Here is a new Lancet paper by Stephen S. Lim, et.al., via the excellent Charles Klingman. Finland is first, the United States is #27, and China and Russia are #44 and #49 respectively. There is plenty of “rigor” in the paper, but I say this is a good example of what is wrong with the social sciences and more specifically the publication process. The correct answer is a weighted average of the median, the average, the high peaks, and a country’s ability to innovate, part of which depends upon the market size a person has in his or her sights. So in reality the United States is number one, and China and Russia should both rank much higher (Cuba and Brunei beat them out, for instance, Cuba at #41, Brunei at #29). And does it really make sense to put North Korea (#113) between Ecuador and Egypt? I’m fine with Finland being in the top fifteen, but I am not even sure it beats Sweden. Overall the paper would do better by simply measuring non-natural resource-based per capita gdp, though of course that could be improved upon too.
I think the paper is fine. It seeks to measure human capital, using indicators of health and educational attainment, whereas Tyler seems to be looking for a measure of all intangible assets. Other intangible assets include skills acquired on the job, social norms, and institutions. One certainly can make a case that human capital includes job skills, but social norms and institutions fall in a different category.
If we look at human capital per person, then it strikes me as plausible that Finland is far ahead of the U.S. We make up for it with social norms that encourage successful risk-taking and with institutions like venture capital and deep capital markets in general. Suppose Cuba and China had governments that were equally inclined to tolerate markets. Would you bet against Cuba having higher per capita GDP than China? I wouldn’t. That bottom third of China’s population has got to be a real drag.
Norms and institutions matter. That is why average human capital is not a sufficient statistic to describe a nation’s intangible wealth. But average human capital is nonetheless worth trying to measure.
I would definitely bet against Cuba in comparison with China. The bottom third of every country’s population has got to be a real drag – Finland included. Why would Cuba’s be better than China’s?
It seems reasonable as a first-order guess to expect convergence to similar neighbors. So, I expect China to converge to its more fully-developed Northeast Asian neighbors like Taiwan, Japan, and South Korea (or maybe even Chinese-dominated Singapore), which are all in the top 30 (depending on how you want to measure per-capita GDP), while Cuba would converge to the better-off Latin American countries, which don’t break the top 50.
I wouldn’t underestimate the strength of Finland’s social norms when it comes to self sufficiency, personal autonomy, and entrepreneurship. While we think of Finland as a fairly “leftist” country, the cultural interpretation of “left” does not appear to be at all the same was what we in the US think of as “left” (in essence, institutionalized, legally enforced large-scale codependency).
Norms and institutions can sink a nation if they are REALLY bad. Like North Korea or Maoist China. Once we get out of the really bad category into “any sort of non-totalitarian mixed market economy” innate human capital is by far the most important factor.
Milton Freedman once remarked that Scandavians in America don’t have much poverty either despite the different less leftist economic system in America. I think basically any run of the mill society, whether it has 20% tax rates or 50%, pretty much ends up “first world place I’d like to live” if it has sufficient genetic human capital. And really, that’s all we care about.
If it doesn’t have the genetic capital then it ranges from middle income trap (think mediocre Latin American country and its slums) to total third world hellhole (Africa, Haiti). Usually with genetic human capital being a good barometer of where you end up on the third world scale in aggregate over time.
“African hell-holes” tend to vary. The best three countries traditionally in a lot of indicators have been Botswana, Senegal, and (perhaps not “really” African) Mauritius. They aren’t Denmark, but they don’t resemble Haiti either.
Ghana tends to be “chill”–historically the richest country West Africa for at least 100 years until petroleum changed the rankings. Ghana has gone through rough patches and it’s far from perfect, but I don’t see why you would class it with Somalia or Central African Republic.
In Africa “bigness” is actually a problem. In _Big African states_ the editor noticed that the biggest African states had more problems. None seemed to be well governed and on an especially healthy long term trajectory.
We can’t reduce things to one or two variables.
I would not deny that Ghana people may be genetically different from (say) Somalis. Empirical question that is beyond me. Disclosure: I have never been to either Ghana or Somalia. I did live among the Yoruba for a year in Nigeria, and that’s the African group I know best.
There is something to be said for looking at how diasporas do abroad. Somewhere Greg Cochrane wrote at his blog “The diasporas track.” Probably in his blog entry “Our Dumb World.” That is to say, you probably won’t find a country on the planet where the Chinese immigrants are bootblacks and street sweepers while the African immigrants are all engineers.
People were saying this about the Chinese 150 years ago–there were prosperous communities of Chinese immigrants in many parts of the world–but China was chaotic and poorly governed. To judge the potential of the Chinese (back then) you had to get them out of China first.
As is usually the case in the social sciences, we just have too many variables, too few controls, too few natural experiments, too many taboos, too much confirmation bias, too much well intentioned lying, obfuscation, and factual claims made by people not qualified to make them. And not enough data, either.
The third world has its ups and downs.
Sometimes you get a stable regime, sometimes you don’t. Over a long enough timescale its probably safe to call things “generally unstable with ups and downs.”
When commodity prices are up they are the future of the world and when they are down nobody talks like that anymore.
The bottom line is that they tend towards an average performance that none of us would actually want to live in.
Smaller countries can more easily become outliers. You get good outliers and bad outliers. They also can sometimes by the magnet of a specialized industry (example: trading HUB, massive natural resource wealth, tax haven). Its not always indicative of something that could be scaled beyond that small population.
They also tend to have very high Gini coefficients. So you’ll have some really productive sector (say, resource extraction or tax haven accounting) where high IQ foreigners do the high value add stuff, and the general populace is kind of there but useless.
China 150 years ago was a chaotic mess. As I noted, if you are a total chaotic mess then indeed that can hold you back. Full retard politics can overwhelm the most worth peoples. But not forever.
“Norms and institutions matter.”
Yes.
Finland gives much higher status to entrepreneurs than does either Sweden or the United States according to the Global Entrepreneurship annual reports provide comparable data across 65 countries on attitudes toward entrepreneurship, start-up and established business activities, and aspirations of entrepreneurs for their businesses. Not to go all Dierdre McClosesky, but when entrepreneurs are respected, or at least tolerated, their human capital is more likely to get expressed in relatively higher GDP figures. Finland is the most sparsely populated country in Europe and only has 8% of its population foreign born. Finland’s top personal income tax rate is 31.2% compared to 37.7% in the US. On the World Intellectual Property Organization’s Global Innovation Index, the US is ranked 6th and Finland 7th.
In addition, when considering higher education as a component of human capital, not all years of education or equivalent either. Finland’s universities tend to embrace the Humboldtian model (after Wilhelm von Humboldt) which integrates the arts and sciences with research to achieve both comprehensive general learning and cultural knowledge. Accordingly, the list of masters degrees one sees on offer at a Finnish university is a tiny fraction of the vast number of trade-school equivalent programs offered at a typical US university, where each one more narrowly focused and quickly outdated than the next. And note too that Finland is highly regarded with respect to implementing innovations in education.
Finland ranks #3 on the World Justice Project’s Rule of Law Index compared to Sweden at #4 and the US at #19.
No, I don’t think Tyler Cowen is correct. The US is not at the top of anything. When considering all human-capital related intangible assets, the US would again come up short.
The study being published in The Lancet, of course one would expect health indicators to be of paramount concern in assessing human capital. Mission creep and all that. The study doesn’t mention it, preferring to present their index as something unprecedented, but it is worth noting that the World Economic Forum also has human capital index and has been publishing annual reports with international rankings for some time now.
The WEF human capital index agglomerates 21 measures in the areas of capacity, deployment, development and know-how. Interestingly, as to the Tyler Cowen discussion, anyway, Finland comes out number 2 behind Norway, with the United States 4 and Sweden 8 in the 2017 report.
Finland comes in first and second in development and kn0w-how respectively and know respectively but is pulled down by a 68 ranking in deployment. The highest the US gets is 4 in development.
This is interesting because Finland famously has free higher education for anyone accepted, including foreigners. The World Education Forum has also ranked Finland #1 for higher education despite only the University of Helsinki being ranked among the top 100 universities. The WEF observes:
“Even though a majority of globally-ranked universities are there, only a fraction of Americans attend its elite universities. The majority of US universities are not globally ranked. In fact, just 3% of its universities are ranked in the global top 200; 5% are in the global top 500; and 8% are in the global top 1,000 (placing it 13th, 21st, and 22nd, respectively). That is, the average tertiary student in the USA is not attending a globally-competitive school. American higher education is delivering for the elite but not for the masses. ”
Moreover 43% of Finnish high school graduates go to vocational training programs rather than university and Finland spends 30 percent less per student than the US.
Unfortunately it looks like the days of free higher sub-standard education will soon be upon the US. And it is easy to see that with the clout of the education lobby with its many pundits moonlighting in journalism, that there is absolutely zero likelihood of any reform or improvement to the US’s third rate money pit colleges and universities.
I would call this the small nation is easier to go up higher on the charts! Finland has ~1/63 the population size. A baseball player can hit .400 for a two week period quite regularly versus nobody has hit .400 in a season since 1941. Maybe we should compare Finland to Minnesota (comparable population size) and I bet the Minnesota would increase here closer to Finland. How about the listings of the most competitive nation in the world. No surprise it is Singapore and Hong Kong both city/nations with limited number of residents. Or where does the US rank among nations of percent of economy (GDP) comes from trade. The US ends up well below most European nations.