Measuring purchasing power in support of policy

With the rising popularity of agriculture and alternative energy sources in territorial micronations, as they strive for self-sufficiency, a better statistical measure of the related economies becomes important to bureaucrats and politicians alike. At present, save for basic budgetary or financial statements, most of the micronational world’s territorial economies, while burgeoning in potential, lack useful statistical data in support of policy planning.

Often very limited in nature, the budgets of a micronational government can be strained to meet the expectations of its citizens, as well as its leaders. It is partly for this reason that some territorial micronations embark on programmes to reduce reliance on macronational sources of goods or services by undertaking such self-sustaining activities as growing local food crops or installing alternative sources of electricity, such as solar panels.

These activities in theory have the ability to reduce the cost of imports for the micronation; however, without any useful statistical data available, it is difficult to objectively measure the impact of such activities on the purchasing power of the micronation or its population. That is, does the savings related to these local offsetting activities have any significant effect on the long-term costs carried by the micronation’s citizens or government? Are the programmes viable economically, or are they simply beneficial from an ethical or political standpoint?

The fundamental way to collect data in support of answer that question is through the creation of a simple Consumer Price Index within the micronation, based on the concept of a “Basket of Goods”. Not as comprehensive as that used by macronations, the micronational Basket of Goods must be lean in its contents, and the related cost data for each item within the Basket must be collected at regular intervals, such as quarterly (for example). It must be structured such that it contains contents that are regularly consumed by the micronation’s citizens.

The Basket must in its most fundamental state include goods that the residents of territorial micronations commonly purchase and consume, regardless of whether they are locally produced or otherwise imported. It can essentially be thought of as the value of one’s monthly grocery and utility bill, though the contents of the Basket can be expanded as necessary to meet uniquely local circumstances (perhaps a local population has a particular fondness for a specific food crop that other micronations do not, for example).

The Basket must also not contain so many items that inputting the related cost data into the tracking survey becomes burdensome, so as to detract participation, as it is important that the citizen maintain participation across reporting periods for accuracy and usefulness in policy planning. The level of complexity of a macronational Consumer Price Index need not be religiously mimicked, and the use of free services such as Google Forms and Google Sheets can facilitate ease of data collection. By sticking to the basics, one arguably gets only a basic snapshot of purchasing power, but that basic snapshot is nonetheless a ten-fold improvement on the current state of data in micronational economics.

Beyond tracking individual and overall costs for its contents, how can the Basket benefit a micronation’s government? Let’s look at a scenario: in quarters where an item in the Basket was locally produced (such as lettuce, for example), for simplicity, it could be assumed to have no cost. In quarters where one had to buy (import) lettuce as it was out of growing season or locally produced stock exhausted, the cost to purchase it would be recorded in the Basket.

The overall cost of the Basket would then be tracked to determine what, if any, impact the “no cost” instance had on purchasing power for the micronation’s citizens. If growing lettuce locally had no measurable or useful impact on the Basket’s overall inflation, that finding might support the micronation’s government redirecting agricultural efforts to other crops that would have more of an impact.

To be meaningful using the “no cost” assumption, the basket must include imported goods, which is reasonable given that few, if any, territorial micronations produce all the goods that are consumed locally. By including such imported goods, one can see how local production compensates, or doesn’t, for the inflationary costs associated with imports.

Arguably the system described above is noticeably rudimentary and certainly not something that an economics professor would consider adequate, but it is a means of creating a simple Consumer Price Index that is easy to maintain for any micronation, and one which can be used as a basis for further development and refinement by those micronations that desire a more complex snapshot of their citizens’ purchasing power. Most importantly, it provides a starting point by which a government can collect useful economic data in support of its micronation’s development.

A basic example Basket of Goods (track the cost of each item and calculate the sum):
x1 loaf of fresh white bread
x1 litre of milk;
x12 eggs;
x1 kilogram of tomatoes;
x1 head of lettuce;
x1 kilogram of potatoes;
x1 kilogram of onions;
Total unit cost of 1 kwh of electricity (total billed amount divided by total kwh consumed.)

About the Author

Liam Sinclair
Owner/Senior Editor. One of the longest-serving micronational journalists, Sinclair started reporting in 2001. His work has since been recognized by several community awards.

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