Mercer explains their ranking system in this way:
"Mercer says its rankings take into account 39 factors, grouped in 10 categories: political stability; economic environment; social freedoms; health and sanitation; schools and education; public services and transportation; recreational activities such as restaurants and theaters; availability of goods; housing; and the natural environment, such as climate and record of earthquakes."
Joel Kotkin explains the rankings in Forbes Magazine:
"To understand these rather head-scratching results, one must look at the criteria these surveys used. Cultural institutions, public safety, mass transit, "green" policies and other measures of what is called "livability" were weighted heavily, so results skewed heavily toward compact cities in fairly prosperous regions."