Sunday, December 9, 2012

Important versus measurable

Nate Silver, the statistician, argues in The Signal and The Noise that one of the most serious problems in social sciences is that many important thing are difficult to measure. Then subjective potentially biased information is unavoidable, and one should be open to any way of improving information (through case studies, narratives, personal experience...). It is very important then to keep in mind that the things that are easy to measure, define and monitor are not necessarily the most important ones. Three examples from economics and politics may help understand that this is really a key issue:
-In the provision of incentives in organizations, if targets and monetary incentives focus on measurable dimensions, then important dimensions that are difficult to measure will be neglected. The clearest example, well known in the theory of incentives, is that teachers will spend too much effort in improving the skills of children to pass tests (which are measurable), instead of helping them become good citizens.
-In the assessment of de facto implementation of de iure institutions, de facto issues are much more difficult to measure than de iure ones. This can lead to serious misallocation of resources. For example, if an international institution gives aid conditional on the degree of independence of industry regulators (for example in infrastructure industries), then the risk exists that countries with good laws but awful implementation of them, will unfairly get international aid.
-In the recommendations to overcome institutional crises, or to improve democracy, too often the focus is placed on institutional discrete fixes, such as changing the electoral system (for example, from proportional to majoritary, or from closed to open candidate lists, as recently suggested in Spain by former prime minister Felipe González). Some thought reveals that a system that is tainted by widespread corruption or patronage will persist after any of these changes: for example, if the voter is granted the ability to rank a list of candidates from the same political party, the list on offer may end up being of even lower quality than before the reform.
A final comparison from the world of sports. In baseball, many things are measurable, whereas in soccer everything is much more fluid (except set-pieces or referee decisions like cards or injury time added). Life is more like soccer.

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