Boots and ragged trousers: Better social indexes

City Hive's Shah says until inflation metrics reflect society investment will fall short of its ESG expectations

You may know the Sam Vimes ‘Boots’ theory of socioeconomic unfairness from author Terry Pratchett’s Discworld Series, which began in 1983. But it originated in The Ragged Trousered Philanthropists by Robert Tressell in 1914, in which the character Owen says: “This is how the working classes are robbed. Although their incomes are the lowest they are compelled to buy the most expensive articles – that is, the lowest-priced articles. Everybody knows good clothes, boots or furniture are really the cheapest in the end, although they cost more money at first; but the working classes can seldom or never afford to buy good things; they have to buy cheap rubbish which is dear at any price”. 

The Vimes Boots Index

Vimes ‘Boots’ theory states that the wealthy stay wealthy as they were able to spend less money. The theory uses the example of how a pair of good boots that would last for years and keep feet dry cost $50. However, Vimes earned $38 a month, so was only able to afford $10 boots, which would last a season or two before leaking and needing to be replaced. Those wealthy enough to afford $50 boots would therefore have to spend this amount just once over a 10-year period, while those without would in the long run spend hundreds of dollars on boots – and still have wet feet.

Although inflation is at near 30-year highs, prices in the real world do not reflect this reality for many. Food poverty campaigner and author Jack Monroe was compelled to speak out about it and started a Twitter thread that pointed out that the 5% inflation figure underestimated the impact of inflation on those with lower incomes. Monroe went on to list how in just a year, the price of many of the cheapest basic food items ranging from rice to beans to pasta had risen by up to 344%. However, while the cost of food staples for lower income households was soaring, upmarket ready meals, and specials had not increased in cost at all over the same period.

With the thread raising awareness of the severe disparities and bringing into question the accuracy of the inflation figure, Monroe is now working alongside economists, analysts and charities to compile The Vimes Boots Index to track the increasing prices of basic, everyday food products as an alternative way to measure inflation.

The information Monroe has shared is so stark that the ONS has already agreed to overhaul its cost of livings statistics, pledging to do more to capture the impact of rising prices across various income groups.

Social Progress Index

GDP is another index that regularly impacts investment decisions, from asset allocation to forecasting. While it has long been seen as an effective value, there have been increasing questions about whether it is fit for purpose. While GDP does serve as an indicator of a society’s standard of living, it fails to consider vital areas such as health, education, leisure, and wellbeing. GDP also completely ignores the environment, with countries with higher GDPs tending to also have higher greenhouse gas emissions. By continuing to prioritise the value, we are placing all attempts to combat climate change at risk.

The Social Progress Index instead measures more than 50 indicators to cover basic human needs, wellbeing, and opportunities to progress. The Index rigorously measures country performance on aspects of social and environmental performance that are relevant for countries at all levels of economic development and enables an assessment of not just absolute country performance but also relative performance compared to a countries economic peers.

Time for an alternative

Until the metrics being used to calculate inflation, measure our standards of living, and subsequently inform investment decisions are more reflective of society, we will as an industry continue to fall short, failing our ESG expectations.

So, my question to anyone who manages or invests claiming ESG credentials, is it time to consider alternatives to CPI, RPI and GDP? Should you be using the same datapoints as your boldly capitalist colleagues especially if you want your investment model to accurately factor in the impact on society?

While indexes such as GDP, CPI and RPI are uncontested and standard data points there are alternatives that give a more holistic and real picture of our societies. The Vimes Boots Index and Social Progress Index are just two that could help create more accurate modelling and ensure ‘S’ is being embedded.


Natasha Turner

Natasha is global editor at ESG Clarity, part of Mark Allen Financial, and has been a financial journalist for seven years. She has been shortlisted for Story of the Year and Investment Journalist of the...