All that money really tells us, is that a given person buying prefers a bottle of milk, or whatever, to the money; and the person selling prefers the money to the milk. It tells us about their subject evaluations in an *ordinal* scale (1st, 2nd, 3rd). That’s it. It cannot be used for *cardinal* values: (1, 2, 3). You can’t get a kilogram of value, a pound of well-being.

Money cannot be used for what is not exchanged against money, such as the beauty of a sunset, or the kindness of one’s mother. But there is no need for it to do so, because these are end values in themselves; they are not means to an end as money is. The idea that it should, only displays a mistaken understanding of what money is good for.

Aggregate measures such as the value of all the housing in Australia, or national income, are a misuse of monetary concepts, because money is only relevant if something is being exchanged against money. All the housing in Australia isn’t for sale at one time, and if it were, it would affect the price. So it’s a nonsense measure.

However money has two other significant advantages. It represents a lowest common denominator for all the values that people attempt to satisfy by exchanging stuff against money. And it enables arithmetic calculation in terms of profit and loss, thus enabling us to economise, even in very complex roundabout production processes where comparing physical quantities directly would not be sufficient and would end in chaos and massive waste - what the greenies seem to think would be better.

(cont.)

But the very real limitations on economic calculation do not reduce its enormous utility for what it does tell us. *All* alternative measures have exactly the same problems and limitations *and* lack the benefits of economic calculation so we are in a worse, not a better position by having recourse to other non-monetary measures of well-being.

“You have to measure the height of flowers and the size of their petals!”

That just says it all about such alternative measures, doesn’t it? And of course, even if you did all that, you would still have the problem that these alternatives are attempts at surrogate objective measures of unmeasurable and incommensurable subjective values.

“how do we as a national [SIC] judge ourselves?”

We don’t judge anything “as a nation”.

“no one has the ability to define the public good; for since they are not the public, its good is not theirs to define…. Since the public good cannot be defined, and all thinking and valuing that others perform cannot be known, government is incapable of systematically furthering the public good or helping others more than they could help themselves of their own accord.”
http://economics.org.au/2011/08/government-is-criminal-part-3-subjective-utility/

“The truth is that the attempt to measure the quality of life over time and between nations is still in its infancy.”
Correction: it is impossible. As we have just seen, it is an attempt to square the circle: to decide by indirect objective measures what, in its nature, cannot be known by such methods. But the author has not noticed that the only *purpose* of these attempts at surrogate measures of wellbeing, is to enable governments to try to do better than the people themselves at ordering their own priorities so as to achieve the greatest satisfaction of values important to wellbeing.

The sound conclusion is not that such bogus measures are becoming increasingly important, but that in trying to optimise human wellbeing, we should prefer freedom to central planning, and governments pretensions to represent the people better than the people represent themselves are false.

An enjoyable piece, Peter, and thank you for it. I too have had years of frustration at the inadequacy of GDP as a measure of anything, and am irritated each time I use it that I could not find something better. I quite like Clive Hamilton's GPI, but it too doesn't do the job I want. I'll play around with the ones you cite.

In the new York Times on 29th October there was an opinion piece by Charles Blow which reported on social justice in 31 OECD countries using eight measurement categories the results of which were then aggregated. In that study carried out by a German group Australia rated 21st and the USA 27th. The Scandinavian countries rated highly.
The following sites give access to the opinion piece and the study.

http://www.nytimes.com/2011/10/29/opinion/blow-americas-exploding-pipe-dream.html?_r=1&nl=todaysheadlines&emc=tha212

http://www.sgi-network.org/pdf/SGI11_Social_Justice_OECD.pdf

As the cow walked up the ramp to the abattoir an ABS statistician approached her.

Tell us Ma'am of the 80 metrics of well being, which ones are an increasingly important part of evaluating your well-being?

Cow: "I'm flattered I am important enough to be asked. Biodiversity, Environment, health, education, work, income, wealth, economic well-being, crime, housing or productivity, family, community, social cohesion, democracy, governance and citizenship are all useful metrics & statistically they are all improving.
But the truth is that the attempt to measure the quality of life over time and between nations is still in its infancy. Thorny problems bedevil the task."

Statistician: Thank you Ma'am for your erudition.

Whereupon the Cow felt proud of herself and continued her march up the gangplank with a spring in her step.

Then as the flap-doors parted she heard the !BANG!. Everything turned white and she knew she had finally attained the best outcome for the SAFE metric of well-being!

At least that is in a free market capitalist system run by small numbers of brute people and organisation that are backed by nuclear weapons, 'H5N1 60% kill-ratio viruses' and who have pronounced themselves TOO BIG TO FAIL with their advanced flu shots in hand.

A note from the statistician: Applied statistics, the driest of disciplines, is now placed firmly at the centre of debate on the quality of life enjoyed by citizens. As the news of a 60% potential loss of human life hits the markets the 'probability' of a sky-rocket in shares is imminent:

Fewer people, more wealth to go round = more of US living the American dream. That's well-being alright!

I think Peter Humes last paragraph did it for me. How can I be so disenfranchised with a country supposedly ranked highly as a wonderful lace to live, raked so highly, that I want to leave ? Is it the metrics used in the ranking criteria, do any feel similarly to me? Apparently the rest of the populous are "happy". Perhaps this is why I feel so disenfranchised, my countrymen are happy with a state of affairs I find oppressive. I am so disenfranchised that we are leaving, our flights are booked for SE Asia on 7 February, we have planned to be away for a year, if it works out, we plan to be away for a life time.

The continued thwarting of personal freedom is something seemingly not measured but something I rank extremely highly. How do we come up with a measurement to identify my despair for the country of my birth ?