The Tyranny of International Index Rankings * Bjørn Høyland Karl Moene Fredrik Willumsen † April, 2009 Abstract International index rankings are popular, but dangerous. They stimulate rank- seeking behavior by emphasizing country differences where similarity is dominant. We concentrate the discussion around the popular Human Development Index, Free- dom House, and Doing Business. Most of the rankings in these three indexes appear to be misleading, not because of wrong indicators, but because the estimation of the scores ignores inherent uncertainty. When we re-estimate them with a method that captures this uncertainty, it is clear that the practice of comparing adjacent countries is a rather courageous activity. “Looking-glass upon the wall, Who is fairest of us all?” 1 Introduction One can hardly open a newspaper without finding a reference to an international index. International country rankings provide an instant idea of the relative success of a country vis-`a-vis other countries in the world. Their appeal lies in their simplicity. Their users need no more statistical knowledge than readers of the sports pages in the newspapers. Just as boxers, baseball players, and national football teams are ranked according to their performance, countries are ranked according to their ability to provide a high standard of living, democratic rights, and an appealing business environment. Just as pundits use sport rankings to place their bets for the weekend, journalists use country rankings in their search for an easy way to finish their Saturday commentary and policy makers use the country indexes to guide their decisions over own policy and evaluate other countries. * We thank Marie Ingvaldsen, Carl Henrik Knutsen, Jo Thori Lind, and seminar participants at the PRIO brownbag seminar for useful comments. While carrying out this research, we have been associated with the ESOP centre at the Department of Economics, University of Oslo. ESOP is supported by The Research Council of Norway. † Høyland: Department of Political Science, University of Oslo. Moene and Willumsen: De- partment of Economics, University of Oslo. E-mail addresses: bjorn.hoyland@stv.uio.no, k.o.moene@econ.uio.no, f.h.willumsen@econ.uio.no 1