New socio-economic indicators in NEMESIS

By , GRIPICO - Universidad Complutense de Madrid

After an introduction to the social innovation concept (Chapter 1), the working paper presents four perspectives of social innovation:

  • The macro-perspective of social transformation towards a global knowledge society (Chapter 2)
  • The work/organizations change perspective: social technologies are identified as drivers of potential productivity gains across several sectors, thanks to the global connectivity, increasing interaction and knowledge exchanges they enable (Chapter 3)
  • The social economy perspective: activities pursuing “not just profit” but also – and mainly – social goals (i.e. human wealth and well being, protection of environmental commons) are indentified across the private, public, non profit and informal/household sectors of the economy (Chapter 4)
  •  The systemic change perspective: social innovation as a process of change to meet social needs (Chapter 5)

In addition, the working paper illustrates in Chapter 6 an approach to analyze the cost disease – i.e. the increase of real costs of health, education and other personal services (stagnant sectors) due to the increase of all sectors of the economy boosted by research, innovation and technological development, and the consequent increase of average wages which affect all sectors (i.e also stagnant sectors where the labor productivity is increasing less than what would be necessary to justify the increase of wages). Chapter 6 concludes proposing a social innovation approach based on turning the cost disease phenomenon into a new welfare therapy:

  • First recognizing that the cost disease exists, and is an unavoidable consequence of the global process of technological innovation and increase of productivity of the economy;
  • Second acknowledging that the “disease”, far from being a problem, can be afforded by the whole society thanks to the productivity gains achieved in the progressive sectors (manufacturing + business services) as an impact of technological innovation.
  • Third, understanding that this opportunity can be taken only by igniting a social innovation process at a macro level. This would imply to transfer resources created by the productivity gains in the progressive sector to the stagnant sectors, financing their increasing costs, and in parallel ensure that the stagnant services achieve the social needs they are supposed to meet. The latter should be measured by physical indicators (measures of effectiveness) and targets of human and environmental health.

As a first step to demonstrate the merits of this approach, in Chapter 7 we propose to run simulations with the NEMESIS modeling system to show potential productivity gains for the EU27 economies as a consequence of investments in R&D (3% GDP target) and ICT/social technologies diffusion (including also “big/open data” applications fostered by the “Digital Europe” policy) in the different sectors of the economy. This analysis should show at the 2020-2030 horizon and beyond the effects of the “cost disease”, in terms of increasing share of the real costs of health, education and other personal services on the total economy of Europe (as it has been done – but to the 2100 horizon – for the US economy in the Baumol’s work mentioned in Chapter 6).

A second step would imply to simulate the impact of an European program of social investments in the health, education and other services (including environmental services and climate change adaptation) aiming to achieve physical targets, as for instance those indicated by Europe 2020 for greenhouse gas emissions, education enrollment etc., or other targets that could be specified for human capital, health and well being in Europe until a 2030 horizon. This second step should show the employment impacts, and in particular to what extent the creation of jobs in the social sectors (stagnant services) can alleviate the reduction of jobs in the manufacturing and other sectors where labor productivity increases. It should also consider how social activities could be financed, transferring by means of taxes and incentives resources from the more progressive to the stagnant sectors. However, to be implemented, this second step will need to develop much more details about the advocated social investments in the stagnant sectors, the definition of the physical indicators and targets to gauge the achievement of social needs, and how transfers of revenue can be accounted for in a SAM-Social Accounting Matrix scheme where the flows to the “social sector” are identified.