World Happiness Report 2023 87 Alternatively, norms can be internalized in values that are learned at a formative age from parents, peers, or educators. Such norms often become “second nature” rather than being the result of calculating behavior. The strength of such values can be assessed in survey data like those assembled in the World Values Survey (WVS). This survey and its many followers contain a number of questions about attitudes and show how much these attitudes, and the values they reflect, differ across individuals, both within and between countries. Nonetheless, looking across waves of surveys, as well across cohorts in the same survey, there is strong evidence of persistence. Moreover, values strongly correlate with education attainment, volunteering, and other forms of civic behavior that are more common among the more educated.22 Aside from these general properties, values and norms can be important in fostering state effectiveness, both directly and indirectly. Directly, they can help to underpin the motives to invest in state capacity. A clear example is a higher perceived return to building legal capacity in the form of a court system when judicial norms have evolved to support the rule of law. Another example concerns the returns to building fiscal capacity. Levi23 argues that trust in the state is important for the building of a tax system, as the power to tax is part of a social contract where tax paying becomes a quasi-voluntary act encouraged by a belief that the state promotes common interests. A culture of tax compliance can also emerge based on principles of reciprocity between the state and the citizen.24 Indirectly, norms and values can help make institutional arrangements more cohesive and hence increase incentives for investment in state capacity. Norms saying that the state should be used for the public good can thus help underpin commitments to universal public programs. Analogously, norms saying that incumbents should be electorally rewarded for delivering universal benefits can be important, although they do require citizens to turn out and vote in the prescribed way, despite any private costs of doing so. Complementarities The conceptual framework we have just sketched gives us good reasons to expect that state capacities, peace, and income will cluster together. In one part, this prediction reflects an expectation that these outcomes have common drivers in the form of cohesive norms, values, and institutions. In another part, it reflects a coevolution due to positive feedback loops among the three outcomes over time. To illustrate the coevolution, consider investments in fiscal capacity. These will tend to be greatest when the formal economy is most developed, something that will be reinforced by a strong legal system. Having a social-security system funded by an income tax will also tend to broaden the tax base – and hence stimulate investments in fiscal capacity – by pulling people into the formal economy, where they are subject to taxation. Cohesive institutions which ensure that tax revenues are used to fund the social-security system also provides reassurance to citizens. Likewise, a contribution-based social security system fosters norms of reciprocity between citizens and the state. The fact that such programs are universalistic means that political control is less important. Hence the incentives are weaker for each group to invest in violence so as to capture the state. The increased expectation of peaceful resolution of conflicts fosters private investment and raises incomes. And so on. Putting the Pieces Together State Spaces Based on our discussion in the previous sections, we can now succinctly describe the characteristics of the three stylized forms of states suggested by the theoretical approach in Besley and Persson.25 Common-interest States Revenue is spent largely for the common good. Political institutions are sufficiently cohesive, with strong constraints on the executive to drive outcomes closer to this one. These institutions constrain the political power of incumbents, which gives them powerful incentives to invest in state capacity with longterm benefits, knowing that future rulers will continue to govern in the collective interest. Common-interest states tend to have effective
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