FOR PARTICIPANTS ONLY

STAT/WGSE.11/14 2 November, 1999

ENGLISH ONLY

ECONOMIC AND SOCIAL COMMISSION FOR ASIA AND THE PACIFIC

Working Group of Statistical Experts

Eleventh session 23-26 November 1999 Bangkok

DEVELOPMENT INDICATORS

(Item 7 of the provisional agenda)

NATIONAL PROGRESS INDICATORS1

1 This document has been prepared by the Australian Bureau of Statistics. It has been issued as submitted. NATIONAL PROGRESS INDICATORS

Paper prepared for the ESCAP Working Group of Statistical Experts 23-26 November 1999, Bangkok, Thailand

Australian Bureau of Statistics October 1999 NATIONAL PROGRESS INDICATORS

Introduction

1 ABS is investigating the development of broad based measures of national progress. This is in response to the issue of the appropriateness of GDP as a single measure of "progress", and discussion in the field of environmental statistics on developing sustainability indicators. The ABS accepts the argument that GDP is a limited measure of national progress. The development of more broadly based indicators provides an opportunity to draw together a number of measures across both economic and social statistics. This paper discusses some of the recent thinking on this subject in ABS.

Alternative Approaches to National Progress Indicators

2 There are at least two alternative approaches which can be adopted to the development of national progress indicators. The first alternative is the production of a composite indicator which incorporates a number of measures, given appropriate weightings and valuations to arrive at a single index. An example of this type of measure is the Genuine Progress Indicator (GPI). (Cobb, Halstead and Rowe, 1995) These measures are based on GDP, but apply a series of "modifiers" to the index to take account of factors such as income distribution, unpaid household and community work and the various costs of social problems such as crime. A GPI has also been developed for Australia (Hamilton and Saddler, 1997). The second alternative is to develop a framework of separate indicators which together seek to cover the range of issues which might be relevant to national progress but which are not additive and do not produce a composite index. This approach also allows countries to decide the indicators which are most relevant to their circumstances.

3 Another composite indicator that is frequently cited is the Human Development Index (HDI). The ABS has significant problems with the HDI because of its lack of statistical validity and the unwillingness of UNDP to address errors in its compilation. In Australia's case, several representations to correct errors of fact were simply ignored.

4 The lack of validity of the HDI as a means of monitoring progress is clearly and logically argued by Ian Castles, the former Australian Statistician (Castles ,1998). The primarily goal of the HDI would seem to be to gain publicity for UNDP's agenda. Its accuracy and validity are not primary considerations, yet the publicity it obtains through local media can be embarrassing for countries' administrations. Given the problems in the HDI persist despite representations to UNDP, the ABS current strategy is to highlight the HDI's deficiencies to the Australian public, through the media in particular.

5 The advantages of a single indicator such as the GPI or HDI are obvious. It provides for an apparently simple measure which can be reported regularly to give a single "performance score" . It provides a counterweight to GDP as a measure of growth and progress and it would be easy to capture headlines with such a measure. It presupposes, however, a conceptual framework to underpin the composite measure. This framework would need to provide a basis for deciding on the various constituent measures of the composite and a basis for determining the relative weights to be given to different constituent measures. Like any composite statistic, a single progress indicator conceals the complexity of the relationships between underlying measures, and thus makes interpretation of movements in the index particularly difficult. Without an agreed framework on which to base the measure, there are potentially intractable problems of valuation and weighting for the various constituent items, leading to problems in interpreting the meaning of the composite measure.

6 In our view, work in this area is insufficiently developed to undertake production of a composite indicator. The opportunity for misinterpretation would outweigh any benefits from apparent simplicity. The ABS is therefore proposing to investigate the second alternative, which is to develop a suite of measures which together would give a picture of overall "progress". This would allow a number of advantages including the ability to base measures on current issues in Australian society; the ability to explicitly show interconnections between different measures; and the ability to measure national progress as an inherently multi-dimensional concept. Measuring national progress will require integrating statistics across the three broad areas of environmental, social and economic indicators.

Environmental Indicators

7 A lot of the interest in the area of developing more broadly based measures of progress has been generated in the field of environmental statistics, particularly around the issue of producing measures of sustainable development. In Australia, a recent Government report recommended that the ABS take a lead role in coordinating the development and collection of sustainability indicators. ABS has for some time produced environmental statistics in areas of general interest such as transport and its impact on the environment and public awareness of environmental issues. There is now interest in extending this work to comprehensive measures of sustainability and the interaction between economic and environmental issues.

8 ABS has now started work on the development of environmental accounts. These are being compiled within the SNA93 framework. Input-output tables underpin many of these developments.

9 Environmental accounts that have already been produced are the national balance sheets, environment protection expenditure accounts, energy, minerals and fish accounts. Other environmental accounts are planned for water, forests, waste and biodiversity. The water account is expected to be released early next year. These accounts can potentially form the basis for more detailed policy analysis of environmental issues, and can also assist in developing a framework for environmental indicators.

10 In addition, we have recently started exploring what we might do in the field of environment or sustainability indicators partially in response to requests from other areas of government. A first step here is to determine those environmental issues which are of most concern to Australian governments and society and to develop a set of indicators around these concerns. This has been the approach adopted in the United Kingdom for example, where their Department of Environment, Transport and the Regions has been producing a State of Environment report based around time series for 150 environmental indicators, organised around a number of broad policy aims and objectives. The attraction of this approach is that it ensures that indicators are relevant to a country's own policy concerns and hence will be relevant to policy making. There is more recent work in the United Kingdom which might be of interest. This is discussed in a following section.

Social Indicators

11 In the field of social statistics, ABS is paying increasing attention to developing measures of the interaction between different social and economic variables on individuals and communities. In examining this area, ABS is returning to some extent to the work on social indicators.

12 The ABS has defined social indicators as measures of social well-being which provide a contemporary view of social conditions and monitor trends in a range of areas of social concern over time.

13 Indicators so defined only have relevance because they reflect societal goals and values. The choice of indicators therefore involves judgement on the part of the ABS as to what appropriately reflects these values. Values will change over time in response to changing socio-political and economic circumstances. This changing context will, therefore, influence the relative importance of particular indicators at different times as well as their interpretation.

14 ABS social indicator work has focused on the development of frameworks for the various areas of concern and the identification of arrays of indicators within each concern area. These indicators are drawn from the program of ABS social surveys as well as administrative statistics produced by other agencies. In addition, those areas of concern for which frameworks are not well articulated such as family and community, and social and political participation are being further developed. Currently, ABS produces a range of broad time series across a range of social concerns in Australian Social Trends. This work, together with the efforts in framework development may lead to the production of a greater array of social indicators across the areas of major social concern.

15 The ABS is now looking to extend activity in this area. The proposed General Social Survey, for example, which will commence in 2002 is aimed at producing broad indicators across a range of social and economic domains, and should allow analysis of the interaction of different variables on individuals and households. Through the use of standard question modules repeated at regular intervals, the intention is to develop a set of measures as a time series which, while interesting in their own right could also provide an input to broad indicators of progress.

Developing National Progress Indicators

16 One of the main difficulties in producing statistics which show the interaction of economic, environmental and social variables is the lack of integration in the data. Data sources may differ, as may concepts and classifications.

17 Economic indicators in contrast to those in the social area have the advantage of a common conceptual framework in the National Accounts which enables aggregates to be derived which have a well understood meaning, and whose elements are linked in a well defined quantitative relationship. The goal in developing more broadly based measures of national progress is to capitalise on the existing conceptual framework of the National Accounts to include consideration of environmental and social issues.

18 A further advantage of using the SNA as a basis for integration is that even where there is no direct quantitative linkage which can be made between social variables and National Accounts aggregates, the common framework at least ensures that the concepts, classifications and definitions which are used are common, well understood, and allow for some international comparability. How far it will be possible in practice to devise indicators which can be integrated in this way will depend to some extent on the issues which are chosen as the focus for the statistical measures.

19 One approach to overcoming the problems of data integration is to use social accounting matrices within the National Accounts framework to show the linkages between economic and social variables. For example, the SESAME system, developed by Statistics Netherlands aims to link social and environmental statistics to economic statistics to produce an internally consistent and coherent set of statistics.

20 SESAME is a statistical information system presented in matrix format (Keuning, 1996). It is based on social accounting matrices, with supplementary tables added to the system to cover issues of particular policy relevance (eg income distribution and expenditure patterns). This information is useful in its own right, but it is also the base from which a set of economic, social and environmental macro-indicators can be developed. The set of matrices and indicators is policy driven. There are numerous possibilities but the sets of matrices and indicators actually used in the Netherlands are determined by the policy issues that have the highest priority to government.

21 The blend of matrices and indicators attempts to provide an integrated system that supports both the need for detailed information for analytical purposes and summary statistics that give a more immediate impression of the most important trends. In describing the system, the author uses the analogy of a series of icebergs, where the "tips" are a range of indicators, which contain beneath them a large body of information which allows detailed analysis of interconnections. By producing a number of SESAMES for different years, it is possible to develop indicators of economic and social change.

United Kingdom

22 As discussed above, the UK Department of the Environment, Transport and the Regions has been producing a State of Environment Report based around time series for 150 environmental indicators. These indicators are organised according to particular themes or issues and are based on the Government's Sustainable Development Strategy.

23 An interesting recent development has resulted from a request by the UK Government to produce a report which provides broader measures of national progress than simply economic progress. It also asked that the report be limited to a relatively small number of indicators so that readers of the report won't be overwhelmed by the detail. To undertake this exercise the Department of Environment, Transport and the Regions carried out an extensive public consultation program to try to identify those indicators which were most pertinent to measuring progress. It was agreed that the indicators would be issues based. As a result of this public consultation process, fourteen issues were identified and an appropriate indicator chosen for each issue.

24 The first report has now been published. As well as a time series for the selected indicator, it contained analysis of the reasons for changes over time and disaggregations of the indicators, for example, on a sub- population basis. The public reaction to this report has been very favourable.

25 The Australian Minister of the Environment has seen this report and has expressed interest in a similar report for Australia.

ABS approach to developing National Progress Indicators

26 ABS is now investigating the best ways of developing new national progress measures. It is proposed that, where possible and desirable, the indicators would be based on the SNA93 framework. This would maximise the opportunity for international comparisons, for understanding the conceptual basis of the indicators, for allowing a greater degree of policy analysis and for explicitly showing connections between economic growth and other areas of progress. The use of this framework would also provide an opportunity to develop at a high level, a more integrated national statistical system across both economic and social issues.

27 We are also considering adopting the UK approach and basing the indicators on areas of policy concern and issues of public interest. As a first step in this area it is proposed to produce an information paper setting out the options for indicators of national wellbeing and seeking input from government and community. We will also be looking at mechanisms for deciding on the areas or themes of most concern to the community. This information will then form the basis for choosing a set of progress indicators. Research work can then commence on determining the best way of collecting and presenting this information, both as a set of summary indicators and as a set of more detailed matrices and other data which will allow interpretation of the linkages between different measures. The current work in social and environmental statistics will assist in providing the information base from which indicators can be derived.

28 The intention is to move relatively slowly in developing indicators and to allow ample opportunity for public consultation. This will maximise the chances of the indicators which are ultimately developed being generally accepted by governments and the community.

References

Castles, I (1998) Population and Development Review

Cobb, C., Halstead, T. and Rowe, J (1995) The Genuine Progress Indicator: Summary of Data and Methodology (Redefining Progress)

Hamilton, C. and Saddler, H. (1997) The Genuine Progress Indicator. A New Index of Wellbeing in Australia

Keuning, S. (1996) Accounting for Economic Development and Social Change

Indicators of Sustainable Development for the United Kingdom, Department of the Environment (1996)