Political Impact of Composite Indicators

Asterios Chatziparadeisis, Ph.D.,

was born in Thessaloniki, Greece, in 1952. He holds a B.Sc. degree in mathematics from Aristotle University of Thessaloniki, and a DEA and Ph.D. degree in Statistics from University Pierre et Marie Curie (Paris VI) in Paris. From 1978 till 1981 he worked as a researcher in the National Institute of Pedagogic Research of France. Since 1984 he is with the Hellenic Ministry of Development, initially in the production and analysis of statistics and indicators for Research, Technology and Innovation, and following that as a Policy Maker for Research and Technology. He has been responsible for the elaboration of the Structural Programs of Greece for Research & Technology for the programming periods 1994 - 1999 and 2000 - 2006. He is also responsible for the elaboration of the Structural Program "Competitiveness and Entrepreneurship" which covers several domains (R&D, Industry, Energy, Tourism, Trade etc.) for the programming period 2007 - 2013. From 1996 to 1998 he provided his services to the European Commission as "Expert National Detaché" in EUROSTAT and in the Research Program ESPRIT.

"Composite Indicators" is not a new concept, yet both generation and demand for composite indicators has intensified in the recent years. Modern economy is becoming constantly more and more complicated and multidimensional, e.g. it is described by many individual heterogeneous indicators of different nature that are measured in different units. As such, nowadays the policy maker is submerged by an overwhelming volume of quantitative and qualitative information, the aggregation and utilisation of which, poses significant difficulties and impedes decision- and policy-making. Consequently, from a policy makers' point of view, there is great need for composite indicators which would aggregate individual ones and present their diverse amount of information in a simple and easy to understand manner.

The importance of composite indicators is higher than it seems at a first glance since they are quite often used for comparing countries' or regions' performance across their basic characteristics. In that case, composite indicators not only reflect the current state of a country/region but influence also its future roadmap. For example, if a country is ranked in the first places of the "Indicator of Competitiveness" it would quite probably provoke positive impact in attracting investments and brains, and thus reinforce (further) the actual competitiveness of the economy. On the contrary, for a country that is ranked at the bottom of the list, this would most probably associate a negative perception that would further undermine the economy. Similar phenomena are also observed with other economic indicators such as the "tourist attractiveness", the "quality of life" etc. For such reasons, significant attention is drawn to the elaboration process of composite indicators.

TExperience has shown that in more than few cases composite indicators have depicted "paradoxes" that are not in line with what is actually the case for a certain topic. Composite indicators are derivatives of simpler indicators and by definition this implies human intervention - by the statistician. Therefore, it is necessary to examine the optimal conditions under which an appropriate composite indicator can be crafted, such as the "participating elements", their "profiles" etc. If the assumptions applied and the choices made during the composite indicator elaboration process, are not the right ones, there is high risk to derive erroneous messages that could further affect decision- and policy-making.

As it so happens, that a policy maker, who is rarely an experienced statistician, who can study in-depth the nature of a composite indicator, understand its shortcomings, and keep these considerations in perspective while using the indicator. Therefore it is essential to address how a policy maker can be supported and guided for the appropriate utilisation of a composite indicator.

The crafting of appropriate indicators for the support of policy-making presupposes appropriate policies in the first place for the indicators! The countries of the European Union and the European Commission should consider the topic of indicators with particular attention and improve their quality so that they present the right picture for Europe and its countries in the international measurements. The presentation discusses R&D actions of the European Commission in the subject of indicators and makes proposals that could be useful for Europe and its countries for the proper crafting and utilization of composite indicators.

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