Our Approach · PRICI
Measure how capital is used.
Reward productive investment.
PRICI — the Price Restraint and Investment Compliance Index — is a proposed, rules-based way to measure whether companies are balancing pricing, shareholder payouts and investment, using published data.
Why a Rules-Based Measure
Designed to complement existing policy
Case-by-case tools
- Grants, tax reliefs and targeted programmes
- Competition investigations
- Periodic policy reviews
These remain essential, but they can be slow to design and hard for firms to predict over the long term.
A consistent, published yardstick
- The same formula applied to every firm in a sector
- Compares firms with their peers, not an absolute standard
- Based on audited accounts, so it can be checked
- Predictable enough for firms to plan around
The aim is to make productive investment the clearly rewarded choice, while leaving decisions with firms.
The Formula
Three components, one score
Price growth compared with the sector median.
Dividends and buybacks relative to sustainable earnings, averaged over three years.
Verified investment in equipment, R&D and median wages. More investment lowers the score.
Reading a score — lower is better
These thresholds are proposals for calibration and testing. PRICI-Lite switches in automatically during sustained low inflation, so that competitive pricing is never penalised.
What It Looks At
Four issues the literature highlights
Pricing power
Looks at price rises relative to sector peers.
- Higher prices are not penalised where matched by investment
- Avoids rigid price controls
Short-termism
Looks at payouts relative to sustainable earnings.
- Three-year averaging reduces timing effects
- Payouts are fine when balanced by investment
Wage growth
Gives credit for median-wage increases.
- Focuses on typical employees, not executive pay
- Weighting can be calibrated by sector
Slow diffusion of innovation
Encourages gains to be shared through prices, investment or wages.
- Rewards genuine investment
- Designed to discourage purely financial engineering
Who Could Benefit
Designed to work for several groups
The wider economy
- More capital directed to investment and wages
- Clearer data on where capital is going
Businesses
- Clear, published rules
- Recognition for firms that already invest well
- No new reporting — uses existing accounts
Policymakers
- A transparent evidence base
- Can sit alongside existing institutions
- Phased, reviewable implementation
Worked Examples
Illustrations of how the approach works
These examples show the method in action. They are illustrations, not proof — the planned back-test is the real test.
A modelled scenario for Spain
A simulation looking at services inflation and slowing investment, with tighter price thresholds in tourism and hospitality and more weight on median wages. Modelled results against baseline:
Results depend on model assumptions and have not yet been independently tested.
Two UK retailers
Two firms in a similar sector, over the same period, with contrasting choices.
Large distributions to owners while pay lagged sector peers.
Paused distributions and raised staff pay.
Standard financial measures such as profit margins did not distinguish clearly between these two patterns. That is the gap PRICI is designed to fill.
Scope
What PRICI is — and is not
- Price controls
- A ban on dividends or buybacks
- A replacement for competition policy
- A judgement on individual business models
- A measurement framework based on public data
- A way to compare firms with their peers
- A possible basis for incentives, if tested and adopted
- Open to scrutiny and recalibration
Where PRICI Sits
Part of a wider framework
PRICI is the practical measurement tool within Transmission Economics, which looks at how efficiently capital flows through institutions.
Iterative Resilience Theory
Why societies tend to grow when institutions allow it.
Resistive Capital Gradient
How friction affects where capital goes: F = P · ΔR · G.
The PRICI suite
PRICI, PRICI-Lite, PRICI-P and the Macro-Impedance Audit.
Next Step
The framework is published. The next step is to test it — and we would welcome help from researchers, officials and practitioners.