When you hear the word “prosperity” what comes to mind? Most dictionary definitions define it as a state of success and good fortune, especially in terms of income, wealth, and the consumption of material goods. A prosperous economy is synonymous with a growing GDP, rising levels of GDP per capita, and good jobs. Prosperity is also associated with non-material conditions of life, such as good health, happiness, and social status.

The Legatum Institute, a London-based think tank, has developed a methodology to measure and compare prosperity across countries and across time. The Institute views prosperity in multi-dimensional terms:

The Legatum Prosperity Index^TM measures prosperity from the bottom-up using more than 300 indicators that are aggregated into 12 “pillars of prosperity.” The pillars are organized around health, living conditions, safety and security, market access, the quality of social connections, environmental quality, and other aspects of well-being. The pillars are grouped into three domains essential to prosperity: Inclusive Societies, Open Economies, and Empowered People. The data are aggregated to provide a single score for a country that ranges from 1 (low prosperity) to 100 (high prosperity).

The geographic distribution of the Legatum Prosperity IndexTM reveals patterns you might expect but also some surprises. The Nordic countries and other northern European countries have among the highest rankings because they score highly across most of the pillars. But there are some important nuances. Finland ranks number four in the world owing to its very high performance in multiple economic and environmental pillars. However, it ranks 18th in the safety and security pillar. In many people’s minds, the United States is synonymous with prosperity, but it ranks 20th, owing to its low scores for safety and security (think homicides and domestic violence) and health (think obesity epidemic). Oil-rich nations such as Oman and Saudi Arabia appear well down the list despite their high incomes due to their poor showing in the personal freedom and environmental pillars.

We expect energy use and the Prosperity Index to be connected in some important ways. A productive economy measured by output, investment, etc., generally requires more energy. We saw this in the article on energy and GDP. Increasing the level of food security, shelter, and thermal comfort requires more energy, up to a point. From 2007 to 2019 we observe that increases in energy use per capita in many countries go hand in hand with increases in the Prosperity Index.

However, the Prosperity Index and energy use per capita do not move in lockstep. We see this in two ways. First, at any given level of energy use per capita, countries achieve vastly different levels of prosperity. For example, Iran and Switzerland use almost identical quantities of energy per capita (about 140 GJ per person), but Iran’s Prosperity Index (49) is well below Switzerland’s (83). Clearly, the Swiss are more effective at “converting” energy into “prosperity,” at least in the sense that the Legatum Index defines prosperity.

The second disconnection between energy use and prosperity is the same phenomenon of diminishing returns that we saw in the case of the Human Development Index. At very low levels of energy use per capita, increases in energy use generate significant improvements in the Prosperity Index. After a certain point, increases in energy use are associated with increasingly smaller increases in prosperity. Above about 80-100 GJ per person, the relationship falls apart, and prosperity is not directly linked to energy use. This suggests that large numbers of people who live in high-energy countries can enjoy the same level of “prosperity” with much lower levels of energy use.

1 The 2021 Legatum Prosperity Index Report, The Legatum Institute Foundation, https://www.prosperity.com/