What If (Part III)…Re-Thinking the Economy One Big System at a Time

The Monadnock Domestic Product

Parts I & II of this series focused on credit card processing and investing, respectively. I argued for increased localization of both of these systems because money from both activities leaves the community unnecessarily, in my view. And truthfully there are many more of these systems we could explore, but for the third and final part in this series, I want to discuss measurement; that often overlooked component that lets us know how we are doing.

Metrics and measurement are hot topics, and I studied alternative metrics and measurement during my graduate work on business sustainability efforts. These metrics were for sustainability, but the importance of metrics (you may also know them as “KPIs” or “Key Performance Indicators”) spans across disciplines.

There is one metric that deserves particular attention, and it is a big one, because everyone pays attention to this number, and whether the economy is deemed “healthy” or “sick” depends on how big it is: the Gross Domestic Product (GDP). But as it happens, we have no real local equivalent, which makes it the perfect topic to close out this series.

System 3: Measuring Our Local Economy

Initial calculations of the GDP went something like this: an assigned person on an assigned day walked out of their office and stationed himself at a suitable vantage point so that he could watch train traffic moving back and forth, East to West. That was our economic activity as a nation.

Now, of course, things are a bit more complex. And to some degree, the calculation has kept up, but the GDP was never meant to serve as an indicator of the health of our economic system. Health, in fact, is far from what it indicates – literally: Because the GDP counts all economic activity as positive, our high rate of spending on chronic illness in the US is considered a valuable thing. That is, it boosts GDP. The same goes for environmental and natural disasters, which produce a boon in spending on recovery efforts, materials, etc. Let me be clear: By this logic, Hurricane Irene? A good thing. The BP oil disaster in the Gulf? Another positive development. For the economy that is.

The GDP has some other problems. For one, if you have ever folded laundry, cleaned your own home, repaired a clapboard, painted your own house, volunteered on a nonprofit Board, raised children, or any number of other activities like the aforementioned, the value of your labor has not been counted as value, or economic output (other than purchasing the clapboard or gallon of paint). So what does that say about our community? It says that if you are busy volunteering, raising your children, unloading your dishwasher, or serving your fellow citizenry, you are not helping the economy, and your activities have no tangible value.

But wait, you ask, these things are certainly valuable, even if they don’t create economic value. And your question would be in line with many Ecological Economists who have set about to create alternative indicators that do account for the value of these activities, and negate the value of things like excessive healthcare spending and environmental disasters.  But these scholars have run into problems, which are inherent in any new and large data collection process: Data is often missing, uncollectible, or simply doesn’t exist.

There have been attempts at more locally or regionally-focused indicators, such as the Genuine Progress Indicator (GPI), but I feel that this is a case where one size does not fit all. The indicators of a healthy local economy in the Monadnock Region likely look much different than those of, say, the Capital District of New York, or the Denver metro-area. We have different drivers, different values, and a different outlook and definition of what has value.

In short, we can’t rely on the GDP to measure the health of our economy, so what I propose is a Monadnock Domestic Product, or MDP. This will take some work, but I think there are clear community-based indicators that could be borrowed from other frameworks. Collectively, and with community participation, these could combine to create a framework that would be incredibly useful in helping us to gauge how we are doing at any given point in time.

What might be in such a framework? I hope that this post will inspire some comments to that effect, but off the top of my head I can think of a few things, such as number of volunteer hours donated by community members, economic output of local companies, local education level, and philanthropic donation levels. Together, we can construct something that can indicate what we are doing well, and what we need to improve. What’s best is that there are already organizations like Transition Keene that seem like a natural fit for this kind of work, so there wouldn’t be any re-creating the wheel!

To conclude, I want to thank you for reading this series of posts, or any one of the three. I encourage you to make a comment or contact me directly if you want to continue the conversation!

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