When we think of prosperity, we think of more than one period’s income and expenditure. Most households and business leaders think about their balance sheets and assets including pensions, savings and monetizable skills and ideas in their head. Most individuals think about their ability to access a broad range of goods and services including, but not limited to, material consumption in the future. They think about access to finance, opportunities and justice as well as the degree to which they are insured against risks of social upheaval, conflict and insecurity.
“The costs and limitations of our GDP-centric approach to measurement are becoming clear, and there are more and more suggested alternatives [...] We propose a system of economic measurement that ensures the future gets due weight in present decisions.”
Diane Coyle & Benjamin Mitra-Kahn, Making the future count, Indigo Prize winner
Forward-looking economic policy manages a portfolio of assets that a country possesses, or can access, to ensure that citizens enjoy a sustainable flow of benefits into the indefinite future. This project asks how we can move to a world beyond GDP? Our measurement of economic success has evolved to include diverse critical assets: physical, financial, intangible, human, natural and social capitals. Could there be a radical replacement of GDP with a small dashboard recording access to these six key assets?
Following on from her Indigo Prize winning essay with Benjamin Mitra-Kahn, Making the future count, Diane Coyle leads the Six Capitals research project which will explore social and natural capital. A new team led by Dimitri Zenghelis and Matthew Agarwala will focus on social and natural capital as key determinants of the wealth economy.
Recent years have seen little progress on measuring (or even defining) social capital, despite broad ranging evidence (not to mention experience) for its importance in economic outcomes.
Natural capital, by contrast, has an international definition (in the System of Environmental Economic Accounts), and a few statistical agencies including the UKs ONS have begun developing natural capital estimates – although they are partial, with data gaps, and some difficult conceptual challenges because of the inter-connections, non-linearities and potential irreversible thresholds in natural systems.
The two therefore offer different types of opportunity to have an impact on statistics, policy and ultimately all of our well-being.
In its initial stages this research project aims to:
- produce a research-based definition of aggregate social capital for the purposes of official economic statistics, and set out a map for its implementation
- explore current systems for monitoring natural assets and how these might be measured and turned into usable metrics
- investigate questions of identifying thresholds in natural systems and the ethics of natural and social capital accounting
- research the valuation of social and natural assets and their services
- communicate and engage with policy makers, share our research and improve the quality of policy advice.
This research is the start of a journey exploring the potential of the Six Capitals, with plans for the project to influence international statistical agencies, guide decision makers and grow more broadly after the initial phase.
This project is funded by LetterOne.