There's a New Country Ranking and You're Not Going to Like it
(See reader questions on this post and my answers here)
I've finally figured out how to rank which countries are best; here's a preview of the top 3:
- Israel
- Qatar
- Faroe Islands
If you're not upset, you're probably at least confused. But trust the numbers, I arrived at them through the Baby Money Index (BMI).[1]
GDP per Capita Eats Everything
To explain why this index is best, let's first talk about other attempts at rating national success.
The UN does this with the Human Development Index (HDI), which calculates the geometric mean of sub-indices in health, wealth, and education.
Using this fancy equation, you can determine that Germany (HDI 0.95) is doing better than Zimbabwe (HDI 0.55).
However, if you ignore all that math and only look at a single income indicator like GDP per capita, you get nearly the same ranking! HDI and GDP per capita correlate very strongly at 0.8.
Similarly, life expectancy, years of schooling, and life satisfaction (sorry Bhutan) all correlate with GDP per capita.
If all the stuff you care about correlates with GDP per capita, you can just measure that alone to figure out how well a country is doing. Additional metrics add comparatively little information.
Does anything good not positively correlate with GDP?
Crime
An important metric that appears to have no correlation with GDP is crime, but upon closer inspection, it may just be reporting bias. Poorer countries have less state capacity and, therefore, less ability to detect and report crime. If you look at crime victimization surveys, they do appear to show crime rates which largely correspond with income levels.
Environmental Impact
Sustainability is also valuable, but energy use per capita is just as strongly correlated with wealth. There are no examples of countries being low-energy and rich, and since GDP correlates with everything good, you'll have to devalue everything else to be a low-energy-use country.
You might propose at least using cleaner energy, but carbon intensity (the amount of carbon released per kilowatt-hour of energy) is also negatively correlated with GDP per capita. Richer countries use cleaner energy, so it’s just another case of richer is better.
Total Fertility Rate – i.e. Babies
Total Fertility Rate (TFR) is the average number of children per woman and "replacement level fertility" is typically 2.1 children per woman.
It’s the last important metric that’s not positively correlated with GDP because it's moderately (~0.6) negatively correlated.
For a long time, this was considered a good thing; if you made a place richer, you got the added benefit of reducing the fertility rate. This would result in a reduction in the number of children and, therefore, an improvement in the dependency ratio.
However, if you reduce the fertility rate too far, you'll again wind up with an unfavorable dependency ratio due to too many older retired people relative to the working population.
A high dependency ratio means worker productivity gains get counteracted by fewer people working, and GDP per capita suffers. Japan's economy hasn't meaningfully grown in three decades, despite robust productivity growth, likely because of unfavorable demographic shifts.
The Two Metrics That Matter
GDP per capita clearly matters if anything matters at all. I also happen to think that fertility matters, because people existing is good. However, even if you just care about life quality over quantity, Japan shows that aging populations eventually diminish quality of life.
If the only two uncorrelated metrics that matter are a country's GDP and fertility, how should we rate them? I propose the Baby Money Index, which is the income per capita multiplied by the fertility rate squared.[2]
Gross National Income per capita (PPP) is used instead of GDP because it better controls income distortions in a few tax-haven and oil-exporting countries (HDI makes the same choice for presumably similar reasons). The two figures otherwise are very close though, and overall correlate at 0.99.
The fertility rate is squared because of its compounding effect. To know what society will look like when today's young are grandparents, take the number of children they're likely to have, multiplied by the number of children their kids are likely to have, effectively squaring the TFR.
Fertility squared is the expected number of grandchildren at current levels and does a good job of appropriately weighting the knock-on effects of fertility rates.[3]
Chads and kiloChads
The Baby Money Index's units are children per woman squared times international dollars, but that's a mouthful, so let's say children and dollars, or Chads for short.[4] Currently BMI’s are in the 5-6 figures, so for ease, we'll use kiloChads or kC. Below is an interactive map of the results:
The top 10:
- Israel - 432 kiloChads
- Qatar - 371 kC
- Faroe Islands - 331 kC
- Saudi Arabia - 313 kC
- Kazakhstan - 302 kC
- Kuwait - 281 kC
- Ireland 278 kC
- Oman - 262 kC
- Norway - 255 kC
- Brunei - 252 kC
(Here is the ranking of all 239 countries/regions, along with GNIs and TFRs)
With the exception of Israel and the Faroe Islands, the top 10 places are either oil/gas-rich or tax havens. It does go to show how difficult it is for typical economies to maintain high incomes and high fertility simultaneously.
However (to the relief of the modern reader), other Nordics also do very well with Denmark (#18), Iceland (#22), and Sweden (#29) all in the top 30. Finland (#65) fairs less well due to its abysmal fertility rate of 1.32.
The two largest nations, India (#213) and China (#223) do surprisingly poorly and perhaps should make us rethink any future east-west power realignment.
Other notable laggards are South Korea (#222), hurt by its record low fertility rate that shrinks each subsequent generation by roughly two-thirds, and dead-last Jamaica (#239), which combines Swaziland incomes with Japanese fertility rates.
Lastly, the United States (#14) outperforms any country with a population over 40 million, plus the entire G12. It does so well that it brings up North America (#16) to be the top-performing region overall.
Again it's America, with its high BMI, leading the way.
I know what you're thinking, there's already an important index called BMI. I just couldn't help myself from sharing with the Big Mac Index though. ↩︎
As a mnemonic, Economy = Money × Children², or for short, E = mc². ↩︎
Squaring the TFR also compensates for the GNI already being divided by a population term, "per capita". ↩︎
Technically, you're only supposed to capitalize units if they're named after someone, so I am hereby also naming Chads in honor of economist Chad Syverson. ↩︎
Thanks to Uri for feedback on drafts of this, and Hannah for the "E".