Story: Economic thought

Page 4. Measuring progress

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Development

Economic thinking about development went further than tariffs. Settlers wanted to build a ‘better Britain’, a more sophisticated colonial economy that could continue to provide living standards superior to Britain’s.

In the 19th century modern concepts of measuring a country’s national income (such as gross domestic product) did not exist. Progress was assessed through indirect indicators like population growth (once censuses were introduced in the mid-19th century), the measurement of exports and imports, and the output of some industries.

Statistics

Over the 19th century an increasing range of statistics was collected and processed, but there were limits to available information. It was not easy to distinguish growth in one industry from overall growth. For example, railways destroyed coaching businesses but provided new services. The financial difficulties of particular industries were not necessarily good indicators of overall income growth. For example, declining wheat yields were more noticeable than the growing output of meat and dairy products. Prices were especially risky indicators. Prices of outputs (like wool) were more prominent than those of inputs (like fertiliser), and prices can both rise and fall while production increases.

Charles Knight

Although these issues were of interest in both Europe and New Zealand, there was particular interest in measuring progress in new societies. In the 1860s civil servant (later auditor-general) Charles Knight recognised that assessing output available to consumers had to take into account the way that products from one industry could be inputs to another industry, whose outputs could improve the standard of living.

This concept of ‘value-added’ rather than ‘value of output’ did not become part of international economic thinking until the 1920s and 1930s. Knight’s sophistication had no direct international significance – overseas statisticians also developed the same ideas. Yet it is a rare example of original New Zealand economic thinking.

How to cite this page:

Gary Hawke, 'Economic thought - Measuring progress', Te Ara - the Encyclopedia of New Zealand, http://www.TeAra.govt.nz/en/economic-thought/page-4 (accessed 29 November 2021)

Story by Gary Hawke, published 11 Mar 2010