Advantages of the Proposed New Monitoring System
Authors: Joffe Michael 
Published: April 2024

The IEO perspective based on economic outcomes and the universal meeting of basic needs has a clear purpose, and a concept that corresponds to it, a formulation appropriate to fulfilling this purpose, a well-specified domain of application and a clear relationship with other related items that are being monitored. It is responsive to relevant societal heterogeneity and to changes over time, and is practically useful in relation to possible interventions. Its metric is clearly related to its purpose, and based on an explicit value system. It combines the advantages of specific individual indicators and an aggregate index, with weighting based on a clear criterion. The real-life significance of its components is intuitively meaningful. In addition, most of the required measures are already available (although needing some development work), they are acceptable, and they could be produced at relatively low cost in timely fashion.

The language of basic needs departs from traditional welfare economics, but some economists now argue that a rethink is needed, in view of the accumulating evidence on subjective wellbeing together with threats such as climate change, and pose the question, what exactly does “better” mean? The language of basic needs is also distinct from that of rights; it has the advantage of being more specific and arguably has a firmer conceptual justification. Compared with GDP, the IEO focus is superior in relation to harmful goods and activities, and more generally in emphasising the importance of the economy in enabling people to live long and fulfilling lives.

Combining the IEO with other measures would provide valuable information. Dividing the IEO by real per capita GDP would generate an efficiency ratio, where high efficiency implies that people’s lives are more fulfilled at lower cost. Similarly, dividing the IEO by the ecological footprint and/or specifically by the carbon footprint would generate a sustainability ratio, which could be regarded as a measure of sustainable development. The IEO could also be used to monitor the effects of policies, and in policy development. For each of the objectives embodied in the constituent items of the IEO, many different policy options would generally exist. The choice of policies would depend on a combination of values-based debate and the evidence on effectiveness and cost-effectiveness.

The IEO is intentionally based on a minimal value system that can command the support of all people of goodwill, whatever their particular political persuasion. It would play a major role in agenda setting, in planning for economic security at the national level and in fostering joined-up government. Action to improve the level of satisfaction of basic needs could involve governments (including regional and local) by means of direct provision, transfer payments, investments, fiscal policy and regulation; the private sector by reducing prices and introducing new products, and possibly by a more “stakeholder” orientation; and cultural change. A major contribution of a focus on the IEO could be to improve the tenor of public debate.