Economic Freedom in Decline


Tuesday September 20th, 2011   •   Posted by Emily Skarbek at 6:38am PDT   •  

The O’Neil Center for Global Markets and Freedom has just released the new, updated Economic Freedom of the World Index.

Over the years, this study has consistently found that the nations that score higher on the index tend to be richer and grow faster, and their citizens face less poverty, live longer, get more educated, and so on. On virtually every measure of the good life, more economic freedom yields better results. Other research finds economic freedom corresponds with less warfare, greater human rights, more gender equity, less unemployment, improved democracy, more trust and less corruption. The results of our study and others are simply overwhelming. Economic freedom works.

The United States recently witnessed one of the steepest losses in economic freedom ever! As Professor Lawson reports, the United States’ score since 2000 has fallen from 8.45 out of a possible 10 points to 7.58. This decline is among the largest in the world during the period—narrowing the gap between the U.S. and countries like Venezuela and Argentina. The overall decline is accounted for by changes in three areas: Spending, Property Rights, and Regulations. Here are some of the specifics (all data are changes from 2000-2009):

Spending
-Component 1A (Government Consumption) fell from 6.59 to 6.02.
-Component 1B (Transfers) fell from 6.54 to 5.94.
-Component 1C (Government Investment) fell from 8.00 to 7.00.
-Component 5Aiii (Private Sector Credit/Deficit) fell from 9.43 to 0.00.

Property Rights
-Component 2A (Judicial Independence) fell from 8.02 to 6.62.
-Component 2B (Impartial Courst) fell from 9.02 to 5.70.
-Component 2C (Property Rights) fell from 9.10 to 6.83.

Regulation
-Component 4Bi (Non-tariff Trade Barriers) fell from 8.12 to 6.03.
-Component 5Ci (Price controls) fell from 8.00 to 6.00.
-Component 5Cii (Administrative requirements) fell from 7.92 to 4.13.
-Component 5Ciii (Bureaucracy costs) fell from 8.15 to 2.58

Robert Lawson is co-author of the Economic Freedom of the World Index, with James Gwartney of Florida State University and Joshua Hall of Beloit College. Below are videos with Professors Hall and Lawson about the Index courtesy of LearnLiberty.org, the Charles G. Koch Foundation and the Institute for Humane Studies:




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