Thursday, January 2, 2014

Social progress

Research from Harvard (1) provides an overall measurement of social progress for countries all around the world. Although there aren’t many surprises in the list, it does point to an overall disparity between social conscience and progress.

The most interesting observation in this empirical study is that no country was able to score in the top half of all dozen components measured including medical care, sanitation, shelter, safety, access to knowledge, information and higher education, wellness, ecosystem, personal rights and equity. This implies that progress in some of these dimensions are negatively correlated with others. Those seeking to design better future societies need to understand the causes of such correlations as well as have an overall view of portfolio management.

The source of negative correlations among factors of progress is likely temporal. The impact one can achieve by investing in certain dimensions is higher than others in the short run. However, such a skewed portfolio allocation may adversely affect overall progress in the long run. Very large countries such as India, pulling up the rear, is symptomatic of its lack of understanding of how to manage a portfolio of seemingly contradictory objectives. Focus on any one area at the cost of others may be useful to win elections for its leaders but it will likely keep it bottled up for decades.

Another large country, the US, albeit being on top, shows that it is necessarily sub-optimizing available opportunities. The immense talent available to it has been constrained by its increasing political and bureaucratic inertia, which if left unchecked, has the potential to bring the galloping nation to slow saunter. Although portfolio management principles are well understood, the current system prevents it from making optimal allocation decisions. The tendency to complicate policy decisions, either because of lack of understanding or for political gains, has created a regime that seems to be controlled by the incompetent.

Good performances by small countries, such as Sweden and Switzerland also imply that scale is a huge impediment to effecting beneficial policy changes. The real question for the countries down the list is how they can take advantage of their size and learn from the mistakes of those showing persistent under-performance.

(1) Michael Porter unveils new health and happiness index, the Guardian.