A British think tank aims to popularize a measure of economic prosperity that goes beyond simple economic output and takes into account the overall well-being of nations.
The Legatum Institute's Prosperity Index is one example of a new trend on the Right to employ emotional or moral language in its defense of economic enterprise, in terms that borrow as much from the vocabulary of Robert F. Kennedy as from Milton Friedman.
"It's an emotionally intelligent tool," said Cristina Odone, a spokeswoman for the London-based Legatum, which has an international profile.
Odone and other Legatum representatives arrived in Washington this week to introduce the index, now in its sixth edition, to a U.S. audience. The index includes not only conventional indicators of economic strength, but also metrics that correlate with self-reported happiness. Overall, the index is intended to capture well-being in a larger sense, not just in narrow commercial terms.
Norway is the world’s most prosperous nation, based on the Index’s rankings, thanks to its strong showing on economic indicators but even more so on measures of social capital, health and education. The U.S. places 10th, and the U.K. 13th, behind Nordic and Anglophone countries, with some African and Middle Eastern countries bringing up the rear.
Part of what earned Norway its top spot was its performance in variables such as the number of people who volunteer regularly or give to charity, and the percentage of citizens who say they feel safe walking alone at night. None of those variables would enter into the country’s gross domestic product calculation, but all correlate with well-being, as reported by respondents in Gallup’s worldwide poll.
Novella Bottini, an econometrician for the Legatum Institute, acknowledged that the index inevitably involves subjective judgments about what to include, unlike GDP. GDP is generally viewed as an appropriate way to measure living standards across countries because it is simply a measure of total spending based on market prices, leaving no room for subjectivity.
The goal is to have “a very wide view of what’s going on beyond gross domestic product,” while still recognizing the value of a purely market-based measures, Bottini said.
Using the index, Bottini added, allows readers to see how growth translates into good governance and happiness, rather than just greater GDP. She referred to an episode earlier this year when Italy moved to include prostitution and illicit drug sales in its GDP figures to meet its European Union target deficits.
Bottini’s critique echoes that of the revered liberal RFK, who issued a searing condemnation of over-reliance on national output statistics in 1968, noting that they counted a laundry list of undesirable spending items, but did not “allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials.”
Kennedy said then that national output statistics measure “neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile. And it can tell us everything about America except why we are proud that we are Americans.”
Criticisms of GDP have generally come from the Left, especially in recent years with the development of “green GDP” measures intended to capture the environmental sustainability of countries’ economic production.
Legatum’s index does capture some measures of environmental sustainability (and they say they’re looking to improve that aspect of the index), but the environment is not one of the eight sub-indices it looks at. Instead, the index better captures countries’ ability to offer freedom and strong civil society.
In that sense, it is similar to the Index of Economic Freedom, published by the Heritage Foundation, a conservative think tank in Washington that has been ranking all the world’s nations for nearly two decades.
But it also mirrors the attempt by U.S. conservatives such as Arthur Brooks, the president of the American Enterprise Institute, who in a 2008 book, Gross National Happiness, argued that some measures of well-being could augment economic statistics in informing policy.
That is why Legatum’s index includes variables on the rule of law, religiosity, availability of school for girls, and inclusion of ethnic minorities. Each one is subjectively included, acknowledges Legatum’s Odone, but that doesn’t have to mean it’s the end of the discussion. “What we want to do is spark a little conversation,” she said.