Podcast Summary: "The Measure of Progress: Counting What Really Matters"

LSE Public Lectures and Events – January 22, 2026
Guest: Professor Dame Diane Coyle (University of Cambridge)
Host: Richard Davis (LSE)

Overview

This episode explores the limitations of our traditional economic measurements—especially GDP—and asks how, and why, we should measure progress differently in an age shaped by digital technologies, shifting forms of work, and new forms of value creation. Professor Diane Coyle, drawing on her new book The Measure of Progress, discusses the inadequacy of current statistics to capture the realities of modern economies, how these gaps affect policy, and suggests new frameworks for what we ought to count if we want to understand societal progress.

Key Discussion Points & Insights

1. The Problem with Traditional Economic Measurement

• GDP’s Outdated Framework
  Diane Coyle argues that “the invisibility of the economy as it is now in statistics is extraordinary” (03:47), emphasizing that policy is still driven by measures designed for a radically different world.
• Why It Matters:
  • Statistics are foundational for governance and policy, but lack tracking of crucial aspects like supply chains and new business models.
  • Real-world surprises (e.g., untracked bottlenecks in energy/fertilizer) exemplify the inadequacy of current data (04:13).
• Metaphor:
  “We don’t have the right shaped holes. The framework just doesn’t fit how the economy has changed over the past 80 years” (04:47).

2. The Origins and Function of GDP and National Accounts

• Historical Roots:
  Economist Sir William Petty’s early work, Political Arithmetic, and Keynes’ WWII-era focus on measuring the economy’s capacity to fight the war (06:22–08:25).
• GDP as a Flow, Not a Stock:
  “It’s what happens during a given period of time... what’s in the tubes, not what’s in the containers.” (10:06–10:19)
• Shortcomings:
  GDP does not reflect the value of unpaid labor, free digital goods, or informal and hidden economies.

3. Digital Economy and Uncounted Value

• YouTube and DIY Repairs
  Using free online resources to repair something (e.g., a boiler) reduces GDP because no market transaction occurs (11:18–11:58).
• Self-Checkout and Automation:
  The shift to self-service at supermarkets blurs the line between paid market labor and unpaid consumer labor. Productivity might appear to rise, but actual labor input hasn’t changed—it’s just unpaid (12:03–13:33).
• Shadow Pricing for Digital Services:
  “There’s no real agreement about how you figure out what [free digital services] are worth. ... One method is to ask people their willingness to pay.” (14:16–16:25)

4. The Hidden and Informal Economy

• Measuring Informality:
  Digital data like mobile phone and satellite imagery is used, but lacks the rigor of official statistics. Access to private sector data is an ongoing challenge (18:47–19:43).
• Emerging methodology:
  “The challenge is that they’re held by private sector companies... not collected with the same kind of rigor...” (18:47–19:28).

5. Changing Nature of Firms and Production

• Factoryless Goods Production & Servitization:
  • Iconic brands (Apple, Nike) outsource manufacturing, while many companies profit from services attached to physical goods (e.g., Rolls Royce’s aero engine monitoring) (20:42–23:08).
  • “The solution is that there are some services that come bundled with the basic product that you’re buying.” (22:31)

6. Time and Hybrid Work

• Wednesday Golf & Hybrid Work:
  The shift toward hybrid and flexible work blurs the home/work boundary, complicating time-use measurement and productivity calculations (23:51–25:11).
• Production Boundary Problem:
  The strict separation of ‘economic’ and ‘household’ production is increasingly unrealistic (25:33–26:13).

7. Toward Better Measurement—Diane Coyle’s Proposals

• Comprehensive Wealth Balance Sheets:
  Go beyond GDP flows by including broader ‘capital’—physical, natural, human, and social—in national accounts to assess sustainability (26:56–29:20).
• Why It Matters for Policy:
  Without valuing these new forms of capital, policy incentives (like tax breaks for physical capital) are incomplete or biased (29:20–30:33).

  “There are some really important trade-offs and choices... If we build housing in a flood zone... in five years time, the value of those assets will be destroyed.” (30:09–30:33)

• Data Collection Challenges:
  Many advanced countries suffer from declining survey response rates. While the private sector collects huge amounts of data, there’s no structure for sharing it with statisticians (32:02–33:40).

8. Time as a Metric

• Time-Use as a Budget:
  “You do have a budget for time. We’ve got 24 hours, can’t save it... One way to think about being better off is: Do we enjoy how we’re spending our time?” (34:53–36:13)
• Measuring Value of Time:
  Diarization, smart devices, and task-based studies are potential tools (36:53).

9. What We Measure Defines What We Value

• “Measurement... is going to be about what we value; you’re not going to be able to come up with any kind of new system... without getting measurement right.” (37:32–38:19)
• Diane’s hope: More conscious, critical engagement with the construction and meaning of economic data—especially as AI and big data encode similar philosophical assumptions.

Notable Quotes & Memorable Moments

• On GDP:
  “GDP is a real number. And I go, you really haven’t understood anything about how this number is put together. It’s no more real than all kinds of other numbers. … They’re philosophical categories, really.” (38:19)
• On Data Resources:
  “How bizarre is it that governments are cutting spending on government data at a time when the whole of the private sector is investing massively in data...” (32:02)
• On Household Value:
  “The whole Internet runs on a few pieces of key open source software that are run by volunteers. And if they stop being maintained, the whole modern economy goes down. The value of that is incredible.” (49:56)
• On the Trouble with Imputed Values:
  “Imputed rent... is a notional rent that owner-occupiers pay themselves to live in their house. It doesn’t exist... One effort I’ve seen comes up with I think 15% [of UK GDP] for imputations. So you do end up with this being a strange beast. It’s not a real thing at all.” (52:03–53:41)

Selected Audience Q&A and Responses

Q: How to handle political resistance to new, lower growth metrics?

• A: Politicians may push back, especially if net growth figures are lower when including human, social, or natural capital—but there’s also public pressure to move beyond “GDP that isn’t doing anything for people.” (42:30)

Q: How to value unpaid care or household labor?

• A: Use market wages for similar paid work, or the opportunity cost of the person’s time. Data remains patchy and much more research is needed. (45:58)

Q: Thoughts on happiness as a measure of progress?

• A: Diane is skeptical, preferring to focus on economics—allocation and use of resources—while acknowledging happiness is “the outcome that we want.” (57:13)

Q: Is time-use as a measure vulnerable to the same subjectivity as GDP?

• A: All economic measures have aggregation and value challenges, but “knowing how much time people spend on [various activities] is important for the policy debate.” (62:28–65:08)

Q: Has the hidden or underground economy grown?

• A: Hard to measure systematically, but likely significant; new digital and volunteer production (such as open source software) remains largely invisible in official stats. (49:32–49:56)

Suggested Measures for Progress and Policy (49:56+)

• Time Use:
  “I would like to know how people are spending their time and what value do they gain from how they’re spending their time.”
• Living Standards, Human and Social Capital
• Comprehensive Wealth Accounts:
  Including natural, human, and social capital, not just physical assets.

Timestamps for Key Segments

• [04:01] – Why the invisibility of new economic realities in statistics matters
• [06:02] – The origins of economic measurement: William Petty & WWII
• [10:06–11:58] – GDP as flow, and its limitations (DIY repairs, self-checkout)
• [14:16] – Shadow pricing in the digital economy
• [20:42] – Factoryless production, servitization, and modern firms
• [26:56] – Diane’s proposed solution: comprehensive wealth
• [34:53] – The importance of time-use as a core metric
• [38:19] – The philosophy and reality of economic measurement
• [49:56] – Q&A: What really matters, measuring the hidden economy, imputed value

Conclusion & Closing Quote

Diane Coyle urges a rethinking of statistical frameworks so that what we measure—as societies and governments—aligns with what we truly value: human potential, sustainable well-being, and the multifaceted activities that define modern life. As Diane puts it:

“If people would start thinking more about where the numbers come from and what they mean, and are they telling us what we really want to know... that would be a step forward.” (38:19)

Recommended: Buy and read Diane Coyle’s new book, come to LSE events, and critically engage with the statistics that shape our world.

Skip to [26:56] for Diane Coyle’s own solutions and vision for the future of measurement if you’re short on time!