World Happiness Report 2023 88 systems of revenue collection with broad-based taxation, strong collective provision using universal programs for health, education, and retirement. They also have legal and regulatory systems which provide the foundations for a strong market economy. While common-interest states are heterogenous, they are concentrated in western Europe and North America. Special-interest States These states are run to favor the interests of a ruling group which is weakly constrained by political institutions. However, ruling elites are often entrenched in power, possibly due to high levels of repression, which foster a form of political stability. State capacities primarily serve the interests of the ruling group. But this limits the domain of the state and weakens the motives to invest in state capacity compared to common-interest states (all else equal). Special-interest states, too, are heterogeneous and include oil-rich states such as Kuwait or Saudi Arabia, as well as some one-party autocracies such as China. Special-interest states can have a focus on raising income levels when this suits the interests of the ruling elite or is seen as a way to keep the populace quiescent. Weak States Like special-interest states, weak states lack strong constraints on the ruling group. However, unlike redistributive states, they are politically unstable, giving frail incentives for incumbent groups to invest in state capacity. As a consequence, the abilities to raise revenue, protect property rights and support markets, or to deliver welfare services are limited. Political instability is often the result of violent contests for state power, as seen, e.g., in Afghanistan. Low state capacity and pervasive conflict limit the incentives for private investment, which may lead to a vicious cycle of poverty and conflict. The Pillars of Prosperity Index To get an empirical handle on these two core dimensions of state effectiveness – peaceful resolution of conflict and high state capacity – along with a more conventional approach based on income differences, Besley and Persson26 suggested a Pillars of Prosperity index. This index was constructed as the simple average of three measures which all range between zero and one. The first component is itself an index of the three components of state capacity which we introduced above, i.e., fiscal, legal, and collective capacity; the second component is an index of peacefulness, based on the prevalence of civil war and repression;27 while the third component is a measure of income per capita.28 Figure 3.1 shows how this measure is related to the two factors highlighted in our discussion of the origins of peaceful orders and high state capacity. One is simply the measure of constraints on executive power (from V-Dem) that we discussed above. The other is an index of civic values (from Figure 3.1: Pillars of Prosperity Index vs. Executive Constraints and Civic Values High Income — Fit (High) Middle Income — Fit (Middle) Low Income — Fit (Low) Pillars of Prosperity Index (2016) Pillars of Prosperity Index (2016) Executive Constraints (2016) Civic Values (2016) 1 .8 .6 .4 .2 1 .8 .6 .4 .2 .2 .4 -2 .6 0 .8 2 1 4 -4
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