assumptions. These assumptions are usually pretty opaque to everyone else. Such assumptions, moreover, are usually determined by the organization constructing the ranking—ideological bias is rife in the rankings industry. One need not read a ranking or report to know what it says: You just need to know who produced it.
All this means that rankings can be arbitrary. Several different scholarly analyses have found that state and local rankings generally do not correspond with various measures of economic performance, including job creation and business creation. If you’re a policymaker or citizen or company basing decisions on these rankings, that’s a problem. Actually, it’s a feature of the rankings. When it comes to rankings, there is no such thing as, “that’s what the data say.” Instead, it’s, “that’s what I made my data say.”
Well, so what? What can or should be done about this?
We favor a scorecard approach, rather than an overall rank. A scorecard, with a distribution of grades or other scores across a variety of indicators, allows rankings consumers to balance different elements, rather than accepting a third-party conclusion that “my state is bad for business,” or “my state lacks opportunity.”
Perhaps, too, a more useful tool for states and communities would be a dynamic collection of data indicators, allowing policymakers and residents to choose their own weights. Maybe one state places a larger emphasis on entrepreneurship than its neighbor, which might prefer to support more established companies. Such a “choose your own ranking” approach does not solve the political problem: Anyone could still use the data for his/her own narrative. This would require a better level of transparency for knowing where the data came from and what assumptions shape even the data collection in the first place. Not all data are created equal, so simply making them available won’t, unfortunately, fix the problem.
This still might be better than an arbitrary rank assignment from a third party claiming to be independent. We need to work on assembling data and research to get to a more informed understanding of what drives economic dynamism and growth at the state and local levels. Take entrepreneurship data: When we say that one state or city has more new businesses than another, we still don’t have the empirical ability to describe the composition of those new businesses or identify the economic effect they have in terms of the types of jobs being created, the incomes being generated and their effect on other businesses.
This might be the next state ranking to be conducted: Which state does the best in pioneering new modes of data collection and measurement? Perhaps Vermont will top that list as well.
