Economic Measurement
I appreciate the opportunity to speak at a conference with the important theme of economic measurement. In many spheres of human endeavor, from science to business to education to economic policy, good decisions depend on good measurement. More subtly, what we decide to measure, or are able to measure, has important effects on the choices we make, since it is natural to focus on those objectives for which we can best estimate and document the effects of our decisions. One great pioneer in this subject area, of course, is Simon Kuznets, who was awarded the Nobel Prize in 1971 for his work on economic measurement, including the national income accounts. Over the years many economists have built on his work to further improve our ability to quantify aspects of economic activity and thus to improve economic policymaking and our understanding of how the economy works. The remarkably broad and ambitious research program of this conference and the impressive expertise that has been assembled illustrate the continued vitality of this field. Evolving technologies that allow economists to gather new types of data and to manipulate millions of data points are just one factor among several that are likely to transform the field in coming years.
As we think about new directions for economic measurement, we might start by reminding ourselves of the purpose of economics. Textbooks describe economics as the study of the allocation of scarce resources. That definition may indeed be the “what,” but it certainly is not the “why.” The ultimate purpose of economics, of course, is to understand and promote the enhancement of well-being. Economic measurement accordingly must encompass measures of well-being and its determinants.
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