Liberty, Equality, Prosperity November 2015 www.antonydavies.org www.antonydavies.org 1
Economic Freedom Less More Economic decisions made collectively. Economic decisions made individually. Controlled people Free people www.antonydavies.org 2
Arguments Against and For Economic Freedom People should be controlled Left to themselves, people will consolidate power, stifle competition, exploit each other, and confiscate wealth. People should be free Left to themselves, people will disseminate power, promote competition, cooperate with each other, and create wealth. www.antonydavies.org 3
Economic Freedom of North America Economic Freedom of the World Size of government Government consumption Transfers and subsidies Social Security payments Takings and discriminatory taxes Tax revenue Top marginal income tax rate and threshold Other tax revenues Labor market freedom Minimum wage Public sector employment Union density www.antonydavies.org 4
For each year, divide the states into two groups 25 least free 25 most free www.antonydavies.org 5
Economic Freedom of North America (1985 2009) Least Free Most Free www.antonydavies.org 6
Income www.antonydavies.org 7
Economic Freedom of North America (all levels of government) Data source: U.S. Census Bureau, Historical Income Tables: Households, Table H-8; Ashby, Bueno, and McMahon, Economic Freedom of North America 2011, Fraser Institute www.antonydavies.org 8
Economic Freedom of North America (all levels of government) 1985 $22,000 $24,000 Data source: U.S. Census Bureau, Historical Income Tables: Households, Table H-8; Ashby, Bueno, and McMahon, Economic Freedom of North America 2011, Fraser Institute www.antonydavies.org 9
Economic Freedom of North America (all levels of government) Less free: $35,300 More free: $38,000 Median household income averaged 7.6% higher in the more free states. Data source: U.S. Census Bureau, Historical Income Tables: Households, Table H-8; Ashby, Bueno, and McMahon, Economic Freedom of North America 2011, Fraser Institute www.antonydavies.org 10
Counterargument Higher incomes can mask the effects of unemployment. 10 workers each earn $50,000 9 workers each earn $0 1 worker earn $500,000 Average = $50,000 Unemployment = 0% Average = $50,000 Unemployment = 90% www.antonydavies.org 11
Unemployment www.antonydavies.org 12
Economic Freedom of North America (all levels of government) 1986 7.5% 6.7% Data Source: Census Bureau, Statistical Abstract of the United States; Ashby, Bueno, and McMahon, Economic Freedom of North America 2011, Fraser Institute www.antonydavies.org 13
Economic Freedom of North America (all levels of government) Less free: 5.8% More free: 5.2% The difference in unemployment rates = 1 million jobs. Data Source: Census Bureau, Statistical Abstract of the United States; Ashby, Bueno, and McMahon, Economic Freedom of North America 2011, Fraser Institute www.antonydavies.org 14
Counterargument Unemployment data ignore the chronically jobless. www.antonydavies.org 15
Workers 5.0 million Employed 4.7 million Unemployed 0.3 million 100,000 unemployed workers become discouraged Unemployment rate = 0.3 / 5.0 = 6% www.antonydavies.org 16
Workers 4.9 million Non-employed 0.1 million Employed 4.7 million Unemployed 0.2 million Unemployment rate = 0.2 / 4.9 = 4.1% www.antonydavies.org 17
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Poverty Poverty numbers will capture poor, discouraged workers. www.antonydavies.org 19
Economic Freedom of North America (all levels of government) Less free: 13.6% More free: 11.9% The difference in poverty rates = 5 million people living in poverty. Data source: Bureau of Economic Analysis, GDP and Personal Income Regional Data; Ashby, Bueno, and McMahon, Economic Freedom of North America 2011, Fraser Institute www.antonydavies.org 20
Counterargument Low poverty rates can mask large outcome inequality. www.antonydavies.org 21
Outcome Inequality www.antonydavies.org 22
Gini Inequality Index 0.000 1.000 www.antonydavies.org 23
Economic Freedom of North America (all levels of government) Less outcome inequality in more free states. Data source: Census Bureau, American Community Survey, B19083; Ashby, Bueno, and McMahon, Economic Freedom of North America 2011, Fraser Institute www.antonydavies.org 24
Counterargument Outcome inequality measures don t mean what we think they mean. www.antonydavies.org 25
Inequality Poverty No one ever died from income inequality. www.antonydavies.org 26
Outcome Inequality Line up people from poorest to richest. Income = $100,000 Income = $400,000 Income = $300,000 Income = $200,000 www.antonydavies.org 27
Outcome Inequality Line up people Each person s from poorest lifetime to income richest. is $1 million. Income = $100,000 Income = $400,000 Income = $300,000 Income = $200,000 www.antonydavies.org 28
Outcome Inequality Inequality at a point in time Inequality over time www.antonydavies.org 29
Wealth inequality measures look at this but ignore this. www.antonydavies.org 30
Gini Inequality Index $54,000 $600 Outcome equality is not necessarily good. 0.000 Sweden 1.000 0.25 Afghanistan 0.28 www.antonydavies.org 31
Focusing on Outcome Inequality is Dangerous 1. Inequality diverts our attention from poverty. 2. Inequality at a point in time is not inequality over time. 3. Inequality ignores half the economy. 4. Equality is not necessarily good. vs. www.antonydavies.org 32
Migration People tend to go where it s desirable to be. www.antonydavies.org 33
Economic Freedom of North America (all levels of government) People move from less free states to more free states. Data source: Census Bureau, American Community Survey, B19083; Ashby, Bueno, and McMahon, Economic Freedom of North America 2011, Fraser Institute www.antonydavies.org 34
Counterargument Perhaps there is something strange about Americans. Compare economic freedom across countries. www.antonydavies.org 35
Poverty www.antonydavies.org 36
Economic Freedom of the World (79 countries, 2000-2010) Less free: 59% More free: 17% Data source: World Bank, Economic Freedom of the World, Fraser Institute www.antonydavies.org 37
Counterargument Rich countries tend to be more free and have less poverty because they are rich. Look at the poor countries. www.antonydavies.org 38
Economic Freedom of the World (25 poorest quartile countries, 2000-2010) Less free: 81% More free: 64% Data source: World Bank, Economic Freedom of the World, Fraser Institute www.antonydavies.org 39
Outcome Inequality www.antonydavies.org 40
Economic Freedom of the World (123 countries, 1995-2009) Less free: 43 More free: 35 Data source: CIA World Factbook, Economic Freedom of the World, Fraser Institute www.antonydavies.org 41
Child Labor www.antonydavies.org 42
Economic Freedom of the World (75 reporting countries, 2000-2009) Less free: 28% More free: 13% Data source: Childinfo.org, Economic Freedom of the World, Fraser Institute www.antonydavies.org 43
Counterargument Rich countries tend to be more free and can afford for their children not to work. Look at the poor countries. www.antonydavies.org 44
Economic Freedom of the World (26 poorest quartile countries, 2000-2009) Less free: 41% More free: 27% Data source: Childinfo.org, Economic Freedom of the World, Fraser Institute www.antonydavies.org 45
Environment www.antonydavies.org 46
Economic Freedom of the World (85 countries, 2007) Less free: 85 More free: 30 Data source: World Health Organization, Economic Freedom of the World, Fraser Institute www.antonydavies.org 47
Economic Freedom of the World (136 countries, 1990-2005) Less free: 7% More free: +7% Data source: Mongabay.com, Economic Freedom of the World, Fraser Institute www.antonydavies.org 48
Rich country effect? www.antonydavies.org 49
Economic Freedom of the World (29 poorest quartile countries, 1990-2005) Less free: 13% More free: 7% Data source: Mongabay.com, Economic Freedom of the World, Fraser Institute www.antonydavies.org 50
Peace www.antonydavies.org 51
Global Peace Index (inverse scale) Economic Freedom of the World (133 countries, 2009) Countries that are more free are also more peaceful. Data source: Institute for Economics and Peace, Economic Freedom of the World, Fraser Institute www.antonydavies.org 52
Counterargument Aggregation may be hiding important information. Look at cities. www.antonydavies.org 53
Economic Freedom of US Cities (first vs fourth quartiles, 2009) Less free: 7.6% More free: 5.5% Data source: Stansel (2013), Census Bureau www.antonydavies.org 54
Economic Freedom of US Cities (first vs fourth quartiles, 2009) Less free: $49,700 More free: $52,600 Data source: Stansel (2013), Census Bureau www.antonydavies.org 55
Economic Freedom of US Cities (first vs fourth quartiles, 2009) Less free: 17.1% More free: 15.2% Data source: Stansel (2013), Census Bureau www.antonydavies.org 56
Conclusion www.antonydavies.org 57
Across countries, states, cities, and time, societies with more economic freedom have Less unemployment Higher incomes Less poverty Less inequality Less child labor Better environments More peace www.antonydavies.org 58
But Free people will act selfishly! www.antonydavies.org 59
Government: Prevent people from harming each other and do nothing else. More freedom greater ability to exploit each other, greater ability to harm each other, greater ability to despoil the environment. More freedom greater ability to cooperate, greater ability to help each other, greater ability to protect the environment. www.antonydavies.org 60
Liberty, Equality, Prosperity November 2015 www.antonydavies.org www.antonydavies.org 61