Tag Archives: Panama

Economic Freedom, Economic Growth, and Freedom in the 50 States

Today, Mercatus released a new edition of William Ruger and Jason Sorens’s Freedom in the 50 States. To my knowledge, it is the most-comprehensive analysis of freedom at the state level, covering both economic freedoms and personal freedoms. The authors explain their study in this pretty awesome video:

Vero offers some interesting analysis over at The Corner.

The timing is excellent, as the World Bank recently released a new study of the impact of economic freedom on economic performance (HT to Robert Lawson). They conclude:   

Reviewing the economic performance—good and bad— of more than 100 countries over the past 30 years, this paper finds new empirical evidence supporting the idea that economic freedom and civil and political liberties are the root causes of why some countries achieve and sustain better economic outcomes. For instance, a one unit change in the initial level of economic freedom between two countries (on a scale of 1 to 10) is associated with an almost 1 percentage point differential in their average long-run economic growth rates.

To put the numbers in perspective, what if, in 1975 (the first year for which they have data), the US level of economic freedom had been 1 unit lower? This would have put us in the neighborhood of Canada or Panama at the time. Then, other things being equal, the World Bank study suggests that we’d expect today’s economy to be about 30 percent smaller than it actually is. What if we’d had 1 unit less freedom in 1945? Then we’d expect today’s economy to be about half its current size.   

 As I have mentioned elsewhere, state-level studies corroborate the international evidence on the importance of economic freedom. I hope decision makers at the state level are reading Ruger and Sorens’s new study.