New National and Local Indices Help Focus Policy Priorities

Preparing an index or report card is often a useful tool for tech-based economic development efforts to assess a geographic area's relative performance across selected statistics or indicators. The outcomes measured, if considered temporally, can help decision makers identify and shift policy and investment priorities for their community, region or state.



Two recent reports apply indices in very different ways, providing examples of how they can be used to promote varied strategies or objectives. The first looks at the Washington D.C. metro region from the perspective of five broad categories of indicators. No recommendations are suggested; the authors hope the report encourages broader awareness of and public engagement toward those areas showing improvement or greater need since the previous year's report was completed.



Measures used for these types of indices, which are both quantitative and qualitative, typically draw from independent data or value-neutral statistics. For instance, a state may look at change in per capita income over a specific period of time. While positive growth — relative to, say, other states, the national average or inflation — may be suggested by the author as good or assumed by the reader to be desirable, the conclusion is not intrinsically present in the data.



The second index discussed below is quite different. Written to advance a specific e-commerce policy agenda, the index ranks states' relative positions across several weighted indicators. The authors readily admit the indicators selected and the scores assigned are subjective, because, as is the case whenever indices are used in this manner, there is a cause-and-effect relationship either assumed or stated between the implementation of certain policies and desired performance. In this particular situation, the prevalence of certain laws and regulations is suggested to be related to a state's preparedness for e-commerce; agreement with the conclusion is assumed because statistical support for the hypothesis is not provided.



Both types of indices have disadvantages or risks. For the first, the risk in not presenting specific recommendations is the report may not lead to any changes in policy, while still achieving the desired concern. To avoid this, the authors must be prepared to help lead the discussion of the issues identified in the report.



The risk in using indicators in the second manner is that the assumptions may be proven invalid, once the statistical analysis is conducted. Other factors, for instance, may be found to be statistically more important for predicting outcomes or behaviors. An example of this contradiction, presented in the August 24, 2001 SSTI Weekly Digest, looked at the Small Business Survival Committee's rankings of the states for the policy  climates for small business and entrepreneurship versus independent statistics compiled by the Corporation for Enterprise Development to measure "Entrepreneurial Energy."



The 2001 Potomac Index

The 2001 Potomac Index is the latest effort to educate Washington metropolitan area leaders and citizens on their changing region and to measure critical issues affecting the region's success.



A joint project of the Potomac Conference and a research team led by the Brookings Greater Washington Research Program, the 2001 Index builds on the work of the 2000 Index and is organized around five priorities — innovation, inclusion, education, quality of life, and regional thinking. Several new indicators, some of which reflect the events of September 11, are added to this year's edition. However, most of the indicators are drawn from annual data, and comparative numbers on the last quarter of 2001 are not yet available.



The Greater Washington Region economy is well positioned for future growth, a highly educated population and nonprofit activity, according to the index. Some of the region's economic highlights include:

• From 1992 to 2000, private sector employment increased 27 percent; total government employment decreased 11 percent. The number of public sector jobs decreased by 57,000 during the same period.
• The service sector, with nearly 1.13 million employees, is the largest industry and is among fastest growing sectors, experiencing a 45 percent increase in workers since 1991.
• In 2000, 69 percent of the region's technology-intensive employment was in service areas such as software development and systems integration, 17 percent was in bioscience and research/testing, 10 percent was in tech-intensive manufacturing, and 4 percent was in aerospace.
• Federal contract awards for R&D increased 21 percent to $3.2 billion between 1997 and 1999 but decreased to $3.15 billion in 2000.
• The total number of patents issued decreased by 7 percent in 2000.
• The value of venture capital investment more than doubled in 2000 to a total of $3.7 billion and 264 deals — up from about $1.75 billion and 161 deals in 1999.
• Technology purchases grew from $3.2 billion in 1992 to $7.8 billion in 1999.

The priorities used in the 2001 Potomac Index were named by business, government and nonprofit leaders participating in the Potomac Conference. The index is available here. 



States & E-Commerce

The Best States for E-Commerce, prepared by the Progressive Policy Institute, uses four indicators — the extent to which states 1) impose "industry-specific protectionist laws," 2) tax Internet access, 3) enable Internet users to transact electronically with state government, and 4) recognize the legal validity of digital signatures — to rank the 50 states and the District of Columbia.



Scores ranging from 0-10 were assigned to each state for ten categories: contact lenses, prescription drugs, telemedicine, mortgages, wine, auctioneering, insurance, automobiles, e-government, and uniform electronic transactions act. Actual values for telecommunications and access tax collections per online household were used for the eleventh category. Final scores were calculated based on the sum of the standard deviations for each category.



Using this process, Oregon, Utah, Indiana, Louisiana, and Iowa received the highest ratings, while South Carolina and New Mexico scored lowest.



Along with the rankings, the report recommends a comprehensive policy framework for states to follow to become more Internet friendly and subsequently improve their scores in the index:

• "Avoid protectionist regulation"
• "Promote uniformity in licensing requirements across state borders"
• "Use information technologies to create digital government"
• "Adopt the Uniform Electronic Transactions Act to enable the use of digital signatures"
• "Eliminate taxes on Internet access"

The full report, The Best States for E-Commerce, can be viewed at: http://www.ppionline.org/

SSTI has created a webpage with links to past Digest articles covering local, state and national indices.