Legatum Institute’s Impressionistic 2015 Prosperity Index — Implies that the United States May Not Be Exceptionally Great — but — We Are Still Pretty Good

© 2015 Peter Free

 

03 November 2015

 

 

Citation — to the source of the following rankings

 

Legatum Institute, 2015 Legatum Prosperity Index, li.com (02 November 2015) (PDF here)

 

 

What is the Legatum Institute?

 

From its website:

 

 

The Legatum Institute is an international think tank and educational charity focused on promoting prosperity. We do this by researching our core themes of revitalising capitalism and democracy. The Legatum Prosperity Index™, our signature publication, ranks 142 countries in terms of wealth and wellbeing.

 

Through research programmes including Vision of Capitalism, The Culture of Prosperity, Transitions Forum, and the Economics of Prosperity, the Institute seeks to understand what drives and restrains national success and individual flourishing. The Institute co-publishes with Foreign Policy magazine, the Democracy Lab, whose on-the-ground journalists report on political transitions around the world.

 

The Legatum Institute is based in London.

 

© 2015 Legatum Institute, About the Legatum Institute, li.com (2015)

 

 

How does the United States rate?

 

As ranked by the 2015 Prosperity Index, the United States is:

 

1st in health

 

9th in education

 

11th in economy, entrepreneurship & opportunity, governance, and social capital

 

15th in personal freedom

 

33rd in safety and security

 

 

I imagine that many Americans will be surprised that . . .

 

We rank a bit down from the top in:

 

 

entrepreneurship-opportunity,

 

personal freedom,

 

and

 

safety-security.

 

But on balance, the US does well, except in the safety category.

 

Of course, we already knew that walking around “good guy gunless” is not smart. The Second Amendment keeps us safe. Right?

 

 

More seriously — and only for the few readers who care how these rankings get generated

 

The methodologies underlying ranked lists are often problematic.

 

To check those used in the Legatum Index, I noticed that the Institute explains that its 2015 methods go back to 2013. And in looking at the pertinent publication from 2013, I saw that the Index evaluates the following conceptually imprecise factors — here listed with my mildly snarky comments italicized inside brackets:

 

 

(1) Economy

 

capital per worker

[How do we screen for productively-relevant — as opposed to looks good, but does nothing — capital?]

 

market size

[Imagine the problems associated with defining this variable’s applicability.]

 

high-tech exports

[Why wouldn’t the ability to pay for high-tech imports count just as much?]

 

gross domestic savings

 

unemployment

 

non-performing loans

[Although apparently here used as an indicator of a poorly performing economy, doesn’t this factor work in reverse according to government’s willingness to bail its non-performers out? For example, the US’s oligarchic response to the 2008 recession.]

 

inflation

 

FDI [foreign direct investment] size and volatility

 

satisfaction with living standard

[Is anyone ever satisfied?]

 

adequate food and shelter

[How does one reliably define this across the spectrum of disparate economic development?]

 

perceived job availability

[How do we standardize volatile perceptions across cultures?]

 

gross domestic savings

 

expectations of the economy

[How’s that for defining something almost innately not comparable across societies?]

 

employed

[Is this a percentage and how reliable is the data?]

 

confidence in financial institutions

[Another inherently inaccurate quantity.]

 

5-year rate of growth

[How is this meaningfully relevant across the continuum of immature to mature economies?]

 

(2) Entrepreneurship and opportunity

 

business start-up costs

[Absolute or standardized according to relative wealth?]

 

secure internet servers

[Without testing, no one knows what is secure. This is more a perception than an actuality.]

 

R&D expenditure

 

internet bandwidth

 

uneven economic development

[How is this normalized, so as to avoid meaninglessness in our results within or across societies?]

 

mobile phones

 

mobile phones per household

[How do these two indices avoid conflating sheer cell numbers with the economic efficiency of their use?]

 

royalty receipts

[Why pick this one facet from among so many others?]

 

ICT [information and communication technology goods] exports

[This measure does not necessarily equate with actual economic advancement.]

 

working hard gets you ahead

[How does one measure this immeasurable in even a minimally meaningful way?]

 

environment for entrepreneurship

[What are the cross-culturally pertinent parameters that define this?]

 

(3) Governance

 

government stability

[Can we reliably compare the benefits of stable autocracy versus chaotic democracy, or vice versa?]

 

government effectiveness

[Against which cultural standards?]

 

rule of law

[I might cynically ask what this even means — again thinking of the oligarchic United States.]

 

regulation

[How do we define too “minimum” versus too “much”?]

 

separation of powers

[Why is this necessarily a good thing, and how do we quantify it?]

 

political rights

[This probably would have been better conceptualized as “meaningful input to governance.”]

 

government type

[A category that invites bias.]

 

political constraints

[What are “constraints” and why are they automatically relevant to prosperity, however defined?]

 

efforts to address poverty

[When does poverty become worrisome, and what do “efforts” against it mean?]

 

confidence in the judicial system

 

business and government corruption

 

environmental preservation

[Why is this necessarily a benefit, especially in the short run? Not one developed economy preserved its environment while building its economic base.]

 

government approval

[How does one get an honest answer to this question across the board?]

 

voiced concern

[How does formulation differ from “government approval”?]

 

confidence in military

[This is a can of not necessarily productive worms.]

 

confidence in honesty of elections

 

(4) Education

 

net primary enrollment

[Why is this category “net” and those that follow, gross?]

 

gross secondary enrollment

 

gross tertiary enrollment

 

pupils to teacher ratio

 

girls to boys enrollment

 

satisfaction with educational quality

[Wouldn’t the apparent economic utility of the education — as assessed by “experts” — be more relevant?]

 

perception that children are learning in society

[How do we compare perceptions of “learning” between religious and secular societies? I imagine the Taliban is well satisfied with its madrassas.]

 

secondary education per worker

[This is only loosely pertinent, depending upon the nature of the economy.]

 

tertiary education per worker

[This is too broad an educational category to be meaningfully relevant to most advanced economies — the US, for example, has arguably too many uselessly educated advanced degree holders.]

 

(5) Health

 

infant mortality rate

 

life expectancy

 

immunization against infectious diseases

 

immunization rate

[Why two categories for immunizations?]

 

hospital beds

 

health expenditure per person

[This rewards inefficiency in expenditures.]

 

diseases

 

incidence of TB

[Why is TB singled out from so many other potentially relevant competing indices?]

 

undernourishment

 

measles

[Why just measles?]

 

satisfaction with health

 

level of worrying

[Measuring this how?]

 

satisfaction with environmental beauty

[Whose satisfaction? I can see that being a tourist destination is economically helpful, but I am not sure that a public’s satisfaction with environmental beauty takes precedence over everything else that it might be concerned about.]

 

water quality

[Why not air, soil, or weather quality as well?]

 

health-adjusted life expectancy (HALE)

 

sanitation

 

death from respiratory diseases

[An indirect and fractionally partial measure of air quality.]

 

undernourishment

 

well-rested

[We’re groping here.]

 

health problems

 

(6) Safety and security

 

group grievances

[This deceptively rewards homogeneous societies without a conceptual justification for doing so.]

 

refugees and internally displaced persons

 

state sponsored political violence

 

theft

 

assault

 

safe walking alone at night

[I’m sure that the American FBI and the People’s Republic of the Congo both keep track of this category.]

 

express political opinion without fear

[Justified fear?]

 

demographic instability

[How does one define this mathematically?]

 

human flight

[How is this different than refugees and displaced persons?]

 

civil war

 

(7) Personal freedom

 

tolerance for immigrants

[Why is this necessarily a positive, when it comes to “preserving” already successfully operating societies? Whose personal freedom are we addressing?]

 

tolerance for minorities

[Same conceptual objection — whose freedoms are we evaluating?]

 

civil liberty and free choice

[What is freedom of choice outside the USA, where choice has narrowed to the perceived right to abort pregnancy?]

 

satisfaction with freedom of choice

[Which choice and how explained and measured?]

 

(8) Social capital

 

reliability of others

[This is a perception and not an especially measureable interpersonal quality.]

 

trust others

 

volunteering

 

helping strangers

[How does one quantify, or even describe this parameter?]

 

donations

 

marriage

[Why is this implicitly a good, especially in societies with a lot of marriage but riven by divorce (or annulments) and marital disharmony?]

 

religious attendance

[A sop to medievalists?]

 

 

The moral? — Rankings like this are inherently impressionistic

 

The Prosperity Index’s northern European slant is inescapable. See its top 10 here.

 

However, imprecision and arguable bias do not necessarily mean that the ratings are incorrect. Living temporarily in Western Europe, I can certainly see why the ten come out where they did. On the other hand, I think that the United States did pretty well.

 

In an otherwise comparable ranking that takes more account of economic inequality and social safety nets, we probably would not compete so respectably.