Tag Archives: Economic Freedom

The unseen costs of Amazon’s HQ2 Site Selection

Earlier this year Amazon narrowed down the list of potential cities to site its second headquarters. Applicants are now waiting out the selection process. It’s unclear when Amazon will make its choice, but that hasn’t stopped many from speculating who the likely contenders are. Varying sources report Atlanta, Boston, and Washington D.C. at the top of the list. The cities that didn’t make the cut are no doubt envious of the finalists, having just missed out on the potential for a $5 billion facility and 50,000 jobs. The second HQ is supposed to be as significant for economic growth as the company’s first site, which according to Amazon’s calculations contributed an additional $38 billion to Seattle’s economy between 2010 and 2016. There is clearly a lot to be gained by the winner.  But there are also many costs. Whichever city ends up winning the bid will be changed forever. What’s left out of the discussion is how the bidding process and corporate incentives affect the country.

Although the details of the proposals are not made public, each finalist is likely offering some combination of tax breaks, subsidies, and other incentives in return for the company’s choice to locate in their city. The very bidding process necessitates a lot of time and effort by many parties. It will certainly seem “worth it” to the winning party, but the losers aren’t getting back the time and effort they spent.

This practice of offering incentives for businesses has been employed by states and localities for decades, with increased usage over time. Targeted economic development incentives can take the form of tax exemptions, abatements, regulatory relief, and taxpayer assistance. They are but one explicit cost paid by states and cities looking to secure business, and there is a growing literature that suggests these policies are more costly than meets the eye.

First, there’s the issue of economic freedom. Recent Mercatus research suggests that there may be a tradeoff to offering economic development incentives like the ones that Amazon is receiving. Economists John Dove and Daniel Sutter find that states that spend more on targeted development incentives as a percentage of gross state product also have less overall economic freedom. The theoretical reasoning behind this is not very clear, but Dove and Sutter propose that it could be because state governments that use more subsidies or tax breaks to attract businesses will also spend more or raise taxes for everyone else in their state, resulting in less equitable treatment of their citizens and reducing overall economic freedom.

The authors define an area as having more economic freedom if it has lower levels of government spending, taxation, and labor market restrictions. They use the Fraser Institute’s Economic Freedom of North America Index (EFNA) to measure this. Of the three areas within the EFNA index, labor market freedom is the most affected by targeted economic development incentives. This means that labor market regulation such as the minimum wage, government employment, and union density are all significantly related to the use of targeted incentives.

Economic freedom can be ambiguous, however, and it’s sometimes hard to really grasp its impact on our lives. It sounds nice in theory, but because of its vagueness, it may not seem as appealing as a tangible economic development incentive package and the corresponding business attached to it. Economic freedom is associated with a series of other, more tangible benefits, including higher levels of income and faster economic growth. There’s also evidence that greater economic freedom is associated with urban development.

Not only is the practice of offering targeted incentives associated with lower economic freedom, but it is also indicative of other issues. Economists Peter Calcagno and Frank Hefner have found that states with budget issues, high tax and regulatory burdens, and poorly trained labor forces are also more likely to offer targeted incentives as a way to offset costly economic conditions. Or, in other words, targeted development incentives can be – and often are – used to compensate for a less than ideal business climate. Rather than reform preexisting fiscal or regulatory issues within a state, the status quo and the use of targeted incentives is the more politically feasible option.

Perhaps the most concerning aspect of Amazon’s bidding process is the effect it has on our culture. Ideally, economic development policy should be determined by healthy economic competition between states. In practice, it has evolved into more of an unhealthy interaction between private interests and political favor. Economists Joshua Jansa and Virginia Gray refer to this as cultural capture. They find increases in business political contributions to be positively correlated with state subsidy spending. Additionally, they express concern over the types of firms that these subsidies attract. There is a selection bias for targeted incentives to systematically favor “flighty firms” or firms that will simply relocate if better subsidies are offered by another state, or potentially threaten to leave in an effort to extract more subsidies.

None of these concerns even address the question of whether targeted incentives actually achieve their intended goals.  The evidence does not look good. In a review of the literature by my colleague Matthew Mitchell, and me, we found that of the studies that evaluate the effect of targeted incentives on the broader economy, only one study found a positive effect, whereas four studies found unanimously negative effects. Thirteen studies (half of the sample) found no statistically significant effect, and the remaining papers found mixed results in which some companies or industries won, but at the expense of others.

In addition to these unseen costs on the economy, some critics are beginning to question whether being chosen by Amazon is even worth it. Amazon’s first headquarters has been considered a catalyst for the city’s tech industry, but local government and business leaders have raised concerns about other possibly related issues such as gentrification, rising housing prices, and persistent construction and traffic congestion. There is less research on this, but it is worth considering.

It is up to each city’s policymakers to decide whether these trade-offs are worth it. I would argue, however, that much of the evidence points to targeted incentives – like the ones that cities are using to attract Amazon’s business – as having more costs than benefits. Targeted economic development incentives may seem to offer a lot of tangible benefits, but their unseen costs should not be overlooked. From the perspective of how they benefit each state’s economy as a whole, targeted incentives are detrimental to economic freedom as well as our culture surrounding corporate handouts. Last but not least, they may often be an attempt to cover up other issues that are unattractive to businesses.

More labor market freedom means more labor force participation

The U.S. labor force participation (LFP) rate has yet to bounce back to its pre-recession level. Some of the decline is due to retiring baby-boomers but even the prime-age LFP rate, which only counts people age 25 – 54 and thus less affected by retirement, has not recovered.

Economists and government officials are concerned about the weak recovery in labor force participation. A high LFP rate is usually a sign of a strong economy—people are either working or optimistic about their chances of finding a job. A low LFP rate is often a sign of little economic opportunity or disappointment with the employment options available.

The U.S. is a large, diverse country so the national LFP rate obscures substantial state variation in LFP rates. The figure below shows the age 16 and up LFP rates for the 50 states and the U.S. as a whole (black bar) in 2014. (data)

2014-state-lfp-rates

The rates range from a high of 72.6% in North Dakota to a low of 53.1% in West Virginia. The U.S. rate was 62.9%. Several of the states with relatively low rates are in the south, including Mississippi, Alabama and Arkansas. Florida and Arizona also had relatively low labor force participation, which is not surprising considering their reputations as retirement destinations.

There are several reasons why some states have more labor force participation than others. Demographics is one: states with a higher percentage of people over age 65 and between 16 and 22 will have lower rates on average since people in these age groups are often retired or in school full time. States also have different economies made up of different industries and at any given time some industries are thriving while others are struggling.

Federal and state regulation also play a role. Federal regulation disparately impacts different states because of the different industrial compositions of state economies. For example, states with large energy industries tend to be more affected by federal regulation than other states.

States also tax and regulate their labor markets differently. States have different occupational licensing standards, different minimum wages and different levels of payroll and income taxes among other things. Each of these things alters the incentive for businesses to hire or for people to join the labor market and thus affects states’ LFP rates.

We can see the relationship between labor market freedom and labor force participation in the figure below. The figure shows the relationship between the Economic Freedom of North America’s 2013 labor market freedom score (x-axis) and the 2014 labor force participation rate for each state (y-axis).

lab-mkt-freed-and-lfp-rate

As shown in the figure there is a positive relationship—more labor market freedom is associated with a higher LFP rate on average. States with lower freedom scores such as Mississippi, Kentucky and Alabama also had low LFP rates while states with higher freedom scores such as North Dakota, South Dakota and Virginia had higher LFP rates.

This is not an all-else-equal analysis and other variables—such as demographics and industry composition which I mentioned earlier—also play a role. That being said, state officials concerned about their state’s labor market should think about what they can do to increase labor market freedom—and economic freedom more broadly—in their state.

Economic Freedom, Growth, and What Might Have Been

Economists are obsessed with growth. And for good reason. Greater wealth doesn’t just buy us nicer vacations and fancier gadgets. It also buys longer life spans, better nutrition, and lower infant mortality. It buys more time with family, and less time at work. It buys greater self-reported happiness. And as Harvard economist Benjamin Friedman has argued, wealth even seems to make us better people:

Economic growth—meaning a rising standard of living for the clear majority of citizens—more often than not fosters greater opportunity, tolerance of diversity, social mobility, commitment to fairness, and dedication to democracy.

For much of my lifetime, brisk economic growth was the norm in the United States. From 1983 to 2000, annual growth in real (that is, inflation-adjusted) GDP averaged 3.67 percent. During this period, the U.S. experienced only one (short and mild) recession in the early ‘90s. The era was known among macroeconomists as the “great moderation.”

But starting around the turn of the millennium, things changed. Instead of averaging 3.67 percent growth, the U.S. economy grew at less than half that rate, 1.78 percent on average. To see the effect of this deceleration, consider the chart below (data are from the BEA). The blue line shows actual GDP growth (as measured in billions of chained 2009 dollars).

The red line shows what might have happened if we’d continued to grow at the 3.67 percent rate which prevailed for the two previous decades. At this rate, the economy would have been 30 percent larger in 2015 than it actually was.

This assumes that the Great Recession never happened. So to see what would have happened to GDP if the Great Recession had still occurred but if growth had resumed (as it has in every other post-WWII recession), I calculated a second hypothetical growth path. The green line shows the hypothetical path of GDP had the economy still gone through the Great Recession but then resumed its normal 3.67 percent rate of growth from 2010 onward. Under this scenario, the economy would have been fully 8 percent larger in 2015 than it actually was.

screen-shot-2016-09-16-at-11-31-02-am

(Click to enlarge)

So what happened to growth? One answer is economic freedom—or a lack thereof. Just yesterday, the Fraser Institute released its annual Economic Freedom of the World report. Authored by Professors James Gwartney of Florida State University, Robert Lawson of Southern Methodist University, and Joshua Hall of West Virginia University, the report assesses the degree to which people are free to exchange goods and services with one another without interference. As Adam Smith might have put it, it measures the degree to which we live under “a system of natural liberty.”

As the chart below shows, economic freedom was on the steady rise before 2000. This coincided with modest deregulation of a few industries under Carter and Reagan, tax cuts under Reagan and Clinton, free trade deals, and restrained growth in the size of government. But from 2000 onward, U.S. economic freedom has been in precipitous decline. This coincides with major new financial regulations under both Bush II and Obama, significant growth in government spending, and a steady erosion in measures of the rule of law.

screen-shot-2016-09-16-at-11-33-15-am

(Click to enlarge)

As I’ve noted before, the research on economic freedom is quite extensive (nearly 200 peer-reviewed academic studies use economic freedom as an explanatory variable). Moreover, meta-studies of that literature find “there is a solid finding of a direct positive association between economic freedom and economic growth.”

Perhaps the two charts have something to do with one another?

 

 

Why are there no libertarian countries?

In a recent article in Salon, Michael Lind posed a question:

Why are there no libertarian countries? If libertarians are correct in claiming that they understand how best to organize a modern society, how is it that not a single country in the world in the early twenty-first century is organized along libertarian lines?

He (or more likely his editors) called it the “question libertarians just can’t answer.” The headline of E.J. Dionne’s piece in praise of Lind’s article was more direct, calling the question “Libertarianism’s Achilles’ heel.”

Before addressing the substance of the question, it is worth noting that Lind seems to have misunderstood a central tenet of libertarian thinking: Few libertarians claim to have any superior knowledge of how to organize society. More often, libertarians come to their world view precisely because they think that no one could know how to plan the affairs of others.

Setting this aside, though, is the absence of a purely or even mostly-libertarian state proof that libertarian goals are unworthy? I don’t see how. No one thinks that the existence of poverty makes charity an unworthy goal. Why should the existence of widespread government intervention in private affairs make individual freedom an unworthy goal?

The key here is to appreciate the distinction between an optimal position and an equilibrium position. Optimality—whether it is defined as Pareto efficiency or justice as fairness—is a normative description of the degree to which we think a condition is ideal. Equilibrium, on the other hand, is a positive description of the way we think the world will actually turn out.

The two can be one and the same, as when economists predict that the outcome in a competitive market will be efficient. But the two needn’t be the same.

And in fact, a long list of libertarians and libertarian-leaning thinkers seem to have believed that liberty is emphatically not a stable equilibrium. Perhaps the most famous statement to this effect is Thomas Jefferson’s lament that “The natural progress of things is for liberty to yield, & government to gain ground.” More recently, in his introduction to Capitalism and Freedom, Friedman averred that “Freedom is a rare and delicate plant.”

Perhaps these statements can be dismissed as rhetorical flourishes. But formal public choice models quite often predict sub-optimal political equilibria. And libertarians frequently cite these models in support of their limited government perspective. So, like a great deal of progressives, it turns out that libertarians seem to think that “what is” is not optimal and that we should strive for, well, progress.

Much of the rest of Lind’s piece is dedicated to Mauritius, a small economically-free island nation off the coast of Africa. Mauritius often ranks high in economic freedom while, Lind notes, it has comparatively high infant mortality and comparatively low literacy rates. From this sample of one, he concludes:

Libertarians seem to have persuaded themselves that there is no significant trade-off between less government and more national insecurity, more crime, more illiteracy and more infant and maternal mortality, among other things

This is not the way social science–or any science–should be done. Do you know someone who regularly exercises yet seems to struggle with a weight problem? If so, this is hardly a reason to conclude that limited exercise is statistically significantly related to excess weight. It might be an indication of a broader relationship. But wouldn’t you want to gather more data and examine it in light of your existing theories?

Fortunately, economic freedom indices such as the Economic Freedom of the World Index (EFW) by Gwartney, Lawson, and Hall, have permitted researchers to do just that. And as it happens, each of the “trade-offs” that Lind names has been examined. Let’s take each in turn:

  • National insecurity and economic freedom: David Steinberg and Stephen Saideman examined the relationship between government involvement in the economy and ethnic violence in a 2008 article published in International Studies Quarterly.  In their words, “Our theory of insecurity predicts that free market economies reduce violent ethnic conflict by reducing fear and insecurity. We present statistical analyses, using data from the Minorities at Risk project and the Index of Economic Freedom, showing that government involvement in the economy increases ethnic rebellion. Our results suggest that the overall size of the public sector is less important than government interference with the market allocation mechanism.”
  • Crime and economic freedom: Edward Stringham and John Levendis explored the relationship between economic freedom and homicide in their chapter in the 2010 EFW. They found economic freedom and homicide to be negatively correlated. Here is Figure 6.1:

economic freedom and homicide, 2010 EFW

  • Illiteracy and economic freedom: A number of authors have looked at the relationship between economic freedom and literacy, often focusing on male/female inequality in literacy. In her 2006 study in Independent Review, for example, Michelle Fram Cohen used a Gender Empowerment Index that included disparities in female and male literacy, life expectancy, and income.  She found economic freedom was positively related to the female empowerment index. Michael Stroup also looked at this relationship in his 2007 article in the Journal of Economic Behavior and Organization. He, too, found a positive association between economic freedom and female literacy (he also found economic freedom was positively associated with life expectancy, fertility, and contraception use by women). Then there is this chart in the 2011 EFW (click on the chart to make it larger):

economic freedom and literacy, 2011 EFW

  • Infant mortality and economic freedom: This relationship was charted in the 2007 EFW:

economic freedom and infant mortality, 2007 EFW

  • Maternal mortality and economic freedom: Stroup visited this question in his chapter in the 2011 EFW. Here is the chart, which also shows the relationship between economic freedom and adolescent fertility:

economic freedom and maternal mortality

For an overview of the entire literature, check out Lawson and Hall’s recent article in Contemporary Economic Policy (here is a non-gated working paper version). They reviewed 198 articles using the EFW as an independent variable. In their words:

Over two-thirds of these studies found economic freedom to correspond to a “good” outcome such as faster growth, better living standards, more happiness, etc. Less than 4% [MM: 8 articles] of the sample found economic freedom to be associated with a “bad” outcome such as increased income inequality. The balance of evidence is overwhelming that economic freedom corresponds with a wide variety of positive outcomes with almost no negative tradeoffs.

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Update:

Here is Jonah Goldberg’s response to Lind. Many others have had excellent responses as well.

 

Economic Freedom and Economic Privilege

Heritage indexLast week, the Wall Street Journal and the Heritage Foundation released their annual Index of Economic Freedom by Terry Miller, Kim Holmes, and Edwin Feulner. I was delighted to contribute a chapter on government-granted privilege. I began by noting that despite the manifest evidence of a strong empirical link between economic freedom and economic prosperity, large numbers of people still lack basic economic freedoms.

In the latest edition of the Index, for example, 92 countries—home to nearly 70 percent of all of humanity—were listed as “mostly unfree” or “repressed.” Even among the freer nations such as the United States, economic freedom in recent years has been declining.

Why? I suggest two answers. The first is that ideas matter and we are currently losing the battle of ideas.

The second answer is more difficult:

Put simply, some entrenched interests benefit from the current lack of economic freedom and are prepared to go to great lengths to maintain the unfree status quo.

If this is not immediately obvious, it may be because the advocates of economic freedom often fail to emphasize it. Too often, those of us who argue for freedom highlight the fact that taxes are crushing, that regulations are burdensome, and that government involvement in the economy is an impediment to progress. While this is typically true, it is also true that tax dollars line the pockets of some well-connected companies, that regulations often allow some firms to profit at the expense of customers and competitors, and that almost every intervention in the market creates both losers and winners.

The chapter, adapted from The Pathology of Privilege, can be found here.

There are other interesting contributions from Robert Barro on “Democracy, Law and Order, and Economic Growth”; James Roberts and John Robinson on how “Property Rights Can Solve the Resource Curse”; and by Myron Brilliant on how “Good Business Demands Good Governance.”

Also, don’t miss Miller’s OpEd from the Wall Street Journal. It offers a nice overview of the latest data and a summary of the chapters. Lastly, be sure to spend some time exploring the data and the website. They’ve done a brilliant job of bringing all of this information together and presenting it in a user-friendly way.

My thanks to Heritage and especially to Terry Miller for the opportunity.

This Week in Economic Freedom

It’s been a promising week for supporters of freer markets as several states and municipalities have taken steps toward deregulation and consumer choice. Here’s a roundup of some new developments:

1. Washington state is making headlines by being the first state (and first place globally) to legalize recreational marijuana. This policy change comes after recent polls indicate that most Americans favor legalizing marijuana. Of course what remains to be seen  is how the federal government will respond to this change in state law. The U.S. Attorney General’s office has issued a letter stating that marijuana remains illegal under federal law in these states and under the Obama administration the office has aggressively prosecuted medical marijuana dispensaries that are legal under states’ laws.

2. In Michigan right to work legislation looks poised to pass. The change would make it legal for employers to pay workers who choose not to be union members. James Sherck explains the political calculus behind this potential policy change:

Republicans have large majorities in both houses of the state legislature. Until now, however, Governor Rick Snyder has insisted right to work was not on his agenda. But today he changed his tune and called for the legislature to pass the bill — Snyder’s support removes the last obstacle to right to work passing in Michigan.

How did this happen? For one, unions badly miscalculated. They tried to amend the state constitution to preemptively ban right to work and attempted to elevate union contracts above state law. Michigan voters roundly rejected the proposal, but the debate put the issue on the public’s agenda.

Unsurprisingly, Michigan unions strongly oppose this change and are currently rallying against this potential change.

3. In Washington, DC City Council took two steps toward greater economic freedom. On Tuesday, the DC Council passed legislation allowing Uber, a popular sedan service which customers use their cell phones to book, to continue operating in the city. The new legislation legalizes “digital dispatch” and permits this new type of service that fits between taxis and traditional car services. Uber still faces legal challenges in San Francisco, Boston, Toronto, New York, and Chicago. Also on Tuesday, DC joined its neighbors Maryland and Virginia with legal Sunday liquor sales. As is so often the case with regulation,  many liquor store owners supported the status quo of mandatory Sunday closings. Store owners testified that they appreciated the mandatory day off and worried that the policy change would allow competitors to cut into the profits of stores that choose to close on Sunday.

U.S. Economic Freedom: A Short Introduction

On a few occasions I’ve experimented with YouTube videos as a way to make dynamic graphs that move in order to help convey a point.

The latest edition of the Economic Freedom of the World Report offered an occasion to try this again. This time, however, I thought I’d add a voiceover and a little context. Let me know what you think.

On the topic of economic freedom, don’t miss this excellent piece, coauthored by my Mercatus colleague Antony Davies and James Harrigan.

When Taxpayer Dollars Are Used to Advocate for More…Taxpayer Dollars

Back in 2010, I noted that government spending can beget further spending. I cited research by Russell Sobel and George Crowley which shows that when the federal government transfers money to the states (as the stimulus bill did), the states tend to increase their own future taxes after the federal money goes away. They found that for every $1.00 the feds send to the states, states increase their own future taxes between $0.33 and $0.42.

Image by scottchan

It recently came to my attention, however, that little-noticed aspects of the 2009 Stimulus and the 2010 Affordable Care Act go even further: they fund advocacy on behalf of further state and local government spending.

Here is the story:

The stimulus bill set aside $650 million for the Department of Health and Human Services to spend on “evidence-based clinical and community-based prevention and wellness strategies.” The idea was to encourage state and local governments to adopt policies that get people to stop smoking, to eat better, and to get exercise.

HHS used the money to create a new grant program called Communities Putting Prevention to Work (CPPW). According to the CPPW website, it features “a strong emphasis on policy and environmental change at both the state and local levels.” (emphasis added).

Grants can go to local governments or to non-profits. You can see a list of approved grantee strategies here. Many of the strategies seem to be regulatory in scope (e.g. media and advertising bans for cigarettes, bans on branded promotional items, etc.). A number are also focused on getting state and local governments to spend more money. For example, they suggest efforts to get money for “hard-hitting counter-advertising” against tobacco. Or for “safe, attractive accessible places for activity” such as “recreation facilities, [and] enhance[d] bicycling and walking infrastructure.” They also call for “Reduced price[s] for park/facility use” (which, of course, means increased taxpayer support).

Interestingly, the Affordable Care Act doubled down on these activities. “Phase Two Funding” for CPPW was buried in the ACA.

It seems more than a little unseemly to have federal taxpayers bankroll an advocacy campaign like this. How would progressives feel if federal tax dollars were spent on a campaign to get state governments to cut taxes and regulations? Or how about a taxpayer-financed campaign to promote awareness of the Economic Freedom of the World index or the Freedom in the 50 States Index? Studies suggest, by the way, that economic freedom is associated with improved health outcomes (see Exhibit 1.16 of the EFW on p. 24). So maybe such a campaign would qualify for a grant under the program?

Economic Freedom and Well-Being Across U.S. States

From new research by R. W. Hafer and Ariel Belasen, both of Southern Illinois University:

There is ample evidence that well-being, measured in various ways, is positively related to economic freedom across countries. Does this relationship hold at the sub-national level? Answering that question is the purpose of this study. Using regression analysis, we test whether economic freedom has an independent effect on well-being across states in the U.S. Our evidence indicates that, at the state-level, improvements in economic freedom lead to higher levels of well-being even after controlling for other economic factors. We also find that the relationship between well-being and economic freedom differs significantly across regions in the United States.

Economic Freedom In Decline

Today, the Fraser Institute released the 2011 version of the Economic Freedom of the World report. Authored by James Gwartney of Florida State University, Robert Lawson of Southern Methodist University, and Joshua Hall of Beloit College, the index is an annual measure of economic freedom. Drawing on 42 data points gathered from each of 141 countries, it assigns each nation an economic freedom score. The score reflects the degree to which citizens in the nation enjoy economic freedom as characterized by “personal choice, voluntary exchange coordinated by markets, freedom to enter and compete in markets, and protection of persons and their property from aggression by others.”

Chapter 3 of the new report features an essay by Jean-Pierre Chauffour, lead economist of the World Bank’s Middle East and North Africa Region. In Figure 3.1, reproduced below, Chauffour shows the relationship between economic freedom and the log of per capita income (adjusting for purchasing power parity).

But economic freedom seems to be about more than just per capita income. Readers of Neighborhood Effects know that scores of peer-reviewed studies have examined the relationship between economic freedom and all sorts of measures of well being. The overwhelming evidence is that economic freedom is positively related to things humans like (per capita income of the poor, life expectancy, access to clean water, etc.) and negative related to things humans don’t like (poverty, child labor, etc.). Some of the most sophisticated studies have even tried to disentangle cause and effect.

So where do we stand? The data are lagged, so this year’s report now calculates economic freedom through 2009. There are some bright spots. For example:

The chain-linked summary ratings of Uganda, Zambia, Nicaragua, Albania, and Peru have improved by three or more points since 1990.

There is also some bad news:

 ….In contrast, the summary ratings of Venezuela, Zimbabwe, United States, and Malaysia fell by eight tenths of a point or more between 1990 and 2009, causing their rankings to slip.

In fact, those countries that slipped the most since 2000 were: Argentina, Iceland, Ireland, the United States, and Venezuela.

To see just how far the U.S. has fallen, consider the graph below. The first phase shows the U.S. (chain-linked) economic freedom score from 1970 through 2000. It is slow and steady progress the whole way. The second phase shows the U.S. score from 2000 onward. It is a dramatic and precipitous drop. Notice, by the way, that the ascendant periods lasts through three presidents of two different parties. The descent also seems to have persisted irrespective of the party in office. It seems that the policies that impact economic freedom are not strongly related to partisanship.

Mercatus has its own state-level measure of economic freedom, developed by Jason Sorens of the University of Buffalo (SUNY) and William Ruger of Texas State University.

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Addendum: Here is Arnold Kling on the report. Here is David Henderson. Here is Mark Steyn. Here is Robert Lawson.