1150 Seventeenth Street, N.W., Washington, D.C. 20036
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What does it mean to prosper? Is prosperity merely the accumulation of material wealth? French President Nicolas Sarkozy has remarked that measuring wealth by Gross Domestic Product alone fails to grasp the overall well-being of a population. Is this correct? Are more vacations and universal health care the real secret
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to a happy life? If not, what is? What explains the great divide in life satisfaction between Denmark and Hong Kong despite their seemingly equal levels of wealth? These questions and more are the subject of the 2009 Prosperity Index.
Developed by the Legatum Institute, an independent policy research organization, the Prosperity Index studies the nature of prosperity and how wealth is created. With the Index, Legatum Institute scholars and researchers hope to contribute to a holistic measurement and a better understanding of prosperity in the twenty-first century. Using a variety of factors including wealth, economic growth, subjective well-being, governance, and quality of life, this year's Index has been expanded significantly and now examines prosperity drivers and outcomes in more than 100 countries.
At this event, Legatum Institute senior vice president William Inboden and senior fellow Ryan Streeter will present the findings of the 2009 Prosperity Index. AEI president Arthur C. Brooks and Brookings Institution senior fellow Carol Graham will respond. Nicholas Eberstadt, AEI's Henry Wendt Scholar in Political Economy, will moderate.
| 10:00 a.m. |
Registration |
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| 10:15 | Introduction: |
Arthur C. Brooks, AEI |
| Presenters: | William Inboden, Legatum Institute |
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| Ryan Streeter, Legatum Institute |
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| Discussants: | Arthur C. Brooks, AEI |
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| Carol Graham, Brookings Institution |
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| Moderator: |
Nicholas Eberstadt, AEI |
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| 11:45 |
Adjournment |
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WASHINGTON, NOVEMBER 3, 2009--In 1968 Robert Kennedy lamented that Gross Domestic Product (GDP) "measures everything . . . except that which makes life worthwhile.” At AEI's November 3 event, "Accounting for Happiness: The 2009 Legatum Prosperity Index,” a panel of scholars from AEI, the Brookings Institution, and the Legatum Institute echoed this sentiment and discussed an alternative to GDP--the Prosperity Index--which attempts to provide a more holistic measure of a nation's prosperity, one that captures both objective and subjective levels of wealth and wellbeing. Legatum Institute senior vice president William Inboden and senior fellow Ryan Streeter presented the results of this year's 2009 Prosperity Index. One key finding was that the most prosperous nations in the world are not necessarily those with the highest GDP, but those with happy, healthy, and free citizens.
Unlike other studies that rank countries by actual levels of wealth, life satisfaction or development, Inboden and Streeter explain that "the Prosperity Index produces rankings based upon the very foundations of prosperity--those factors that help drive economic growth and produce happy citizens over the long term.” Using a combination of objective data and subjective survey results from 104 countries, the Index ranks countries based on their overall abilities to foster the nine drivers of prosperity: economic fundamentals, entrepreneurship and innovation, democratic institutions, education, health, safety and security, governance, personal freedom, and social capital.
Finland topped this year's Prosperity Index, followed by Switzerland, Sweden, Denmark, and Norway. The United States ranked ninth, with Australia, Canada, New Zealand, and the Netherlands rounding out the top ten, and large European countries, such as Britain, Germany, and France, among the top twenty.
To highlight that the Index focuses on the "drivers" of prosperity, as opposed to the outcomes, Legatum presenters Inboden and Streeter pointed to Iran and Costa Rica: the two countries are ranked very similarly in terms of GDP, with Iran slightly higher than Costa Rica. But regarding life satisfaction outcomes, Costa Rica is ranked 19th in the world and Iran 71st. But Iran is even further down in the overall rankings (94th) because of it performs so poorly on other key fundamentals, such as internal stability and satisfaction, while Costa Rica performs relatively well (32nd)--a success story for Costa Rica.
Among the key findings the presenters highlighted in the 2009 Index was the role that variables such as security, freedom, and governance play in determining or driving a nation's overall prosperity. These links can be seen throughout the rankings, but particularly by the performance of the BRIC countries (Brazil, Russia, India, and China) in the Index's overall rankings, where Brazil (41st) and India (45th) outpaced Russia (69th) and China (75th). Just looking at the economic sub-indexes, they are similarly ranked; but when other factors key to a flourishing society are taken into account, such as social capital, governance, and personal freedom, Brazil and India perform better than China and Russia in the Index overall.
While the rankings alone have already received a great deal of attention from the media, both AEI President Arthur Brooks and Brookings Institution senior fellow Carol Graham pointed out that the rankings actually tell us a lot less than the extensive data that went into the making of the Index itself and which is now available for users at Prosperity.com. To arrive at their data, the makers of the Index tested over two-hundred variables to see which ones had correlations with growth or happiness, which produced a number of interesting correlations for future exploration by researchers.
While on the whole both discussants praised the Legatum Institute for its attempt to create a measurement of prosperity based on both objective and subjective indicators, Graham offered several points of caution about subjective data. One is that in measuring a populations' well-being , there can be large disparity in the data between people's perceptions versus their actual lived conditions. This is often due to what Graham calls the adaptation paradox, in which people who live in relatively poor conditions often report to be happy because they have adapted to bad conditions. This is visible in the Index's objective health data (number of hospitals, doctors, accessibility of health services, etc), where the United States ranks among the top fifteen in the world. Yet subjective data reflects Americans' reporting poor health, resulting in a rank of 50th or 60th in the world. In contrast, India, which does not perform well on objective health indicators, performs very well on subjective health indicators. This is because Indians have a different frame of reference regarding health. The adaption paradox is also visible in data that shows the same percent of Kenyans and Americans as satisfied with their individual health, yet many know that the objective indicators in the two countries are completely different.
Brooks agreed with Graham about the difficulties involved in measuring subjective well-being, touching on both his own and others' research on happiness, which suggests that, after a certain point, the rich get richer but not happier per se; Brooks calls this the "money doesn't buy happiness” paradox, and Graham the "happy peasant versus the miserable millionaire” paradox. Instead, Brooks used the strong correlation in the 2009 Index's data between levels of entrepreneurship in a country and its overall prosperity ranking to support the finding in his own research that it is actually earned success, not money, which drives happiness and therefore prosperity within a country. Bringing the discussion home, he suggested that this data supports the idea that free enterprise is a relatively important thing for prosperity, at least in the United States, because "if earned success brings happiness, than forcing equality does not spread around success, it merely spreads around money and it also lowers the incentive to earn success.” Brooks also posited that the free enterprise system tends to be a very good system for bringing the most human flourishing to other countries.
The 2009 Prosperity Index has generated ample new data and information for policymakers to analyze and consider. As the presenters acknowledged, the Index is not a policy prescription in and of itself, nor was it meant to be. Instead, the creators of the Index offer its database as a valuable resource for scholars, policymakers, and citizens alike in thinking about the factors that will drive prosperity within their own nations. At the end of the day, all conference participants agreed that the Index is likely to feature as a key source of data for policymakers and has the potential to shape future policy discussions around the world.
-- EMILY PUTZE and MEGAN MORAN
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Speaker biographies
Arthur C. Brooks is the president of AEI. Until January 1, 2009, he was the Louis A. Bantle Professor of Business and Government Policy at Syracuse University's Maxwell School of Citizenship and Public Affairs. He is the author of Who Really Cares (Basic Books, 2006), which examines American charitable giving; Gross National Happiness: Why Happiness Matters for America--and How We Can Get More of It (Basic Books, 2008); and a textbook on social entrepreneurship.
Nicholas Eberstadt is the Henry Wendt Scholar in Political Economy at AEI. A political economist and a demographer by training, he is also a senior adviser to the National Board of Asian Research, a member of the visiting committee at the Harvard School of Public Health, and a member of the Global Leadership Council at the World Economic Forum. He researches and writes extensively on economic development, foreign aid, global health, demographics, and poverty. He is the author of numerous monographs and articles on North and South Korea, East Asia, and countries of the former Soviet Union. His books range from The End of North Korea (AEI Press, 1999) to The Poverty of the Poverty Rate (AEI Press, 2008).
Carol Graham is a senior fellow and the Charles Robinson Chair at the Brookings Institution and College Park Professor at the School of Public Policy at the University of Maryland. She is the author of Happiness around the World: The Paradox of Happy Peasants and Miserable Millionaires (Oxford University Press, forthcoming), among other publications. She is also the author of articles in journals including the Journal of Socio-Economics, World Economics, Foreign Affairs, Journal of Development Studies, World Development, and the Journal of Happiness Studies, and of numerous chapters in edited volumes, including, most recently, in the New Palgrave Dictionary of Economics (Palgrave MacMillan, 2008). Graham served as vice president and director of governance studies at Brookings from 2002 to 2004. She has served as a special adviser to the deputy managing director of the International Monetary Fund and has been a consultant at the Inter-American Development Bank, the World Bank, United Nations Development Program, and the Harvard Institute for International Development.
William Inboden is senior vice president of the Legatum Institute. Most recently he served as senior director for strategic planning on the National Security Council at the White House, where he worked on a range of foreign policy issues including the National Security Strategy, democracy and governance, contingency planning, counterradicalization, and multilateral institutions and initiatives. Before working in the Bush administration, Mr. Inboden worked at the Department of State as a member of the policy planning staff and a special adviser in the Office of International Religious Freedom. He is a regular contributor to Foreign Policy's Shadow Government. Mr. Inboden was also a Civitas Fellow at AEI and has worked as a staff member in both the United States Senate and the House of Representatives. He has lectured widely in academic and policy settings and received numerous research and professional development fellowships. He is the author of Religion and American Foreign Policy, 1945–1960: The Soul of Containment (Cambridge University Press, 2008).
Ryan Streeter is a senior fellow at the London-based Legatum Institute. He writes about and researches a range of issues related to socioeconomic mobility, private-sector solutions to public problems, and the nature of civil society. Prior to joining the Legatum Institute, he was vice president of Civic Enterprises, a public policy development firm in Washington, D.C., where he provided a wide range of research, analysis, and public communication services to a diverse group of clients such as the Bill & Melinda Gates Foundation, the United States Chamber of Commerce, the Heritage Foundation, the Urban Land Institute, and others. Previously, Mr. Streeter worked in the White House as a special assistant for domestic policy to former president George W. Bush, where he managed the development policy on a range of issues such as poverty, civil society, global health, housing, human services, and health care. He has served in other national and local government positions and was a fellow for three years at the Hudson Institute. Mr. Streeter is the editor, coauthor, and author of four books, including Transforming Charity: Toward a Results-oriented Social Sector (Hudson Institute, 2001), and he has published numerous articles.
