August 14, 2012
Benedict Kingsbury, a Visiting Professor of Law at the University of Utah S.J. Quinney College of Law, co-edited Governance by Indicators: Global Power Through Quantification and Rankings (Oxford University Press, 2012), a new book that assesses burgeoning reliance on rankings to guide global policy and investment.
In growing numbers, national and transnational governments, NGOs, and private consultancies are producing rankings of everything from corporate governance to immunization and human trafficking to “state fragility” — and increasingly, these rankings are playing a crucial role in global allocation of funds and resources.
It makes sense. Prospective investors in, say, a Ukrainian corporation, might want to know where that country stands on matters such as transparency and shareholder rights. Businesses seeking to avoid involvement in human rights abuses might turn to the Human Rights Risk Index, a mash-up compilation based on data from bodies such as Amnesty International, Human Rights Watch, and the U.S. Department of State. Producing such data — and making decisions based on it — is a manifestation of the adage that you can’t manage what you don't measure.
But what about managing the measurements? What kind of oversight is there (or should there be) of the accuracy and legitimacy of global ratings and rankings? What are the implications of our increasing reliance on them to guide policy and investment? How should governments use — or challenge — them?
Key points from the book include:
* Basing decisions on numerical data is rational, but the insatiable demand for simplified rankings and the misplaced trust in numbers calls for a lot more awareness of what such indicators mean and how limited they can be. ("Indictor" is essentially synonymous with "ranking".)
* Rankings may have more effect on behavior than many regulations do, but unlike regulators, the producers of rankings are often self-appointed, with little oversight.
* Producing an indicator is a successful way for organizations to attract attention and generate revenue, but this affects what is measured and how rankings are made.
* Some prominent Indicators claim to be scientific and objective, whereas in reality there may be very little science and a lot of politics in their production.
* Challenging decisions based on numbers and indicators can require expensive technical skills and access to raw data that may be unavailable.
And here are some facts about specific rankings and producers of rankings:
* The World Bank's indicators for ease of doing business around the world encouraged countries to make it easy to fire workers - until pressure from the US Congress and labor unions led the bank to rethink its approach.
* China already produces influential rankings of world universities, and is strongly interested in producing credit ratings and other major global indicators — so Western dominance of indicators may be fading.
The book is mentioned by Carl Bialik in a recent Numbers Guy blog in the Wall Street Journal (on Olympic Medal Tables) :