Economic Freedom

It is usual for people to ignore information that would contradict or at least not support their ideas about the way that the world works. It is important not to fall into this trap. One of the ideas that I have held is that economic liberty, as libertarians see it, is good. For this reason I have supported the efforts of the Fraser Institute which came out with the economic freedom of the world report.

I believe that the policies that they advocated are good and are indeed what a supporter of free market economics would agree with. For this reason I found their detractors to be unpersuasive. Basically they objected to the concept on the basis that it had little to do with what they thought of as freedom. Particularly in the area of labor markets. Economic freedom as capitalists and libertarians see it includes liberalizing the labor market. This goes against the right to collectively bargain as those on the left see it.

I found this objection unpersuasive because the work of the Fraser Institute tells whether or not a particular country or state has implemented capitalist policies, regardless of whether or not these policies conform to your ideas about liberty.

In any case I suppose that I need to write about a deficiency in the work.  The opponents of capitalism do not claim that all aspects of economic liberty, even as capitalists see it, are harmful.  Thus the index will include some things that they like along with certain others that they do not.  In order to use the index in order to make certain policy prescriptions, it is necessary that all aspects of economic liberty contribute to producing desirable results.

Suppose, for example, that we were to argue that a diet that included lard and vegetables left one susceptible to heart disease.  I cannot use empirical information of this sort to argue that eating either lard or vegetables will cause heart disease.  If I construct an index that measures how much lard and vegetables people eat, I might find that people who ate more would be more prone to heart disease.  In this case we have a pretty good idea that lard contributes to heart disease while vegetables do not.

We can shed light on this issue if we take apart the various components of economic liberty and see if they each individually contribute to economic growth, for example.  If we do this the case is quite a bit weaker.  Now, it may be the case that this is simply due to the fact that we need more data in order to obtain significant results.  The trouble is not that we show results that tell the exact opposite story from the one that they are telling, but that the results in many areas were rarely significant and didn't always point in the direction of supporting capitalism.  There were instances of a particular aspect of economic liberty actually pointing in the opposite direction.

Now it might be the case that if I were to look at the data over a longer time horizon, that I would be able to obtain significant results.  Unfortunately, I no longer have my work on this subject.  Perhaps I can do it over.