Lorenzo Fioramonti is Director of the Centre for the Study of Governance Innovation. We talked to him about his new book, How Numbers Rule the World: The Use and Abuse of Statistics in Global Politics (Zed Books, 2014)
Your new books "How Numbers Rule the World" is just out. Could you give an example of a number that you think has a great deal of power?
The book is not about numbers per se, but how numbers affect our political decisions. The most powerful number is called GDP - Gross Domestic Product. GDP is extremely influential in our society, possibly the most influential tool for measuring success in contemporary governance. In my view, GDP is the world’s most powerful number. It dictates economic policies and can do or undo entire governments. But its power goes way beyond economic performance - it affects the way in which we operate as a society, the way in which we value social policies, the way in which we decide what is productive and what is unproductive in running our lives. For example, working is productive but looking after children is not. And this is because GDP dictates, separates what is valuable and is not valuable according to its (very selective) methodology.
Is the problem with numbers or the structural conditions in which they emerge? Are there particular forces that push us towards using numbers in particular ways?
Numbers are fundamental. I don't think human beings can progress without measuring. We measure every day. Carpenters need measurements to make furniture, doctors need thermometers to measure our fever. Measurement is part and parcel of our understanding of reality. What is happening, however, in contemporary governance is that we live through a phase where our political decisions are surreptitiously anchored to measurements that are extremely controversial and yet presented as neutral. As a consequence, our political debate is minimised because the numbers we use to make decisions are already forgone conclusions. These selective measurements provide us with a very narrow range of options, thus limiting our real freedom. For instance, no government or society is really able to think of progress outside of GDP. So it's not about numbers per se, it's about how these numbers are being made and integrated into policy making.
Most of the numbers I discuss in the book are econometric measures, such as stock indices, credit rating, natural capital accounting, whose ultimate goal is to put a “price” on everything we do, thus reducing social values and ambitions to simple market decisions. Take, for example, cost-benefit analysis, something you and I take for granted. When our governments decide whether to build a school or a shopping centre, they weigh up the costs and the benefits of either decision. Numbers bring the appearance of neutrality that helps eliminate political contestation. Yet there is no public scrutiny on the methods and formulae used to calculate these costs and benefits. As a matter of fact, these calculations only value what has a formal price and, above all, never tell us how costs and benefits will be shared in society. Who benefits from a new school? Who benefits from a shopping centre? Numbers flatten distributional issues and make us blind to the fact that building school is an important goal per se, whether its narrowly defined benefits outweigh the costs or not.
We deal with climate change based on cost-benefit analysis, and then we systematically end up with market-based solutions, such as carbon trading. These solutions are supposed to be reducing climate change but the evidence, so far, is that they have created new markets for speculation and gambling, while emissions have not been decreasing. Similarly, measuring the value (read, price) of natural capital appears rational. It is presented as a way of taking account of nature’s contribution to GDP. Yet, it poses serious problems. First of all, who measures the value of nature and how? Secondly, if nature has a price than it can be bought and sold. No surprise then that we see the rise of investment banks trading in biodiversity credits, forest bonds and other forms of financialization of ecosystems.
On environmental policy, we’ve seen a growing move to economic frames for considering climate change, I guess ever since the Stern Review. This has started to have an impact on activism - groups like 350.org working through financial systems. And many people see this as a good thing. Because it's giving activists new places to work, and it's also offered space for new communities to get involved in green issues. It was previously seen as a hippie thing, but now you have people like Lord Stern in a suit, and it's a good way to talk to right wing environmentalists. We certainly have a history of Conservative greens in the UK. The American model of the right not being into green issues is a bit odd for us, and I'm sure that's true of many other countries. So we might say it's a positive. Would you agree with that, or are we losing something with that frame?
I'll be frank with you, it's a dilemma. We all agree that GDP is a problem, that GDP is incomplete and misleading. It's really dangerous, because it gives us an idea of value that is profoundly skewed. And yet, it affects our political decisions. What we do, as nations, as communities, tends to reinforce what is measured in GDP, and neglect what is not.
So people think: let's measure the economic value of nature! Let’s measure the economic value of climate! Put a price tag on it and then deduct it from GDP, so that governments will immediately pay attention to it. We feel that policy makers will say "oh, wait a minute! I never knew that air was so important. It has a real economic value. We need to protect it." This helps, but it also has a dark side. First of all, the methodologies to value the economic contribution of nature are embarrassingly superficial. Often they are based on sketchy opinion surveys of how much people would be willing to pay for the protection of these public goods, or on how much it would cost to replace these ecosystems. These methods seem to ignore than most intangibles, including nature, have an intrinsic value that cannot be guessed through market surveys. Secondly, when these values are incorporated into public governance processes, then they become an opportunity to create new markets. A price is an indicator of an exchange value. If I say the price of this tea is £5, that means if I give you £5 you give me tea. Implicitly, by putting a price on a rainforests, we are accepting that that would be the amount of money I would need to invest to offset the loss of the forest. As a result, some might say: "instead of protecting the forest, I could clean my conscience by saying here's what I need to pay in order to abuse it" and this has been happening already.
The underlying principle behind natural capital accounting is that you need to create markets so that investors can make money out of rainforests and guarantee their preservation. But this idea of making money out of rainforests implicitly requires rainforests to be made productive. And how do you make a rainforest productive? There is a huge risk that we are building a system of market-based governance that is aiming at preserving the natural biodiversity but will ultimately enslave it. It comes out looking like a rational decision, but it opens up possibilities for abuse that are beyond our belief.
It strikes me that it offers a lot of space the what Rumsfeld would call the unknown unknowns. That you are limiting yourself to measuring only what you know to look for - particularly with the rainforest. You are capturing only what you know now is there, not what we don't know. Do you think that is part of the problem, so there isn't space for improving these sorts of measurements, because they'll intrinsically be limited?
Mother Nature doesn't sign off on the checklists of auditors. You and I maybe do, because we are subjected to systems of public governance, but Mother Nature doesn't do that. So it'd be interesting to ask Mother Nature whether she thinks that the models developed by McKinsey, by KPMG, by Ernst and Young (which are leading companies in the measurement of natural capital) are appropriate to measure the sustainability of the rainforest. Given the track record of some of these companies I have my own doubts. But even if it were possible to provide accurate and transparent values, the room for speculation is enormous because Mother Nature has no say (and we naively trust the producers of numbers, the so-called experts).
Moreover, it is important to understand the incentives that this system creates. It’s like a fixed rate phone system? You buy time on your card and you say this week you have a hundred minutes: either use them or lose them. When you are investing in the sustainable extraction of natural resources, you may well say: "I have bought an allowance to use certain resources, so I will use them all even if I don’t need them”. This doesn’t provide incentives to be better, to beat the cost curve. In society, in real life, when you don't have a system of allowances you basically improve yourself by trying to save as much as you can. But if you pay for it, you have an incentive to consume it. These systems provide incentives for people to simply follow the curve set by the auditors. And if the curve by any chance is wrong, we may ultimate destroy our natural world, while trying to save it.
What about spaces for improving public engagement participation in the making of these numbers, of the setting the perimeters of what we choose to measure? There are things like net’s Happy Planet, do you believe in that sort of thing? Or want more participation? Or do you think any system like this will be flawed?
Lorenzo: You can try to defeat numbers with numbers, by showing that some numbers are better others. Organisations like NEF and researchers like me try and produce better numbers all the time. This is what NEF has done with the Happy Planet Index, for instance. What we need, however, is also to build awareness among the population that the numbers we use to take decisions are systematically manipulated (consciously or unconsciously) and ultimately serve the interests of certain sectors within society.
You know who invented the carbon trading systems? It was invented by climate denialists. They had lost the battle on environmental governance during the acid rain debate in North America. So they said: OK, you guys win, but we choose the tools to achieve emission reductions. And they came up with emission trading schemes, which were supported by their own cost benefit analyses. This has then become the normal approach to climate change mitigation. Instead of fighting on the level of environmental awareness, they fought on the level of numbers, and they won. Unfortunately, environmental movements didn’t realize how crucial the political of numbers could be.
We need to encourage public debate on what sort of numbers we want. This is essential for democracy. I'm not against numbers, but we need to have a say over the numbers that we use. And the result may very well be that numbers that put a price on things should be done away with and we should only focus on numbers that take things for what they are. Carbon emissions, for example. We might say we don't need to know how much carbon emissions are worth, we just want to reduce carbon emissions per se. So, rather than putting a price on them, we could simply say we have x number of tonnes of CO2, and we need to reduce that.
The politics of numbers has to be unveiled. I think that's what the more progressive movements in society should do. I think it's really important that to understand there is no democracy without control of the numbers that lead our decisions. As boring as it may sound, it is actually the core of democracy.