We Measure Our Economy Too Narrowly

A British national security assessment recently did something unusual. It assessed the loss of biodiversity as a threat to national security - using the same methodology the intelligence services use to weigh military and geopolitical risks.

The conclusions are bleak. Monitored wild animal populations have declined by 73 percent since 1970. Six of nine planetary boundaries have been crossed. Every ecosystem assessed as critical is heading toward collapse - coral reefs and boreal forests possibly as early as 2030, rainforests and mangroves from 2050. The consequences spell out as crop failure, drought, migration, pandemics, armed conflict.

The most telling thing is not the content. It is who is writing. When a security agency starts doing the maths on nature, it means something has gone fundamentally wrong in how the rest of society counts. The market never priced the ecosystems. The national accounts never recorded them. The air, the water, pollination, a stable climate - all of it was treated as free, infinite, outside the calculation.

Now the reckoning comes. And it does not land with those who should have done the counting. It lands with all of us.

This is the core of a problem that has become increasingly hard to ignore: we measure our economy too narrowly. We count GDP, market price, quarterly profit, shareholder value. What we don't count - natural capital, human health, social cohesion, the living conditions of future generations - is treated as if it did not exist. Not because it lacks value, but because the measurement system cannot see it.

And what we do not measure, we do not manage. What we do not manage, we lose.

Four Reports, One Diagnosis

In just six months, four different voices, from four entirely different directions, have arrived at the same diagnosis.

In November, the report Value Gap: Sweden - from RISE, Circle Economy and RE:Source - showed that Sweden loses around 600 billion kronor every year to a linear economy. That is 19 percent of all the value we create across six sectors studied. Value that leaks precisely because the measurement system does not see it until it is gone.

The UN expert group on Beyond GDP has delivered its final report: gross domestic product is not enough. Continuing to steer by GDP risks a future where production grows while societies sink deeper into ecological, social and political crises.

EY's megatrend report Rebalancing Capitalism argues that markets work better when prices reflect real costs - put a price on the externalities, broaden value from shareholders to all stakeholders.

And in the Journal of Industrial Ecology, researchers Kirchherr and Jones go furthest: if the circular economy is taken seriously on a global scale, it will even shrink GDP, because growth and material flow are so tightly interwoven. Not as a flaw - as logic.

Four reports, four positions, the same underlying conclusion: what we count determines what we do - and we are counting wrong.

The Clock and the Cloud

Why is this so hard to change? Because measurement systems are never neutral. They shape what we see - and thereby what we value and what we sacrifice.

The futurist Martin Börjesson often raises a metaphor that captures the problem: the difference between clocks and clouds. The clock is mechanical, predictable, measurable part by part. The cloud is alive, interconnected, unpredictable.

GDP treats the economy as a clock. Count every transaction, sum it up, compress the change into a single number. But the economy is a cloud. It is bound up with people's health, with ecosystems, with cultural patterns, with future generations. Damage one subsystem and others bleed. A clock cannot measure a cloud - and an economy steered by clock-numbers will systematically sacrifice whatever does not fit inside the number.

The British security report is what happens when the cloud sends the reckoning back.

Food Makes It Concrete

The abstract becomes clear when you look at something close to home: food.

Food production, according to the British assessment, is the single largest cause of biodiversity loss on land. At the same time, the food system is where the narrow measures do the most damage - and where a different logic is easiest to see.

When we buy food through long chains, the farmer at the end often receives only around 9 percent of the price. The consumer pays more, the producer gets less, value leaks in the intermediate links. But this is not only a question of distribution. It is also where marginal utility comes in: paying the farmer one krona more can determine whether more farmers stay in business, whether more hectares are cultivated, whether local food systems are built. Value directed to where marginal utility is highest creates new value - it does not merely move it.

And the measures govern not only who gets paid, but what we choose. When sugar and chemically sprayed products are priced without their costs to health, soil and water being counted in, it becomes cheap to eat worse. When local farmers are not paid for their full contribution, it becomes expensive to eat better. The measurement system creates the incentives - and today they point the wrong way.

In the Fairchain project, this became concrete. We began with an observation: the annual growth of Sweden's wild forest berries corresponds - in theory - to the annual growth of Swedish timber in economic potential. But where we have well-developed processing pathways for the timber, the berries are exported largely unprocessed. The value is captured somewhere else.

And it is not only about processing capacity. Bilberries have documented health properties - but for regulatory reasons these may not be printed on the packaging. Sugar products, whose long-term health costs are borne by society, face no comparable restriction. The asymmetry is twofold: the berries' value is visible neither in the economy nor on the label.

The question became: how can we create, deliver and capture that value in Sweden - without relying on simplistic assumptions? We compared two systems - the current one and an alternative with Swedish processing - across several sustainability dimensions at once: economic, environmental, social, regional. Radar charts side by side. Hot spots in both. The work was about sorting out three types of intervention:

• Change: value capture. The berries are exported unprocessed today - that has to change if Sweden is to share in the value.
• Preserve: the livelihood of Thai berry pickers. For them, the seasonal work has a high marginal utility that should not be swept aside.
• Optimise: who does the picking. Newly arrived or unemployed people in Sweden fall into an in-between category - geographically local, with a marginal utility from the work similar to that of the Thai pickers. Social inclusion without damaging the integrity of the value chain.

Change, preserve, optimise. Not a universal method, but a way of working: map the system, compare alternatives multidimensionally, find the hot spots, ease them. It takes the whole seriously instead of optimising a single variable.

The Sweet Spot - and the Way Forward

Back to the 600 billion. Here a reasonable objection arises: if Kirchherr is right that the circular economy will eventually shrink GDP - how can Sweden at the same time create 600 billion in value through more circularity?

Both can be true. Kirchherr's argument concerns a fully developed, global circular economy. Sweden today is the exact opposite - a half-linear economy where enormous value leaks because of insufficient circularity. We are nowhere near the point where circularity begins to cost. We are in what Kirchherr himself calls the sweet spot of circularity, where increased circularity creates both economic and environmental value.

And it is not enough for Sweden to build its circularity on top of continued extraction from the rest of the world. It has to be paired with other countries being able to build their own circular economies, where their materials and value capture stay at home. Otherwise the pressure is merely displaced geographically.

At RISE we work with both horizons. Value Gap shows what can be captured here and now. The project Policy for a Redesigned Economy explores what will be required in the longer term - for the day when the bridge needs to lead somewhere.

Counting Again

What we count determines what we do.

Right now we count narrowly: short-term profit, shareholder value, GDP, quarterly results. And we get an economy that produces exactly the outcomes the methods optimise for - concentration, extraction, leakage, and ultimately ecosystems that a security agency has to warn about.

Counting more broadly is not about adding more indicators to the same clock. It is about asking something fundamental: what value is, and whom the counting is for.

At RISE we build the business cases for circular business models. One foot in the techno-economic analysis. One foot in the rooms where the decisions are actually made - in municipalities, in industrial companies, in negotiations that do not always speak the language of research. That is where the transition happens. Not in abstract arguments about growth or circularity, but in concrete choices between reuse and new purchase, between new production and extended lifespan, between extraction and regeneration.

Value Gap shows that around 600 billion kronor leaks every year. But the figure for your sector specifically - construction, furniture, vehicles, textiles - says more than the total does. It exists, and I am glad to share it.

Get in touch and we will go through what the value gap looks like in your organisation, and where the marginal utility of counting differently is greatest. It is often not where you would expect.

What we don't count doesn't disappear. It becomes a reckoning. The only question is whether you would rather see it coming.