You cannot manage what you cannot measure.

Although that's an old line, going back at least to the 1950s, when the folks at IBM started using it, it's absolutely true.

And as a result, that motto has led to all manner of measurement devices that now permeate our culture, from batting averages in baseball to crime statistics to unemployment rates.

In economics, there are two really big sets of numbers: "Gross Domestic Product" (GDP) and "Gross State Product" (GSP).

GDP adds up every bit of paid economic activity in each of the states into a measure of our nation's total economic activity.

GSP measures everything that is bought and sold in one individual state, in our case, Michigan.

Economists look to GDP and GSP to get an idea of how our nation’s economy is doing. Two successive quarters of falling gross domestic product, for example, means the nation’s in a recession. Declining gross state product means a state’s economy is contracting.

GSP is measured in current dollars and inflation-adjusted "real" dollars tied back to the value of currency in the year 2000. Michigan's "real" GSP was $331 billion in 2007, down about $4 billion from 2006, indicative of our recent reputation for a "one-state recession"

A careful look at the details casts some light on more details of really going on inside our economy. Sure, the manufacturing sector is down a bit, overall, when compared with last year. Automobile manufacturing, including "motor vehicle, body, trailer, and parts manufacturing," is also down. Construction is way down compared to last year, the result of the housing crisis.

But there are numerous parts of our economy that are growing smartly, thank you, especially in areas that relate to the brain-based, knowledge-driven economy. Information, for example, is up by nearly seven percent, while professional and technical services, education and health care all show good gains.

In other words -- while the deterioration of the auto industry in Michigan keeps making the headlines, the very real story of good growth in the new economy is overlooked, or left on the back burner.

There's also a larger story associated with squinting too much at the gross economic statistics. While they measure wealth and economic activity just fine, they overlook our overall well-being. As Robert F. Kennedy put it in a famous 1967 speech, statistics "measure everything, in short, except that which makes life worthwhile," including our happiness.

Do the economic statistics measure educational attainment or graduation rates? Do they measure life expectancy or obesity or the overall health of our people? Do they track the strength of our families, or how parents are doing at rearing their children or how many kids are on drugs or commit crimes?

No. No, and again no.

Economists have been worrying about this for many years. The problem is partly that we can measure tangible things like automotive output, but "putting a caliper" on how well kids are learning, or why so many of us are fatter than we should be, is much, much tougher.

"We may be in the early stages in the United States of recognizing that the gross domestic product is very misleading and something must be done to get better measures of well being," says Amartya Kumar Sen, a Nobel Prize-winning economist quoted in a recent article in the New York Times.

Moreover, GDP numbers often mask important details. While a rising GDP makes us feel the economy is growing, the actual way in which cash flows -- and how and to who it flows -- are often hidden.

For example, over the last 15 years, while GDP has risen pretty steadily, wages have stagnated, pensions have shrunk or disappeared, and income inequality has increased dramatically.

Nearly all the growth has gone to those at the very tip of the income pyramid -- the top one-half of one percent.

In Michigan, where building and staffing prisons is one of the growth areas in our gross state product, the GSP statistics don't measure the damage done from the crimes that made prisons necessary. Nor does the GSP measure the extra burden from college loans that graduates have to shoulder.

It cannot measure the long-term consequences of rising tuitions, which price some young people out of a future, and the failure of the state, which spends far more now on prisons than it does on supporting public universities, the cradles of our future.

In short, we need to start measuring what’s really important. The non-partisan, non-profit Center for Michigan (of which I am founder and president) has published a "Michigan Scorecard" that attempts to do just that. It measures high school and college completion, investment in schools and colleges, growth in the knowledge economy and entrepreneurial activity and venture capital investments.
Each of these things is just as important as the numbers reflected in gross state product statistics. The Michigan Scorecard is an attempt to get a handle on what makes life worth living here in Michigan. The goal is simple: To connect state policy with our quality of life. I think it makes fascinating reading, and it’s available at www.thecenterformichigan.net.

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Editor’s Note: Former newspaper publisher and University of Michigan Regent Phil Power is a longtime observer of Michigan politics and economics, and a former chairman of the Michigan chapter of the Nature Conservancy. He is also the founder and president of The Center for Michigan, a centrist think-and-do tank which publishes the Michigan Scorecard. The opinions expressed here are Power’s own and do not represent the official views of The Center. He welcomes your comments at ppower@thecenterformichigan.net.