We live in a world of measures. We love to quantify things. How much money are you making? How many steps did you take today? By how much did your investment go up today? What is the caloric count of a food item? What is the carbon emission of a vacation flight to the Maldives? These are everyday measures that we use in life...okay maybe not the last one. But we are used to this idea of measuring things. It is easy to optimize to one target number.
But this blurb is not about the problem with tracking these silly numbers. It is about paying attention to how these measures are developed and what they quantify. We often take these blindly and do not worry about what it is that the measure is really capturing. If a holistic measure is not possible, we often prefer to go with a flawed measure. And then the flaw is forgotten and the measure becomes the goal.
Here is the trick to watch for: a measure improves not only when things get better, but when costs are moved outside of what it measures. Draw the box smaller, and everything pushed outside the box becomes someone else’s problem while the number inside the box looks great. Keep that in mind for the two examples that follow.
The first is this idea of privatization. We know government departments tend to be inefficient and operate with fat. Privatization implies that the efficiency will kick in and the business will turn to profit. And the numbers agree. But the numbers are measuring the box, not the system. What sits outside the box? The tax breaks and subsidies given to the company. The loss making assets that were quietly dropped before the sale. The people who were laid off, whose output is now lost to the economy, at best working in suboptimal jobs that pay a fraction of what their old skills were worth. And the services that were dropped because they were unprofitable, like an airline route serving a remote area that may not have made money but was needed by the people who lived there. None of these disappeared. They were simply moved outside the measurement, where the government, which is to say the taxpayer, picks them up. We need to understand that not everything is about efficiency. Not everything should be measured in dollars and cents. Just because something can be optimized does not mean it should be.
Now the next conversation is about productivity gains through the use of AI at work. We need fewer people. We can do more by employing machines. And sure enough, the measure will improve: revenue per employee goes up the moment the employees are gone. But it is the same trick. The displaced workers do not vanish, they move outside the box, and the cost of absorbing them lands on the same system that is applauding the productivity number. Nobody sat down and decided that a higher number matters more than a healthier society. That is what makes it dangerous. The metric decided, and everyone downstream just followed it.
To understand why these measures, which are clearly inadequate, are still being used and celebrated, we need to ask one question. Who pays the cost that the measure fails to reflect? The taxpayers bear the costs pushed outside the box, and the shareholders keep the gains inside it. That is a transfer of wealth from the general taxpayer, a very large group, to shareholders, a much smaller one.
So the next time someone tells you that we should be happy about an upcoming privatization, pause. Ask what was left outside the measurement. Ask who pays for it. And ask who is standing to gain.