Article 201411192113: LI publishes The prosperity index

The Legatum Institute

LI publishes The prosperity index

ID: 201411192113

Is a nation’s prosperity defined solely by its GDP? Prosperity is more than just the accumulation of material wealth, it is also the joy of everyday life and the prospect of an even better life in the future. This is true for individuals as well as nations. The Prosperity Index is a global measurement of prosperity based on both income and wellbeing.

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The econometric analysis of LI has identified 89 variables, which are spread across eight sub-indices:

1) Economy;

2) Governance;

3) Entrepreneurship & Opportunity;

4) Education;

5) Health;

6) Personal freedom;

7) Safety & Security;

8) Sociale Capital & Social Values.
Each of the 8 variables are subdivided in two: 1) having an effect on income 2) having an impact on wellbeing.

The sociological data were mainly retrieved from the Gallup World Poll.

Methodology for income and wellbeing scores. For each country, the latest data available in 2013 were gathered for the 89 variables. The raw values are standardised and multiplied by the weights. The weighted variable values are then summed to produce a country’s wellbeing and income score in each sub-index. The income and wellbeing scores are then standardised so that they can be compared.

Critical note LT: a) What we miss in the Prosperity Index is some kind of measurement of inequality and the measured effect of taxes on income redistribution (e.g. Gini before and after taxation). b) The GDP/capita is not critisized by Legatum Institute for being a variable not taking into account inequality.

Land: INT