fortunately, the feeling that something has to change is in the air. Nicky Pouw mentioned the need for change in her blog post ‘Shifting gears’. And during the conference, Paul Anand of the UK Open University also referred to the necessity of an economic scholarship that dares to look more broadly and include more dimensions.

Such a shift brings with it a toolbox of varied research methods for researchers to pick from. Not only quantitative methods, which economists love so much, but also ways to include qualitative methods. This is important because quantitative methods generally tend to overlook minority and vulnerable groups.

Although economic models have improved significantly, it is still very difficult to include various dimensions in them. This became clear in the keynote speech by econometrist Gordon Anderson of the University of Toronto. Despite the fact that a considerable amount of literature has recently stressed the multidimensional nature of wellbeing, expanding the dimensions over which wellbeing or deprivation should be measured is a very difficult task. Adding just one extra dimension to economic models on poverty, for example, has a huge impact on their robustness, Anderson explains. He distinguishes 34 dimensions that have an influence on poverty. Bringing them all together he calls the ‘curse of dimensionality’; the more dimensions are taken into account the more the outcome flattens out. Furthermore the approximation error is 10 times larger when you go from one to two dimensions. Reducing the dimensions will lead to clear mathematical answers but will that help to solve problems in society?

And this brings me to my last point. This message will not suit policy-makers. They want clear answers and demand a workable framework on which they can rely. I already discussed the challenges of moving from the wellbeing measurement agenda to a more political agenda on wellbeing in a previous blog post. In general most economists believe that if you measure something well, it will influence policies for the better. But this is not the case. To translate wellbeing into a framework that is useful for policy-makers and to implement it in policy needs further attention and requires an open debate on the concept of wellbeing beyond a pure economics approach.