Macro data and are we doing better?

Statistics New Zealand launched their social indicators on 26 November 2013. It is a collection of data from the General Social Survey, which supplements various ‘hard’ economic data with ‘softer’ measures of perceptions.

I was part of a panel that spoke briefly at the launch. Donal at Economics New Zealand has written about it already.

The question posed to me was: Are we doing better? It’s a loaded question. It depends on who you ask and what dimension you measure.

Putting it in the context of the economic cycle, we can describe a recession where economic activity, employment and various other indicators fell. They have subsequently recovered. But the recession and the recovery were shared unevenly, across regions, industries, age, ethnicity etc:

• A young, unskilled, Maori or Pasifika solo parent from the provinces probably felt the recession harshly.
• A middle aged, Pakeha male in a professional job in Auckland probably barely felt the recession.

Looking at aggregate measures of economic data is very helpful to describe general trends in the economy, but it also behoves us – as economists – to look at the implications for real individuals beneath the surface.

Macro data can help the focus our attention. Atomised and distribution data provide additional powerful information to properly define a problem, formulate the likely solution set and, ultimately, measure the impact of the chosen policy intervention(s).

Preferences matter

But at the same time, relying entirely on one lens to make policy is dangerous. What should the policy intervention be for the following two hypothetical people?

1. Chooses to move from a well-paid job Auckland to Wanganui. Then is surprised to find lower wages and fewer employment opportunities.
2. A young solo parent with limited skills in Wanganui. Who wants the opportunity to access education and move to Auckland for a job.

Many characteristics may look the same between these two people, but one is an issue of preference and the other is about persistent poverty and access to opportunity – they are not the same. Based on my values, I feel no moral duty to help person 1, but I see every reason to help person 2.

So, are we doing better?

I strayed far from the question at hand. Are we doing better? It depends on who you ask and how you measure it.

At the aggregate level we are doing better. Social indicators enrich our understanding of the economy, but they are not without their weaknesses. The dispersion of outcomes in the GSS reinforces that the picture for the anonymous average is not the same as the varied experiences of the individuals who constitute society.