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