Weighing the Costs and Benefits of Public Policy: On the Dangers of Single Metric Accounting

Abstract

This article presents two related challenges to the idea that, to ensure policy evaluation is comprehensive, all costs and benefits should be aggregated into a single, equity-weighted wellbeing metric. The first is to point out how, even allowing for equity-weighting, the use of a single metric limits the extent to which we can take distributional concerns into account. The second challenge starts from the observation that in this and many other ways, aggregating diverse effects into a single metric of evaluation necessarily involves settling many moral questions that reasonable people disagree about. This raises serious questions as to what role such a method of policy evaluation can and should play in informing policy-making in liberal democracies. Ultimately, to ensure comprehensiveness of policy evaluation in a wider sense, namely, that all the diverse effects that reasonable people might think matter are kept score of, we need multiple metrics as inputs to public deliberation.

Valuing business impacts in the areas of wage inequality and employee well-being

“…The present paper complements an OECD proposal for a set of outcome indicators for B4IG companies, and more broadly the OECD approach to measuring the non-financial performance of businesses through the lens of the OECD Well-being Framework (Siegerink, Shinwell and Zarnic, 2022 [4]). The proposal identities a suite of indicators, which would allow firms to identify strengths, risks, and vulnerabilities related to the well-being of their stakeholders.…”

“…References business impacts on other business stakeholders, such as value chain workers, consumers, communities or the environment (Siegerink, Shinwell and Zarnic, 2022 [4]). Despite the limited scope, the findings have strong policy implications regarding the wage structure of the firm, incentives on hiring and firing practices, as well as incentives to improve the quality of the working environment.…”

“…The OECD's framework on measuring the non-financial performance of firms (Siegerink, Shinwell and Zarnic, 2022 [4]) has identified a number of core components of firms' social performance: the well-being of employees and workers in the value chain, product impacts and the well-being of consumers, the well-being of communities in the supply chain, and the capital resources that firms create and deplete that are relevant to society as a whole.…”

“…This parameter is calibrated on a Value of a Statistical Life (VSL) equal to 6.3 millions USD in the US in 2004, the US Environmental Protection Agency VALUING BUSINESS IMPACTS IN THE AREAS OF WAGE INEQUALITY AND EMPLOYEE WELL-BEING Unclassified benchmark. 4 As a result, the parameter 𝑦𝑦 0 , yielding a VSL of 6.3 million in 2004, is equal to 130.96 (see (Boarini, 2021[13])).…”