1370.0 - Measuring Australia's Progress, 2002

ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 19/06/2002

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Contents >> Measuring progress - an ABS approach

Analysts in Australia and abroad have taken many different approaches to assessing national progress. This section discusses concepts of progress and sets out the ABS approach.

NOTIONS OF PROGRESS

Thinking about progress and allied concepts (such as wellbeing and the good society) has exercised philosophers from the time of Socrates. Answering the question 'Is life getting better?' is not straightforward. It is clear, however, that to understand progress one must examine many aspects of people's lives - their health, the quality of their environment, their incomes, their work and leisure, their security from crime, and so on. So progress is multidimensional. Moreover, the dimensions of progress are intertwined. To earn more income, people may need to work longer hours and so have less leisure time. Increased industrial activity may generate more money to spend on health care, but it might also lead to more air pollution and hence to poorer health.

For this new publication, we have chosen to adopt progress as our primary concept. Progress here encompasses more than improvements in the material standard of living or other changes in the economic aspects of life; it also includes changes in the social and environmental areas. Measuring Australia's Progress depicts national progress. It encompasses:

the major direct influences on the changing wellbeing of the Australian population;

the structure and growth of the Australian economy; and

the environment - important both as a direct influence on the wellbeing of Australians and the Australian economy, and because people value it in its own right.

The ABS does not attach more or less weight to progress in any of the three major areas. However, while the essentials of economic progress can be readily consolidated, social and environmental dimensions of progress are more difficult to measure.

This publication focuses on aspects of progress that are, in principle, susceptible to some objective measurement (e.g. life expectancy and educational qualifications). We have avoided aspects that are either intrinsically subjective (e.g. happiness) or, while somewhat more objective, do not at present have generally agreed measures (e.g. political freedom). These aspects of life are important to Australians, but they do not yet lend themselves to statistical expression. Moreover, people's subjective wellbeing should be influenced to some degree by the changes in objective wellbeing that are included here.

Various temporal perspectives are provided within the publication. The major focus is on the history of progress over the past ten years in key economic, social and environmental aspects of Australian life. But a snapshot of the current (or, more strictly, recent) condition of the Australian economy, society and environment is also provided. While we have not made forecasts or entered into any direct discussion of sustainability, we have, for some aspects of progress, reported on whether Australian stocks of assets (human, natural, produced and financial, and social assets) are being maintained.

While most would agree on the desirability of progress in, say, health, work or environmental protection, there is no universally accepted view of the relative importance of these aspects of Australian life. This publication contains an array of objective measures of progress; readers can apply their own subjective valuations to decide whether that array of measures implies that Australia is on balance progressing and at what rate. The measures (or indicators) can be loosely associated with one of the three broad domains of progress (economy, society and environment), although some relate to several domains. But the number of indicators associated with a domain is not a measure of the domain's relative importance to overall national progress.

Just two headline indicators - national income and national wealth - are used to encapsulate economic progress. They consolidate major flows and stocks relevant to national progress.

There is no similarly compact set of indicators to encapsulate progress in the social and environmental domains. When seeking indicators of social progress, we have examined the various areas of social concern; when seeking indicators of environmental progress, we have examined the various environmental subsystems or resources.

Many aspects of progress relate to one another, and it is important to understand some of those links when assessing overall progress. The issues of concern that are considered span important aspects of life in Australia and enable readers to assess the country's capacity to maintain a healthy economy, society and environment.

ALTERNATIVE PRIMARY CONCEPTS

Different commentators in this field start from different primary concepts, which include the following.

Wellbeing or welfare, which is generally used to mean the condition of being well, contented and satisfied with life. It typically includes material, physical, social and spiritual aspects of life.
Quality of life, which is linked strongly to (sometimes as synonymous with) wellbeing and can also be used in a collective sense to describe how well a society satisfies people's wants and needs.
Sustainability, which considers whether an activity or condition can be maintained indefinitely. Although it has most commonly been used when considering the human impact on environmental systems (as in 'sustainable fishing'), it can also be extended to economic and social systems.

APPROACHES TO MEASURING PROGRESS

Most attempts at measuring progress begin with a model or paradigm. A paradigm provides a context for the dimensions of progress that one is trying to measure. It helps to identify gaps in the available measures. It can also be used to place a given approach within the discourse on progress, welfare, sustainability, etc.

There are two steps to applying the chosen paradigm. First, one defines and applies a mechanism for choosing what aspects of progress are to be measured. Second, one decides how each aspect is to be measured and how the measures are to be presented.

MECHANISMS FOR CHOOSING ASPECTS OF PROGRESS

The ABS considered three broad approaches to choosing what aspects of progress to measure:

referring to international standards or practice;

referring to current policy issues and debates; or

referring to the views of stakeholders and the general Australian public.

International standards or practice. Some international statistical initiatives, such as the United Nations' Human Development Index (HDI), consider only a very few issues of concern common to all nations and so take quite a narrow view of progress. (The HDI uses information about longevity, knowledge and command over resources needed for a decent living.) Others use a larger number of issues. However, some issues of concern in Australia are almost uniquely Australian (salinity, for example, affects few other countries; and while much of western Europe is preoccupied with growing road congestion, this is not (yet) a major issue here - at least not when compared to the scale of congestion problems in the UK, for example). We examined international standards and publications when listing aspects of progress. But because of this publication's Australian focus, we did not judge it necessary to confine our list to aspects of progress for which international comparisons are possible. On occasion we refer to other countries' data when they are useful for setting Australian progress in context (in the area of health, for example).

Policy issues. Some statistical initiatives aim to choose measures which relate directly to government policy - the European System of Social Indicators, for example. Many aspects of progress included in this publication are potentially useful for assessing policy. However, they were not chosen with that in mind. Measuring Australia's Progress is meant to inform public discussion of national progress, rather than be used as a scorecard for government policy.

Public opinion. Other projects in this field have asked the public about what aspects of progress should be measured. Some, such as the Tasmania Together project (see Appendix III), have been based on extensive public consultation and focus group discussions. We have not polled members of the public directly, but we have gathered broad views about what should be measured - first, by directly consulting stakeholders and experts in the fields of economic, social and environmental measurement; second, by distilling the views expressed during the ABS regular user group discussions regarding what data should be collected and published; and third, during a wide-ranging consultation process in 2001 (see Appendix II).

Whichever mechanism is used, it is important to remember that society's views of progress, and of what is important, change over time, and that there are also some aspects of progress - governance and democracy, for example - that are seen as important now, but for which there are no agreed statistical measures yet. The issue of ongoing statistical development is discussed in more detail at the end of this section.

DECIDING HOW MEASURES OF PROGRESS SHOULD BE PRESENTED

Three broad approaches to presenting the chosen indicators of progress were considered - the one-number approach; the integrated accounting approach; and the suite-of-indicators approach.

The one-number approach combines information about progress across a number of fronts (such as health, wealth and the environment) into a single composite indicator. Such composite indicators can be set in contrast with narrower indicators such as GDP. The ABS considers that it is more appropriate for others to develop such composite measures (see box overleaf).

The accounting framework approach presents social, economic and environmental data in one unified system of accounts, measured in various units. Potentially this is a powerful tool for analysts, and a detailed set of accounts will complement indicators. However, such a complex system may be too difficult to interpret for anyone wishing quickly to form an overall view about Australian progress. Most importantly, Australia is still a long way from being able to develop such a system, although some work is in train. The Dutch System of Economic and Social Accounting Matrices and Extensions (SESAME) is one of the most mature sets of integrated accounts - more details of SESAME are in Appendix III.

The suite-of-indicators approach sets out key aspects of progress side-by-side and discusses the links between them; readers make their own evaluations of whether the indicators together imply that Australia is on balance progressing and at what rate. This is the approach used in Measuring Australia's Progress.

The ABS already publishes sets of indicators relating to economic, social and environmental concerns. Measuring Australia's Progress brings together all three domains by providing a set of headline indicators of progress that are tracked over time. In our view, this approach strikes a balance between the potential oversimplification of the one-number approach and the complexity of the accounting framework approach. The approach has been used by some other countries, for example in the United Kingdom where the government produced a publication Quality of Life Counts. Further information is included in Appendix III.

ONE-NUMBER APPROACHES TO MEASURING PROGRESS

Although a good deal of effort has been put into trying to develop a single measure of progress (most notably the Genuine Progress Indicator, and the Human Development Index), consensus about the merits of the approach and about particular implementations still appears a long way off. There is no doubt that composite indicators are appealing. The demand for an alternative to that important indicator, GDP, is an argument in favour of a one-number approach.

However, difficulties arise when one wishes to combine several indicators into one number. The components of composite indicators are usually measured in different units - life expectancy (in years), income (in dollars), air pollution (in particles per volume of air), etc. Some compilers of composite indicators express the components in index form, then calculate a weighted or unweighted mean; others convert the components to a common unit of measurement, typically some estimate of their economic value or cost. But neither technique removes the basic methodological (and ethical) issue - namely, that any composite indicator is based on some judgment regarding the relative weights to be applied to the components. Is a one-year increase in average life expectancy to be weighted more heavily than, less heavily than or equally with a 5% decrease in greenhouse gas emissions?

There is, therefore, a danger that a composite index will oversimplify a complex system and give potentially misleading signals.

There is still a debate about extending the scope of economic valuation into non-economic areas. Although attaching dollar values to changes in life expectancy, say, is usually done for methodological convenience, it might send the wrong signals. For example, E.F. Schumacher wrote, "To press non-economic values into the framework of the economic calculus...is a procedure by which the higher is reduced to the level of the lower and the priceless given a price".

More details of the Human Development Index and the Genuine Progress Indicator are in Appendix III.

POTENTIAL SHORTCOMING OF THE SUITE-OF-INDICATORS APPROACH

Although we adopted the suite-of-indicators approach, it is not without its problems.

The choice of indicators could not be made using statistical criteria alone; it has required us to exercise judgment. Any of thousands of measures of progress could have been chosen, but we present just 15 headline dimensions, most of which use one headline indicator. Although we explain the criteria we have used to select indicators, there is an irreducible element of judgment, both in choosing the dimensions of progress to include and in choosing the statistical measures for those dimensions of progress.
We have not included indicators for every aspect of progress that some Australians regard as significant. Some (such as a happiness indicator) are not included because such areas of progress are inherently subjective. Some (such as a single indicator for social attachment) are not identified because there is not yet a consensus about the concept that one should measure. Some (such as a human capital indicator) are not yet included because ABS data construction work or other statistical development is still in progress.

CHOOSING THE PROGRESS INDICATORS

The progress indicators presented in this publication were chosen in four key steps.

First, we defined three broad domains of progress (social, economic and environmental).

Second, we compiled a list of potential dimensions of progress within each of the three domains.

Third, we chose a subset of dimensions for which we would try to find indicators.

Fourth, we chose an indicator (or indicators) to give statistical expression to each of those dimensions.

This was an iterative process and several steps were revisited after listening to the views of the many people we consulted during the publication's development.

DOMAINS OF PROGRESS

Most commentators consider that progress relates to issues clustered around broad areas of concern (domains of progress). Each domain in turn comprises a number of dimensions of progress. Domain boundaries can be drawn in several ways.

The two-domain view: human concerns and environmental concerns.

The three-domain view: economic concerns, societal concerns, and environmental concerns.

The four-domain view: concerns about aggregate material wellbeing and economic development, society and equity, democracy and human rights, and the environment and nature.

We adopted the three-domain view.

The choice of a view is largely a matter of presentational convenience; the view is a tool to help choose areas of concern and identify progress indicators. The view we have adopted does not purport to be a model of a world in which the environment, economy and society can be separated. The three domains comprise one system: the economy depends on a functioning society which in turn depends on a functioning environment and economy. And although some concerns can, for the convenience of discussion, be attached loosely to the economy, the society or the environment, they are all of importance to other domains - education and training, and work, for example, are of both social and economic importance; air quality is of economic, social and environmental importance.

DIMENSIONS OF PROGRESS

Economic, social and environmental progress was considered by the ABS as well as an expert group from outside government (membership details are in Appendix II). To identify the major dimensions, the three domains were considered in detail and partitioned into a number of dimensions of progress to ensure that the important aspects of economic, social and environmental progress were considered.

Once a list of dimensions of progress that might be presented had been compiled, we selected the subset that would be presented. A balance had to be struck - if we showed too many indicators, readers would not be able to assimilate them; if we showed too few, important aspects of progress would be omitted, and the overall picture might be biased. Ten to twenty indicators seemed about right, and the choice of those 10-20 headline dimensions was guided by the expert group and ABS subject matter specialists.

INDICATORS OF PROGRESS

Our next step was to find indicators to express these dimensions of progress. Our selection of indicators was guided by expert advice and by the criteria set out in the box below (Criteria for choosing progress indicators).

Such a small set of indicators cannot paint a full picture of progress, and so supplementary indicators are included. Some supplementary indicators give more information about dimensions of progress that are already represented by a headline indicator; others extend beyond the dimensions covered by the headline indicators.

We recognise that our sifting process means that this publication is both partial and selective - partial because not every dimension of progress is included, and selective because progress in each of the included dimensions is measured using just one or two indicators.

FROM DOMAINS TO DIMENSIONS

Economy. We began with the systems of economic accounting that guide the ABS program of economic statistics, and concentrated on the major stock and flow variables represented in those systems. Our aim was to find one primary flow variable (which would express changes in the volume of Australia's economic activity) and one primary stock variable (which would express changes in Australia's wealth). Other economic indicators are provided as supplements to these two key measures of economic progress.

Society. We began by considering key dimensions of social concern, which are underlaid by a view of fundamental human needs and aspirations. The ABS program of social statistics is guided by a social concerns framework, the design of which has drawn on many other frameworks and initiatives, such as those developed by the UN, the OECD and the EU.

Environment. We began by considering major ecosystems and environmental resources that are recognised in international frameworks such as the System of Economic and Environmental Accounting.

CRITERIA FOR CHOOSING PROGRESS INDICATORS

Our first step was to take each dimension of progress in turn, and to ask "Why is this dimension particularly important to Australia's progress? What are the key facets of progress in that dimension that any headline indicator should seek to express?"

There were usually several competing indicators that might be included. We chose among them by reference to criteria, such as the following.

Indicators should focus on the outcome rather than, say, the inputs or other influences that generated the outcome, or the government and other social responses to the outcome. For example, an outcome indicator in the health dimension should if possible reflect people's actual health status and not, say, their dietary or smoking habits or public and private expenditure on health treatment and education. Input and response variables are of course important to understanding why health outcomes change, but the outcome itself must be examined when one is assessing progress.

It was also judged important that movements in any indicator could be unambiguously associated with progress. For instance, one might consider including the number of divorces as an indicator for family life. But an increase in that number is ambiguous - it might reflect, say, a greater prevalence of unhappy marriages, or greater acceptance of dissolving unhappy marriages.

Applying this no-ambiguity criterion depends crucially on interpreting movements in one indicator, assuming that the other indicators of progress are unchanged. For example, some would argue that economic growth has, at times, brought environmental problems in its wake, or even that the problems were so severe that the growth was undesirable. Others would argue that strong environmental protection might be retrograde to overall progress because it hampers economic growth. However, few would argue against economic growth or strong environmental protection if every other measure of progress was unaffected: that is, if growth could be achieved without environmental harm, or if environmental protection could be achieved without impeding economic growth. Of course, although keeping other things equal might be possible in theory, it seldom, if ever, occurs. The links between indicators are important, and Measuring Australia's Progress discusses these links once trends in the individual indicators have been analysed.

Other criteria included an indicator's availability at a national level and as a time series.

A full list of our criteria for headline progress indicators is in Appendix I.

CONTINUING DEVELOPMENT

These headline indicators form a core set of statistics for reporting on Australian progress. But the first set we have chosen will change over time, because, for example:

thinking may change about what is important to national progress;

there may be conceptual developments relating to one or more dimensions of progress (such as social capital or social attachment); and

there may be statistical developments that allow us to measure aspects of progress for which we do not at present construct indicators (such as human capital).

The commentary accompanying each headline indicator discusses what an ideal progress indicator might be for each dimension. The conceptually ideal indicators may, in some cases, help guide the continuing development of Measuring Australia's Progress. Further consultations are planned in 2002 to develop this publication and its indicators.