Of course these sorts of rankings are always a bit questionable as they rely completely on whatever you choose to measure and how to factor it into the final number, but it seems like this comes from people who at least should know what they're talking about. The blind ideological bias of the source, if it exists, should also go against Finland... actually, some of this ideological bias regarding "government size" was corrected in the newest version of the ranking list.
To me, the fact that we have so many Nordic nations up there is, once again, proof that we've got it right. Our way of life might not be perfect, and it should perhaps be adjusted from time to time, but the core ideas are correct. We do not waste human resources. Our ability to keep people in touch with society is very good, although we have certainly had problems after the 1990s recession... of course a country the size of the USA can dump countless millions of souls overboard as useless if neccessary and still be economically strong through brute force... we can't afford that kind of a strategy.
Of course it has to be realized that the proper functioning of the Nordic system requires two things... cohesion of the people, as in, a feeling that the guy next door is your human compatriot and not just something you can kill for food if it doesn't fight back hard enough, and firm ethics on every level of society... I find it no surprise at all that Finland regularly ranks also as the least corrupt nation in the world, or is at least second -- in these cases Sweden typically is in number one.
Interestingly, take one of these base pillars away, and the other falters. Take away cohesion, we no longer share the ethics or have motivation for them... take away ethics and you certainly will lose the cohesion.
It is indeed reassuring to be told that from an outside observer's vantage point, a more humane approach to life at large is competitively successful. It results in a stable society where agreements are honored, people keep the peace and are "well enough" to function meaningfully in their lives, thus contributing to overall prosperity and creating a safe climate... finally, it is noteworthy that one of Finland's main draws is its educated population.
Then again, if losing a few places on the competitiveness chart meant tearing apart what makes Nordic societies special... my choice would be easy.
; behind Iceland 
?
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