Why we measure our economies the way we do: the political economy of macroeconomic measurement

Programme group PETGOV

Macroeconomic indicators stand central in economic governance and its political contestation. Measurements of growth, unemployment, inflation and public deficits tell us “how economies are doing”. Yet, in contrast to their air of objectivity, it is everything but self-evident how these indicators should be defined and measured.

Our measurement choices have deeply distributional consequences: they produce winners and losers. They shape our future, for example when GDP figures hide the cost of environmental degradation. So why do we measure our economies in the way we do?

Measuring economies 

Criticism of particular measures is not new. But its limited effect on policy reveals that such criticism does not explain real-world practice. This project therefore asks: which social, political and economic factors shape the formulas underlying macroeconomic indicators? Existing scholarship provides detailed historical studies of statistics, mostly in single countries. But we lack theoretical and empirical tools to describe and explain differences in measurement formulas between countries and over time.

This project will provide such understanding through three subprojects. The first offers a systematic diachronic comparison of formulas underlying four indicators in four central OECD countries. The second subproject analyses the timing and content of international statistical harmonization efforts in the EU and the OECD. The third one builds on the other two and constructs a new database of “measures of measures” to quantitatively test hypotheses emerging from the qualitative subprojects across the OECD.

Objective 

Beyond providing novel insights and a new database, this project will promote public debate about meaningful measures, allow policymakers to reflect on current practices, and increase sensitivity among academics who use macroeconomic data about its political and historical roots.

Published by  AISSR

29 October 2014