Living Standards Framework From Treasury

Despite what poorly informed left-wingers might claim, the Treasury frequently produces very interesting documents. One of my current favourites is the Living Standards Framework.

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At first blush, it is simply a 5-point framework with which to measure different bits of policy advice. But I see it as an amazing tool with which to criticise the government for pursuing policy options that lower the likelihood of higher living standards over time.

The framework incorporates the politically correct dialogue necessary for evaluating all potential policy options by the New Zealand Government in 2012.

“Living standards encompass much more than just income or GDP. It also includes a broad range of material and non-material factors which impact on the well-being of both the individual and society (such as trust, education, health and environmental quality).”

Therefore, the framework can be used as a starting point to examine government policy options we don’t like. The entire criticism can be framed in the language of the Beltway. And the leading questions that Treasury ask in their accompanying PDF make me wonder – how enormous is the chasm between Treasury advice and what the government is doing on many issues?

Economic Growth

  • Does this improve the opportunities or incentives for higher incomes or greater economic growth? 
  • Does this remove obstacles that hinder resources moving to their most efficient use, or enhance the ability of people to take up new opportunities?

Sustainability for the Future

  • Does this impact on the capital stocks for future use (e.g. physical capital, human capital, or the sustainability of the environment)?

Increasing Equity

  • Does this impact on the distribution across society (both intra and intergenerational)? 
  • Does this improve opportunities for people to improve their position?

Social Infrastructure

  • Does this impact on core institutions that underpin our society (e.g. trust in the rule of law, democracy, Crown-Māori relationship, cultural identity)?
  • Does this impact on the trust and connections between people? 

Reducing Risks

  • Does this impact on NZ’s ability to withstand unexpected shocks?
  • In particular, does this impact on our macro-economic position (debt, deficits, inflation etc)?

If this is a rough indication to what Treasury are discussing in their briefing papers and the like, I’d love to read their “free and frank advice” on some Very Important Issues.

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2 thoughts on “Living Standards Framework From Treasury

  1. Paul Walker

    “It also includes a broad range of material and non-material factors which impact on the well-being of both the individual and society (such as trust, education, health and environmental quality).”

    Note, however, that all these “broad range” of things are positively correlated with economic growth. Countries with higher growth and thus income have better education, health and environmental quality etc. So growth is still the key factor and concentrating on growth still the right policy.

  2. wellygnome Post author

    Definitely. But the point I’m getting at is that the government of the day can change the weighting given to different points on the framework.
    It would be interesting to note what objective analysis was conducted to determine what are the “core relationships that underpin our society”.

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