World Happiness Report 2023 99 The latter includes our three measures of state capacities and our measure of peacefulness – thus, it coincides with our Pillars of Prosperity Index, except that we now exclude GDP per capita.37 The six graphs show a positive relationship with our measure of state effectiveness for five of the life-satisfaction determinants from Chapter 2, the exception being generosity (measured by private donations).38 The positive correlation coefficients range from 0.35 to 0.7. This exercise does not take into account the fact that different aspects of state effectiveness may correlate more or less strongly with different life-satisfaction determinants. This becomes clearly visible when we disaggregate the state-effectiveness index into its subcomponents. In that case, we find that the life-satisfaction determinants relate most strongly to our measures of collective capacity and fiscal capacity.39 Concluding Comments This chapter has focused on the building blocks of effective states and their support for peace, prosperity, and happiness. This links an extensive literature in political economics with studies on the determinants of well-being. We have argued that investments in state capacities and achieving peace without repression are central elements in the creation of effective states. We have also seen that the underpinnings of those states - especially when it comes to common-interest states – appear to be conduits of life satisfaction. Although we can pinpoint a number of factors that shape effective states, there is no magic formula; each polity has to build a solution that works in its own historical and cultural context. The cross-cutting cleavages supplied by history can be helpful or harmful in making progress. But institutions, norms, and values can help to foster common interests. However, there are few examples of progress based on external advice or conditions, no matter how well-meaning external actors may be in their attempts to help. The common-interest states that we have identified here as having the highest levels of life satisfaction have largely been crafted from the toil and vision of their own citizens. Even though many challenges are global, it is hard to dispel the idea that nation-states remain the basic building block by which governments support the well-being of their citizens. That said, it is undeniable that judicious decentralization in some federations may offer further support for well-being. In the other direction, government action to support well-being beyond the nation- state is, at best, work in progress. Even though many things have been effectively organized in the European Union, core state capacities – like the ability to defend the territory and to raise taxes – have not. It is also difficult to identify strong supranational cohesive institutions, despite the existence of acute global challenges such as the climate problem. While the future may see more global cooperation, the basic architecture of state effectiveness is therefore likely to remain at the national level for some time to come. “Little else is required to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things” (Adam Smith, 1755).
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