The most peaceful place in the world? It's not a California beach, nor the Scotland Highlands. For the second year in a row, Iceland ranks as the most peaceful nation in the world, according to the annual ranking of the Institute for Economics and Peace (IEP).

Drawing from 23 quantitative (“How many homicides per 100,000 people?") and qualitative (“relations with neighboring countries”) indicators that measure the amount of internal and external violence within specific countries, the IEP annually compiles a list of the most -- and least -- peaceful countries in the world.

This year's ranking saw the U.S. drop six spots, from 82nd to 88th. Syria, which has been rocked by 15 months of brutal violence, unsurprisingly dropped 31 spots, to 147th out of 158 nations ranked.

Steve Killelea, founder and Chairman of the Institute for Economics and Peace, said there is a strong relationship between improvements in peace and economic prosperity. “I realized that we spend a lot of time studying conflict, and not much time studying peace,” he said. “If you wanted to understand what it takes to have a good marriage, would you hang around a divorce court?

The IEP produces the index as a way of informing governments and nongovernmental organizations of the economic incentives of a world without violence and encourages them to “invest in peace,” Killelea said.

Violence costs money. The U.S., as an example, spends $100 billion in Afghanistan per year, or nearly $2 billion a week.

Although he acknowledges that there needs to be an appropriate amount of investment in security and the prison industry, Killelea suggests that the fortunes spent on "violence" can be directed into more “productive investments.”

“For example, the U.S., rather than building a prison, can use money for water levees or a rapid transit system,” Killelea said.

He cited Sub Saharan Africa as an example of a region in which economic and political integration have created a more peaceful environment.

“Nations have become externally more peaceful as they compete through economic, rather than military means,” Killelea said.

Iceland is this year's most peaceful country, but can you guess the most violent one? Find out in the slideshow below.

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  • #10 - Pakistan

    Photo: A Pakistani boy, who was injured in a suicide attack, receives treatment at a hospital in Peshawar, Pakistan, Tuesday, June 12, 2012. (AP Photo/Mohammad Sajjad)

  • #9 - Israel

    Photo: Masked Palestinian stone-throwers run away from tear gas fired by Israeli security forces, not pictured, during clashes in the West Bank town of Al-Ram, near Jerusalem, Saturday, Feb. 25, 2012. (AP photo/Bernat Armangue)

  • #8 - Central African Republic

    Photo: A soldier from the Central African Republic stands guard at a building used for joint meetings between them and U.S. Army special forces, in Obo, Central African Republic, Sunday, April 29, 2012. (AP Photo/Ben Curtis)

  • #7 - North Korea

    Photo: In this April 25, 2012 file photo, North Koreans pay tribute to the statues of late leaders Kim Il Sung, left, and Kim Jong Il, right, during a holiday in honor of the 80th anniversary of the founding of the North Korean Army in Pyongyang, North Korea. (AP Photo/Vincent Yu, File)

  • #6 - Russia

    Photo: In this Sunday, May 6, 2012 file photo, Russian riot police try to disperse opposition protesters in downtown Moscow. (AP Photo/ Ivan Sekretarevl)

  • #5 - Democratic Republic of Congo

    Photo: Congolese riot police throw a supporter of Congolese opposition leader Etienne Tshisekedi in a police truck during clashes near Tshisekedi 's headquarters in Kinshasa, Democratic Republic of Congo, Thursday Dec. 8, 2011. (AP Photo/Jerome Delay)

  • #4 - Iraq

    Photo: Mourners pray over the coffins of security forces killed in an attack in Haditha, Iraq, at their funeral in Fallujah, 40 miles (65 kilometers) west of Baghdad, Monday, March 5, 2012. (AP Photo/Hadi Mizban)

  • #3 - Sudan

    Photo: Sudan People's Liberation Army (SPLA) forces at the frontline in Tachuien, Unity State, South Sudan on Friday, May 11, 2012. (AP Photo/Pete Muller)

  • #2 - Afghanistan

    Photo: An Afghan boy pushes a wheel on the Naderkhan hill in Kabul, Afghanistan, Wednesday, May, 30, 2012. (AP Photo/ Ahmad Jamshid)

  • #1 - Somalia

    Photo: This photo Released by the African Union-United Nations Support Team, Friday, May 25, 2012, Ugandan soldiers serving with the African Union Mission in Somalia (AMISOM), listens while Contingent Commander for Uganda, Brigadier Paul Lokech (not seen) briefs members of 09 Battalion before an advance on the town of Afgoye to the west of the Somali capital Mogadishu. (AP Photo/ AU-UN IST / Stuart Price.HO)