New Measure of a Country’s Success

Long-time readers of my blog will know that I think that exclusively quantitative methods, in investing especially, are domed to failure.  It’s because quantitative methods measure facts and facts, by definition, took place in the past.  But investing unfolds in the future.

But facts are excellent at evaluating those past events when measuring is important.  Take for example measuring the success of a country at providing for its people.  The standard measure of success is gross domestic product (GDP).  GDP simply measures total economic output.  However, I think that you would agree with me that quality of life is not solely determined by quantity of money.

Believe it or not this concept is revolutionary to economists.  But that old scion of conservatism, the Organization for Economic Cooperation and Development (OECD), has announced that it is changing its mission to include a more qualitative measurement, they are calling this “a better life initiative.”

The Better Life Index is made up of 11 data points, including traditional measures like income and employment, but now also includes factors like life satisfaction and safety.  Amazingly, the OECD is offering users of their data tremendous flexibility to tweak the data.  Users may choose the weightings that they give the various data points to see how its various 34 member nations score after the shifts.

Secretary General of the OECD, Angel Gurria says the new index, “has the potential to find out what people want and need and what government is giving them.”

For me this is a tremendous success and a rare piece of evidence of human emotional intelligence (i.e. wisdom) evolution.  Frankly, it is my hope that governments begin to sculpt their data gathering into measures that include a good balance of quantitative and qualitative measures.  For now, let’s celebrate the OECD’s decision.  That a major organization has done this will very likely have ripple effects throughout the First World.

Who knows, maybe even businesses themselves can begin to evaluate the quality of their performance on more than just profits – the business equivalent of GDP.

Jason