His Strong Point is His Grasp of Economic Figures

 http://www.guardian.co.uk/world/2012/jul/30/mitt-romney-israel-economic-success

'Romney said: "As you come here and you see the [gross domestic product] per capita, for instance, in Israel, which is about  USD 21,000, and compare that with the GDP per capita just across the areas managed by the Palestinian Authority, which is more like  USD 10,000 per capita, you notice such a dramatically stark difference in economic vitality."  According to the World Bank, however, Israel's per-capita GDP was about USD 31,000 in 2011, while the West Bank and Gaza's was just over USD 1,500.'

There goes that liberal media again.  Criticizing him for being off by what... a factor of six or seven?  Its not like being President requires you to know about numbers and stuff...right?   But it does bring up an interesting question.  Why is Israel's per capita GDP so much higher than that of its neighbors.  per capita GDP data from the World Bank

COUNTRY	Israel	Lebanon	Jordan	Syria	Egypt	West Bank & Gaza
per capita GDP (USD)	31,282	9,904	4,665	2,892	2,780	1,123
year	2011	2011	2011	2010	2011	2005

Mitt Romney suggested that Israel's economic success (in contrast to the Palestinian's) was due to culture and the hand of providence - see here for text.  Max Fischer over at the Atlantic points out that if GDP is due to cultural superiority then are we to assume that Kuwait and Brunei are culturally superior to Israel?  I get what he is saying but its not quite a fair comparison. Both of the latter countries GDP is in large part due to their immense oil wealth - while neither Israel nor the Palestinian Territories derive their wealth primarily from natural resources.

Jordan Weissman also over that the Atlantic suggests four reasons that the Israeli economy has done well (1) it learned from its history of hyperinflation (2) it welcomes smart immigrants (3) the government promoted venture capital (4) Israeli Central Bank head Stanley Fischer implemented nominal GDP targeting.  Some or all of these reasons may be significant but I think we should start with the economists textbook models.  What leads to high GDP and high growth of GDP?  Physical capital stock, human capital stock, technology which overlaps human capital stock, natural resources, and business environment.

ECONOMIC MODELS OF GROWTH

The baseline neoclassical economic model of growth says that output Y is a function of the physical capital stock K, the labor input L, and the state of technology A commonly referred to a multi-factor productivity   

• Y=AK^aN^1-a

Note that we can divide through by the labor supply and convert the whole system into per capita terms

• y=Ak^a where y=Y/N and k=K/N

Assuming the neoclassical growth model is true then if Israel has a higher per capita output than does its neighbors we would expect that either her per capita capital stock or her technology level must exceed that of her neighbors. This model however assumes that each unit of labor is equally productive and that technology evolves exogenously (see the Wiki page for the full description of the model).

A simple extension of the neoclassical growth model assumes that labor is defined by not only how many of hours of input are used for production but by the quality of the labor as well.  Just like we can accumulate physical capital the Lucas Growth model assumes that a nation can accumulate human capital as well.  So that gives us another possible reason that Israel could have higher per capita output than its neighbors - they could have more human capital.

Some models of growth dispense with the technology A term but instead assume that when one invests in new capital they are also investing in the most recent technology.  In this case A is now longer exogenous.  If you look at the world in this manner (vintage capital) then it does not make sense to differentiate between the level of the physical capital stock and the state of technology - they are interlinked.   So in trying to explain Israel's higher per capita output we may want to consider both the amount of physical capital and the technological state of that capital.

Finally there are two other factors which - while they do not appear in the standard growth model certainly influence per capita GDP.  Max Fischer from the Atlantic gave the example of Kuwait which has a higher per capita output than does Israel.  Obviously that may be (probably is) due to Kuwait's great oil wealth and not due to higher greater physical capital or human capital or technology.  So we should also consider natural resources or factor endowments.

Finally there is a factor that I will call general business climate.  As we can see from a myriad of examples (Zimbabwe is the current poster child) government can play a destructive role in economic growth.  But as one can also see (think Somalia) a lack of security, central authority, and property rights can completely retard growth as well.  So that factors that we should look at are physical capital, technology, human capital, resources, and business climate.

PHYSICAL CAPITAL

Per Wikipedia "In economics, physical capital or just 'capital' refers to a factor of production (or input into the process of production), such as machinery, buildings, or computers. This is a tough one....(add more here)

TECHNOLOGY
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HUMAN CAPITAL

Human Capital as defined by Wikipedia is "the stock of competencies, knowledge, social and personality attributes, including creativity, embodied in the ability to perform labor so as to produce economic value. It is an aggregate economic view of the human being acting within economies, which is an attempt to capture the social, biological, cultural and psychological complexity as they interact in explicit and/or economic transactions. Many theories explicitly connect investment in human capital development to education, and the role of human capital in economic development, productivity growth, and innovation has frequently been cited as a justification for government subsidies for education and job skills training.^"  

We generally think of human capital as having something to do with education and training.  From the CIA Factbook it appears that Israeli's are getting more schooling than their neighbors.  Remember Israel's GDP is five times that of its next closest country so they are spending over five times as much to educate each person.

COUNTRY	Israel	Lebanon	Jordan	Syria	Egypt	West Bank	Gaza
Median Age	29.5	30.4	22.4	22.3	24.6	21.7	17.9
Literacy Rate	97.1	87.4	92.6	79.6	72.0	92.4	92.4
Average Years Education	15	14	13	11	11	14	14
Education Expenditures / GDP	5.9	1.8	?	4.9	3.8	?	?

Some people have suggested that higher education may actually be a luxury good and university may not correspond to actual productive training.  But if we are going to attribute any portion of per capita GDP to human capital then at least literacy has to be a relevant measure.   And one would think that there must be some productive content in the biology, chemistry, engineering, computer science, etc...Accounting is probably useful for growth too.

Assuming we do consider higher education to be indicative of human capital let's look at some rankings of universities.  From QS University Rankings  (whose rankings also appear to be used by US News Reports World's Best Universities) Israel has four of the world's top 400 universities:  Hebrew University (#120), Tel Aviv (#173), Technion (#220), Ben Gurion (#385).  Lebanon has one:  American University of Beirut (#300).   Jordan, Syria, Egypt, West Bank & Gaza did not place.

Times Higher Education ranked them slightly differently.  They have Hebrew University (#121), Tel Aviv (#166), Technion between 200 and 225, Bar Ilan between 300 and 350.  Egypt's Alexandria University  comes in between 300-350.  Jordan, Syria, Lebanon, West Bank & Gaza did not place.
So I think it is fair to say that Israel is at least spending more at the primary levels and has a superior higher educational system to that of its neighbors.  How much that actually contributes to increased growth is an open question.

NATURAL RESOURCES
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BUSINESS CLIMATE

For a review of the business environment in each country I am going to refer to two sources.  First the Heritage Foundation's Index of Economic Freedom.  This is a survey published each year and IMHO it is the only thing of value that the Heritage Foundation produces.  It seems to use objective criteria and though you may disagree with inclusion of some of the criteria it does seem pretty fair in how countries get placed.  There was no data for West Bank and Gaza.

	Israel	Lebanon	Jordan	Syria	Egypt
OVERALL RATING	67.8	60.1	69.8	51.2	57.9
Property Rights	70	25	55	30	35
Freedom From Corruption	61	25	47	25	31
Limited Govt Spending	41	68.2	67	78.5	64.1
Fiscal Freedom (Low Taxes)	64.1	90.8	93.5	84.4	89.7
Business Freedom (from Regs)	64.4	53.9	69.5	60.1	63.8
Labor Freedom	65.1	60.6	75.7	50	53.7
Monetary Freedom (Stable FX)	79	76.9	81.2	70.9	62.3
Trade Freedom	83.6	80.4	79.6	72.8	74
Investment Freedom	80	60	70	20	65
Financial Freedom	70	60	60	20	40

Israel and Jordan are very close together.  Syria is clearly the laggard.  Israel's weak points are Limited Government Spending and high Taxes (although I would argue this may be why they can afford the better education?)   Israel comes out well ahead in the categories of Property Rights and Lack of Corruption.
Secondly we can look at the World Bank's Ease of Doing Business Ratings.  All numbers represent a ranking among 183 countries with 1 being the best and 183 the worst. 

	Israel	Lebanon	Jordan	Syria	Egypt	West Bank & Gaza
OVERALL RANK	34	104	96	134	110	131
Starting a Business	43	109	95	129	21	177
Construction Permits	137	161	93	133	154	129
Getting Electricity	93	47	36	83	101	85
Registering Property	147	105	101	82	93	78
Getting Credit	8	78	150	174	78	166
Protecting Investment	5	97	122	111	79	46
Paying Taxes	59	30	21	111	145	39
Trading Across Borders	10	93	58	122	64	114
Enforcing Contracts	94	120	130	175	147	93
Resolving Insolvency	45	125	104	102	137	183

Under this rating system Israel appears to be a much more business friendly environment than any of its neighbors.