They are eye catching. We all love them. The ubiquitous “best of” lists: best school districts, best presidents, best championship teams, best places to eat. It’s the hook that keeps on hooking. Of course, we don’t always agree with what is at the end of the hook. These lists are only as good as how they are compiled. The last “best beach” list I saw was developed by three travel writers who placed Hawaii beaches in four of the top 10 places. I’m sure Hawaii beaches are fabulous, but a best beach list is relative. Couples may opt for one type of beach (deserted getaway or party beach), while parents with children will go for a completely different type (low waves and proximity to bathrooms).
Such lists are only as good as how they are defined and the means by which they are developed. Two recent examples provide striking contrasts. Last month, CEO Magazine came out with its “Best and Worst States for Business” list. No doubt, state governors’ offices around the country went scrambling in one direction or the other to either embrace or contest its findings. No New England state cracked the top 25. Massachusetts came in as fourth worst state in the nation. Connecticut was sixth worst. New Hampshire, our oft-noted low-tax, low-regulation standard in the region, managed only 26th. California was rated worst. Texas, Florida, North Carolina, Tennessee, and Indiana were ranked as the top five.
We jump quickly to another list, the Milken Institute’s State Science and Technology Index of 2012. Every two years, the Milken Institute looks at each state’s science and technology capabilities and their impact on the regional economy. The Science and Technology Index ranks Massachusetts first, followed by Maryland, California, Colorado, and Washington. Top states in the CEO Magazine rankings fared rather poorly in the Milken rankings, with Texas at 19, Florida at 38, North Carolina at 21, Tennessee at 35, and Indiana at 27.
The Milken Institute is focused on the science and technology capacity of each state. Milken bases its rankings on a total of 79 indicators around five weighted components – R&D inputs, risk capital and entrepreneurial infrastructure, human capital investment, technology and science workforce, and technology concentration and dynamism. Milken’s sources range from the Bureau of Labor Statistics and National Science Foundation, to the U.S. Patent Office and PWC’s MoneyTree Report. CEO Magazine, meanwhile, depended entirely upon the input of the 736 respondents to its CEO survey. You can see where I’m going.
Survey Says …
Surveys are only as good as the quantity and quality of responses received, as well as the quality of the survey design. There is nothing inherently wrong with surveying CEOs on various matters. Associated Industries of Massachusetts (AIM) does a regular survey of CEOs on business confidence that seems a good barometer on the regional economy. But, CEOs are not necessarily well-versed on comparative state data on business climate. Indeed, CEO Magazine’s list is accompanied by comparative data, not seen by the responding CEOs, that reveals this. Forty-seventh-ranked Massachusetts had an economic growth rate higher than all but one of the top ten ranked states. Its reported state-local tax burden percentage was better than a majority of states. In other words, an objective look at the data provides better insight than the subjective responses of a few survey respondents.
Mark Twain said that there are “lies, damned lies, and statistics,” but statistics are damned useful for determining the health of an economy and, therefore, the vitality of a business climate. State economies are not always well-suited for every industry, just as every nice beach doesn’t work for every circumstance. Some CEO Magazine respondents may well be in industries that no longer work in a New England economy or, as likely, perceive all “blue states” as necessarily overregulated and over-taxed. To be sure, there is work to be done to make our state economies more competitive. That said, the Milken Index, admittedly a more narrowly-focused inquiry, uses a far more appealing statistics-based approach. And, for our region, its findings ring more true. For scientific and technology-based industries, Massachusetts is at the center of one of the most dynamic regions in the world.
Peter Abair is director of economic development and global affairs at the Massachusetts Biotechnology Council (MassBio).
