Professor Scott Stern of MIT 's Sloan
School of Management
Can social progress enhance a
society’s ability to compete economically?
A Civic Caucus
Focus on Competitiveness
Interview June 20, 2014
Dave Broden (vice chair),
Pat Davies, Paul Gilje (coordinator), Curt Johnson, Sallie Kemper, Ted
Kolderie, Dan Loritz (chair), Dana Schroeder, Clarence Shallbetter. By
phone: Scott Stern.
According to MIT's Scott Stern,
coauthor of The Social Progress Index 2014, the study's key
finding is that economic development is not sufficient to explain a
country's social progress outcomes and GDP per capita is an incomplete
measure of a country's overall performance. The Index shows,
Stern says, that on average, social progress outcomes are better as
GDP per capita increases. But that doesn't necessarily hold for many
advanced economies, where there can be big gaps between a country's
ranking on GDP per capita and its ranking on social progress. Another
important finding of the study is that there is no direct, tightly
linked correlation between publicly funded inputs, such as education
spending or health spending, and social progress outcomes.
Stern points out that the social dimensions
of people's lives and whether or not those are improving have not been
measured and understood nearly as well as the economic dimensions.
The Social Progress Index 2014, he explains,takes a rigorous look
beyond traditional measures of economic development and GDP in 132
countries in order to understand the relationship between economic
progress and social progress.
For the study, social progress is defined as
the capacity of a society (1) to meet the basic human needs of its
citizens, (2) to establish the building blocks that allow citizens to
enhance and sustain the quality of their lives, and (3) to create the
conditions for all individuals to reach their full potential. The
authors divide these three broad dimensions into components that could
be systematically calculated and compared across countries.
New Zealand, Switzerland and Iceland ranked
first, second and third in their total scores on the social progress
measures. The United States ranked 16th, higher than France
(20th), but lower than Germany (12th), the
United Kingdom (13th), Japan (14th) and Ireland
(15th). Brazil ranked 46th, Russia 80th
and China 90th. Chad (132nd) came in at the
bottom of the rankings.
Biography Scott Stern is the David
Sarnoff Professor of Management of Technology at the MIT Sloan School
of Management and chair of the school's Technological Innovation,
Entrepreneurship and Strategic Management group.
He is coauthor, with Michael Porter and
Michael Green, of The Social Progress Index 2014, a ranking of
livability in 132 countries that aims to go beyond economic metrics to
measure social factors, which, the authors contend, are also important
to economic growth.
Stern started his career at MIT, where he
worked from 1995 to 2001. Before returning to MIT in 2009, he held
positions as professor at the Kellogg School of Management and as
senior fellow at the Brookings Institution. He is the director of the
Innovation Policy Working Group at the National Bureau of Economic
Research. In 2005, he was awarded the Kauffman Prize Medal for
Distinguished Research in Entrepreneurship.
He holds a B.A. in economics from New York
University and a PhD in economics from Stanford University.
The Social Progress Index
of which Scott Stern of MIT is a coauthor, ranks New Zealand first
overall among the 132 countries ranked in the study on a variety of
social progress measures, followed by Switzerland, Iceland and the
Netherlands, all of which have lower GDP per capita than the United
States. The U.S. ranks 16th on the index, just behind
Ireland. While the U.S. ranks first in access to advanced education,
it ranks 70th in health, 69th in ecosystem
sustainability, 39th in basic education, 34th in
access to water and sanitation, 31st in personal safety and
23rd in access to cellphones and the Internet.
The Social Progress
Index2014 takes a hard-nosed, rigorous look beyond
traditional measures of economic development and GDP in order to
understand the relationship between economic progress and social
progress. According to Scott Stern of MIT, there has been a
dominant focus, in looking at economic progress, on the impact of
particular initiatives on GDP. "There has always been a belief," he
said, "that the reason we can focus on GDP is that economic progress
will inevitably lead to social progress. In other words, if we can
solve the economics, then these broader issues of social progress are
likely to be addressed in a useful way."
"But it's not clear that that's true," he
continued. "It's useful as a first step to decompose what we mean by
economic development and GDP versus social development and social
progress. Social progress itself can facilitate the conditions that
lead to economic development. Economic development can facilitate
social progress. Or, in some cases, you can have a country that can
achieve very high economic progress, but that may be at the expense of
The objective of the Index is to
measure social progress directly and then to explore the relationship
between social progress and economic progress in a systematic way that
can lead to public action. To do that, Stern said, the authors
used four broad design principles to develop a consistent, rigorous,
holistic, objective measure of social progress.
1. The index would be constructed from a
set of measures that are exclusively social and environmental in
nature. It would take economic measures off the table, in order to
sharpen the understanding of the relationship between social and
2. The index would focus on social
progress outputs, not inputs. For example, if literacy is an output,
then money spent on education is an input. In future work, there
will be more exploration of the relationship between inputs and
3. The index would find a meaningful way
to benchmark social progress across the widest range of countries.
The work would focus on a cross-section of countries, rather than
changes over time within each country.
4. The index would allow countries or
regions to see their strengths and weaknesses and to understand
opportunities for action and collective decision-making.
Social progress is the capacity of a society
(1) to meet the basic human needs of its citizens, (2) to establish
the building blocks that allow citizens to enhance and sustain the
quality of their lives and (3) to create the conditions for all
individuals to reach their full potential. The authors consulted
withadvisory boards, academicians and practitioners to develop this
relatively simple definition. The three broad dimensions in the
definition are divided into the following 12 components:
(1) Basic Human Needs
Nutrition and Basic Medical Care;
Water and Sanitation;
(2) Foundations of Wellbeing
Access to Basic Knowledge;
Access to Information and Communications;
Health and Wellness;
Personal Freedom and Choice;
Tolerance and Inclusion;
Access to Advanced Education.
For each of these 12 components, the authors
identified a series of measures that can be calculated across
countries in a systematic way. From those measures, the authors
generated a score on each component for each country in the study. The
scores for the components were added up to come up with each country's
score for each of the three broad dimensions. Then those scores were
added up to calculate each country's aggregate score.
Based on countries' Social Progress Index (SPI)
aggregate scores, the study identified a series of six tiers of
countries. Each tier includes countries with close aggregate
1. The first tier (aggregate scores
of 86 or above) includes the top three countries, New Zealand,
Switzerland and Iceland, all with strong scores across all social
progress dimensions. The tier is rounded out with the rest of the
top 10 countries: the Netherlands, Norway, Sweden, Canada, Finland,
Denmark and Australia.
2. The second tier (aggregate
scores of 80 to 85) includes the next 13 countries (ranked 11th
through 23rd overall): ranging from Austria at the top to
the U.S. near the middle (16th overall) to the
Czech Republic at the bottom. This tier includes five members of the
G-7: Germany, the United Kingdom, Japan, the U.S. and France.
3. The third tier (aggregate scores
of 71 to 79) includes 16 countries, ranging from Slovakia at 24th
overall to Israel at 39th overall. It is a diverse group
of nations, with countries at sharply different levels of economic
development. Stern said there are "massive gaps" between how these
countries rank in economic progress vs. social progress, showing
that high GDP per capita alone does not guarantee social progress.
4. The fourth tier (aggregate
scores of 58 to below 71) includes 52 countries, ranging from Kuwait
at 40th overall to Morocco at 91st overall.
These countries are closely bunched in terms of their overall SPI
scores, but have widely differing strengths and weaknesses. Four of
Brazil (46th), South Africa (69th), Russia (80th)
and China (90th), are in the fourth tier.
5. The fifth tier (aggregate scores
of42 to 57) includes 33 countries, ranging from Uzbekistan at 92nd
overall to Pakistan at 124th overall. The aggregate SPI
scores of most countries in this tier are substantially lower than
those of most countries in the fourth tier. Many, but not all, of
these countries also have low GDP per capita. The fifth BRICS
country, India (102nd overall), is in the fifth tier.
6. The sixth (and bottom) tier
(aggregate scores of 32 to 40) includes eight countries with the
world's lowest levels of social progress. The countries range from
Yemen at 125th overall to Chad at 132nd
overall. Their SPI scores provide evidence that extreme poverty and
poor social performance often go hand-in-hand.
The study's key finding is that economic
development alone is not sufficient to explain social progress
outcomes and GDP per capita is an incomplete measure of a country's
On average,Stern said, social progress increases with GDP per
capita, but in most advanced economies, it's a relatively flat
relationship. "So, there can be big gaps between where you register
in terms of GDP per capita and where you register in terms of social
progress," he said.
Stern said some aspects of social progress are more correlated
with GDP per capita than others. For example, basic human needs are
tightly linked to GDP per capita, while areas such as opportunity
have a much weaker relationship to GDP per capita.
Countries can translate the measurement data
into a framework for action. "For example," Stern said, "in
countries like Paraguay, Costa Rica and Brazil, we've been able to
intensively involve business, government, unions and nongovernmental
organizations (NGOs) in using these findings as a mechanism for
formulating a social progress policy."
The Social Progress Index uses countries
as the basic unit for comparisons for two reasons: (1) to get a series
of comparable measures for which data are available at the national
level, but not at the subnational regional level; and (2) because
policymaking is done at the nation-state level. Stern said,
though, that the study's authors are intensely interested in using the
same basic framework and adapting it to undertake regional or
An interviewer pointed out that education is
one area where data are collected and policy made at the state level
in the U.S.
There are elements of innovation and
entrepreneurship that are poorly captured by GDP measurement and by
innovation statistics like patents per capita, but are usefully and
meaningfully captured within some of the elements of social progress.
For example, Stern said, the ability to live where you want within
a country, to express your own views and to choose your own path in
life are very important inputs to an environment in which innovation
and entrepreneurship thrive. Those factors are often given short
shrift by economists and policymakers.
The study found no direct, tightly linked
correlation between publicly funded inputs and social progress
outputs. An interviewer commented that the study seemed to show no
strong relationship between social progress and the amount of
government spending. Stern replied that the study looked at a variety
of different inputs into the measures of social progress, such as
public spending as a share of GDP, health spending and education
spending. For each country, the authors then tried to map spending by
components and look at the relationship between those publicly funded
inputs and the social progress outputs. "We found no direct, tightly
linked correlation between those inputs and the outputs," he said.
For example, Stern said, the U.S. spends
more on health care than on any other nation on earth, both overall
and on a per capita basis. "And our outcomes are not particularly
good," he said, pointing out that the U.S. ranks 70th in
health in the study. He noted that Minnesota has a relatively low cost
in health care, with relatively good outcomes. Minnesota, he said,
spends 25 percent less per capita on health care than Florida, even
adjusted for risk and for age, and has 20 or 25 percent better health
outcomes. "Those are big, huge numbers," he said. "Even regionally
within the U.S., the relationship between inputs and outputs is much
weaker than we should allow as a society."
The top tier of countries on the social
progress index has a much lower level of income inequity, but not
necessarily wealth inequity, than the countries in the second tier,
which includes the U.S. Stern cautioned, though, that the
relatively uneven relationship between GDP and social progress among
countries is not fully explained by controlling for income or wealth
inequity. "We don't yet have the full portrait," he said, "so we
didn't emphasize this relationship as a core finding. It turns out
that the relationship between economic equity, social progress and
economic measures like GDP is much more complex than I had
anticipated." He did note that people's anger at income inequality is
much more muted if they have a better level of opportunity, that is,
the ability to live the lives they want to, to have basic human needs
met and to be able to pursue opportunities.
The social dimensions of people's lives and
whether or not those are improving have not been measured and
understood nearly as well as the economic dimensions. An
interviewer commented that because people in the U.S. have had high
levels of social prosperity, they're not recognizing the slow decline
in that prosperity. "Until this effort and a few others," Stern said,
"there hasn't been a language that allows people to even understand
where they are relative to others and what their relative strengths
and weaknesses are. Until we measure social progress over time at the
level of regions, we don't have the language that allows governments,
citizens, civic groups and business to even understand how social
progress is changing." His group is just starting a longer-term study
looking backward at how social progress has changed over time for a
selected group of countries, including the U.S.
The coming changes in technology and those
we've inherited over the past several decades from the
information-technology and the life-sciences revolutions bring a vast
majority of people in the U.S. and in Minnesota up to a certain level,
so that managing social progress as a policy matter is becoming
relatively more important than economic productivity.
Higher education in the U.S. is much better
than in almost every other country around the world. Stern said
Minnesota has long been a leader in higher education through both its
public and private colleges. He shares the concern about our current
disinvestment and declining pursuit of excellence in higher education,
as in California, "where they can't figure out how to fund the
University of California system. While the U.S. is clearly ahead in
higher education now," he said, "I worry that we're eroding its
The nature of technological change is
changing, so the ability of innovation to overcome challenges in
industries like health care and education could dramatically improve
social progress. Stern gave the example of the improvements over
the last 30 years in the lives of people with disabilities through
policy and the technology that interacts with policy. For example, the
automation of wheelchairs and requiring Braille in places like
elevators have "dramatically transformed the ability of those with
mobility or sight issues to participate fully in society." He said
those changes might actually hurt economic growth, but most people
think there is an extraordinarily high rate of return on this
Places like Minnesota need to start building
those institutions that develop the kind of human capital that will
allow people to live meaningful lives by leading them to be
productive, to be problem-solvers and to be entrepreneurial.
"Social progress allows you to be more competitive than traditional
economic measures would show," he said. For example, after controlling
for cost and overall GDP, higher social progress leads places to be
more attractive for foreign direct investment. "People are choosing to
live in and invest in those regions that have produced a higher level
of social progress," he said.
The Civic Caucus
is a non-partisan,
tax-exempt educational organization. The Interview Group
includes persons of varying political persuasions,
reflecting years of leadership in politics and
business. Click here
to see a short personal background of each.
S. Adams, David Broden, Audrey Clay, Janis Clay, Pat Davies, Bill
Frenzel, Paul Gilje (coordinator), Randy Johnson, Sallie Kemper, Ted
Kolderie, Dan Loritz (chair),
Tim McDonald, Bruce Mooty, John Mooty, Jim Olson, Paul Ostrow, Wayne
Popham, Dana Schroeder, Clarence Shallbetter, and Fred Zimmerman