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There was some excitement in Minnesota’s media recently when the state was named the best governed in America. But, as I’ve written before, it is always worth popping the hood and looking at what goes into things like this.
How do we measure that?
If you want to measure how long a pencil is, get a ruler. If you want to know the average rainfall in a week, leave a measuring cup outside. But how do you measure something like how well a state is governed? How do you rank the presidents or the James Bond movies?
One way to do it is to ask people what they think. But this doesn’t seem very rigorous. It is, to a large extent, subjective. You could say that FDR was the best president because he enacted Social Security and that The Spy Who Loved Me is the best Bond film because of that stunt with the parachute at the start. Or you could say that Reagan was the best president for winning the Cold War and that From Russia With Love is the best Bond film because it is most faithful to the books. Who is to say which of these is right? It all depends on what the respondent values.
So, more usually, we try to pick something quantitative. We pick some measure, say, economic growth or box office receipts, and see which president or 007 adventure performed best. But, again, this assumes that the variable we have chosen – GDP growth or ticket sales – reflects what we actually want to measure, which is quality. There is no guarantee that it does. For example, the dreadful Moonraker is, apparently, the fifth most successful Bond film at the box office.
To address this, we can often assemble a number of data series all of which we hope reflect what we want to measure. That is what 24/7 Wall Street did with their rankings of the governance of the states of the union.
Does that really measure what you think it does?
24/7 Wall Street set out to measure how well run the states were, the performance of their leaders, in other words. So what variables would you pick to assess that?
State leaders can tax and spend. Those that do more of the latter than the former will get their states in trouble so budget balance, debt levels, and credit ratings would be useful things to consider. But, according to their methodological note, 24/7 Wall Street only look at debt levels, not budget balance. They look at both revenue and spending but, to a large extent, these are only interesting insofar as they impact budget balance and, through that, debt.
They also look at per capita tax collection, but it is not clear why a high tax burden should be a sign that a state is ‘well run’. The same goes for the use of the amount of welfare paid out. It also goes for the ‘replacement rate’, which is the the amount of weekly welfare payments as a share of weekly wages. How is an open-handed welfare system a sign that a state is ‘well run’?
Things get cloudier after that. 24/7 Wall Street go on,
From the U.S. Census Bureau’s 2016 American Community Survey (ACS) we also considered a range of socioeconomic factors to assess social outcomes and residents’ well-being. We looked at poverty, high school educational attainment, the percentage of adults without health insurance, median household income, and 1- and 5-year changes in median home value.
It is difficult to see how some of these measures reflect whether Minnesota’s politicians are doing a good job. Median household income? One and five year changes in median home value? Annual foreclosure rates? Per capita value of the state’s exports?
Always check under the hood
The 19th century poet John Godfrey Saxe is supposed to have said that laws were like sausages, people would like them less if they saw how they were made. The same goes for these sorts of rankings. It also goes for stats like GDP and inflation rates, for that matter.
Yesterday, I wrote about the Fraser Institute’s Economic Freedom of North America report, which ranks states by economic freedom. The same methodological questions apply to that work, as they do to all these things. Before simply repeating a report’s headline finding, it is always worth looking at how that finding was arrived at.
And, for the record, From Russia With Love is the best Bond film.
John Phelan is an economist at Center of the American Experiment.