What Matters

As I said in my last blog post, we measure and therefore focus on the wrong things. If you manage performance using the wrong metrics, you will get the wrong results.

I would suggest that all of our current economic indicators are highly suspect guides to a sustainable economy since the source and justification for the metrics comes from the Wall Street economy. Even the employment numbers are suspect because they lack any qualitative values.

The New Economics Foundation has created the Happy Planet Index which measures our well-being divided by our ecological footprint.  Well-being is measured as the product of Life Satisfaction x Life Expectancy.

Life expectancy is an indicator for our overall health.  By putting our ecological footprint as the denominator, we can drive the index up by improving life with a smaller footprint.

As you'll notice, this index has little to do with financial indicators and who cares - in the end we don't really care about money, just the things money provides.  And as they say, money doesn't buy happiness.

Here are some examples of nonfinancial indicators we might want to measure:

• Voter participation rates
  
• Divorce rates
• School attendance and graduation rates
• Open park space
• Community service
• Percentage of home ownership
• Percentage of locally owned businesses
• Number of clean streams and rivers
• Youth involvement
• Suicide rates
• Percentage of organic food
• Incarceration rates
• Obesity rates
• Etc., etc., etc.

These factors impact the quality of our lives.  It is time we stop worrying about the Phantom Wealth numbers generated by Wall Street and Washington, and start focusing on the numbers that help us get where we want to go.

What We Measure Matters

The most important number to the powers that be is the GDP. The GDP is how Wall Street and the government measure the health of our economy but this number is seriously flawed for two important reasons.

First, it measures negative events as positive additions to GDP - Car accidents, divorces, and oil spills all add to the GDP.

Second, it fails to include or account for positive activities if money doesn't change hands - taking your neighbor to the doctor doesn't count while hiring a stranger to drive a cab does. Which do you think makes a better society?

As an accountant, I'm keenly aware that what we measure matters. In my MBA program, I really appreciated the work of Mark Anielski, an Adjunct Professor at the Bainbridge Graduate Institute and the author of The Economics of Happiness. Mark has developed a "Genuine Wealth Indicator" that can help any community measure its wealth across a number of indicators in order to measure those things we actually want.

We need new measurement tools if we are going to achieve sustainability. It is high time we stopped using GDP as a tool to measure our economic progress.