The Warsaw Enterprise Institute, a Polish think tank, makes the attempt.
Whenever the government acquires goods on behalf of and for its citizens, it acts as an agent in someone else’s cause. A good agent will make a good purchase, a bad agent – a bad one. The concept that was present from the very beginning when preparing the WNI was to apply already existing criteria of effectiveness to public expenditure. In the absence of an independent decision of the consumer, who would decide on the allocation of resources in the economy with his or her own wallet, the evaluation of the government’s decisions must be undertaken by an external body. Therefore, we take into account public expenditures in the WNI not by adding up their values, but according to the qualitative criterion. In other words, the higher the deterrent potential of a country’s armed forces, the greater the value of military spending. The better universities place in international rankings, the more expenditure on higher education is worth. The better the reputation of healthcare in a country, the higher the value of government activity in this regard – and so on.
GDP measures the value of government purchases at cost. It’s as if you cannot get more or less value than what you pay for. This sounds like a creative alternative.
Does the document even mention multipliers? I didn’t notice if they did. One would think that might be a relevant measure of value as well. Not that GDP growth actually means much, but Poland and Hungary outperform Austria, Germany, and Denmark in GDP growth. If one had to choose between high scores on these indices and higher GDP growth rates, there really is no choice. GDP growth will always be preferable. https://en.m.wikipedia.org/wiki/List_of_European_countries_by_GDP_growth
I am not convinced that inclusion of multipliers would help much.
For example, by shifting expenditure on a project in the private sector to one in the public sector the difference in multipliers would probably be a wash.
Having worked in central government for over 30 years I have seen a lot of proposals for public spending that forget this, and also plenty that put their thumb on the scales to argue why the cost benefit analysis on a public project is justified because XYZ public benefit.
A creative alternative? This is naive. Valuation would be highly manipulable and in many cases purely subjective. This would open the door to promoting projects for which great benefits would be dubiously claimed. A paradise for grifters…
This has already been done for a long time (e.g. stimulus with jobs created or saved).
I clicked through to the link and I came away with a higher opinion of the attempt than I got from Kling’s excerpt. This was mainly because the comparisons were focused on former Soviet Bloc countries, with Western European countries included as well, but countries from other regions were not included. So it was a lot closer to a an apples to apples comparison.
The lede of the cited study: Measuring the wealth of societies is considered the Holy Grail of economics. The idea to reflect the level of wealth with a single value sounds extremely encouraging.
Aargh! The Austrian school’s basic idea (in my view) is value is subjective. Accepting that, I cannot comprehend what the WEI thinks it is doing.