Commensuration and policy comparison: How the use of standardized indicators affects the rankings of pension systems

Abstract
This article presents an analysis of the process of commensuration in the field of pension policy. It looks at the consequences of reducing disparate and variable characteristics of pension systems to a limited set of standardized policy indicators. Although techniques of scoring complex systems through common indicators are applied today in fields as diverse as scientific research, human resources management and international development, this article is the first to examine the process of commensuration in the field of pensions.

The empirical analysis looks at three cases where international institutions use standardized pension indicators to score and rank the performance of national pension systems. The first case examines the use of replacement rates in the international benchmarking of pension systems. We then focus on how rankings diverge considerably depending upon which function of the pension system is under assessment. Finally, we discuss how the public–private mix of a pension system affects the ranking of pension adequacy due to the way in which second and third pillar pensions are measured. The cases illustrate some of the problems associated with scoring and ranking the outcomes of unique and complex pension systems by means of internationally standardized indicators.