Economic Freedom
or
Why Limited Government is Good
www.antonydavies.org
www.antonydavies.org
1
Controlled Economy
www.antonydavies.org
2
Chaos
www.antonydavies.org
3
Free Economy
www.antonydavies.org
4
Arguments Against and For Economic Freedom
We must make decisions for people!
Left to themselves, people will consolidate power, stifle
competition, exploit each other, and confiscate wealth.
We must allow people to make their own decisions!
Left to themselves, people will disseminate power, promote
competition, cooperate with each other, and create wealth.
www.antonydavies.org
5
Measuring
economic freedom
www.antonydavies.org
6
Economic Freedom
≠
Less Government
Economic Freedom
=
Right Government
www.antonydavies.org
7
Economic Freedom
Less
More
Collective decisions
No property rights
Individual decisions
Property rights
Too much government
Right government
www.antonydavies.org
Less
Individual decisions
No property rights
Too little government
8
For each year, divide the states into two groups…
• 25 least free
• 25 most free
www.antonydavies.org
9
Economic Freedom of North America (1985 – 2009)
Least Free
www.antonydavies.org
Most Free
10
Income
www.antonydavies.org
11
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.
www.antonydavies.org
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
12
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
www.antonydavies.org
Average = $50,000
Unemployment = 0%
Average = $50,000
Unemployment = 90%
13
Unemployment
www.antonydavies.org
14
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.
www.antonydavies.org
Data Source: Census Bureau, Statistical Abstract of the United States; Ashby, Bueno, and McMahon,
Economic Freedom of North America 2011, Fraser Institute
15
Counterargument
Unemployment data ignore the chronically
jobless.
www.antonydavies.org
16
www.antonydavies.org
17
Poverty
Poverty numbers will capture
poor, discouraged workers.
www.antonydavies.org
18
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.
www.antonydavies.org
Data source: Bureau of Economic Analysis, GDP and Personal Income Regional Data; Ashby, Bueno,
and McMahon, Economic Freedom of North America 2011, Fraser Institute
19
Counterargument
Low poverty rates can mask inequality.
www.antonydavies.org
20
Note:
There is no such thing as “inequality.”
www.antonydavies.org
21
Equal Opportunity
Unequal Outcome
www.antonydavies.org
Equal Outcome
Unequal Opportunity
22
Outcome Inequality
www.antonydavies.org
23
Economic Freedom of North America
(all levels of government)
Less outcome inequality in more free states.
www.antonydavies.org
Data source: Census Bureau, American Community Survey, B19083; Ashby, Bueno, and McMahon,
Economic Freedom of North America 2011, Fraser Institute
24
Warning
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
Each person’s lifetime income is $1 million.
Income = $400,000
Income = $300,000
Income = $200,000
Income = $100,000
www.antonydavies.org
27
Inequality measures look at this…
…but ignore this.
www.antonydavies.org
28
Gini (Outcome) Inequality Index
$54,000
$600
Outcome equality is
not necessarily good.
0.000
Sweden
0.25
1.000
Afghanistan
0.28
Two most equal countries in the world.
www.antonydavies.org
29
Focusing on Outcome Inequality is Dangerous
1. Inequality diverts our attention from poverty.
2. Possible to have persistent inequality and perfect
equality.
3. Inequality ignores half the economy.
4. Equality is not necessarily good.
vs.
www.antonydavies.org
30
Counterargument
Perhaps there is something strange
about Americans.
Compare economic
freedom across countries.
www.antonydavies.org
31
20 Most Economically Free Countries (2014)
www.antonydavies.org
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Country
Freedom Index (1-10)
Hong Kong
8.9
Singapore
8.6
New Zealand
8.4
Switzerland
8.2
Ireland
8.2
Canada
8.1
Australia
8.1
United Kingdom
8.0
Mauritius
8.0
Chile
7.9
Netherlands
7.8
Jordan
7.8
Luxembourg
7.8
United States
7.8
United Arab Emirates
7.7
Taiwan
7.7
Denmark
7.7
Estonia
7.7
Israel
7.7
Czech Republic
7.7
32
20 Least Economically Free Countries (2014)
www.antonydavies.org
Rank
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
Country
Benin
Ukraine
Togo
Guinea-Bissau
Pakistan
Chad
Dem. Rep. of Congo
Ecuador
Niger
Malawi
Gabon
Central African Rep.
Iran
Zimbabwe
Syria
Myanmar
Republic of Congo
Argentina
Algeria
Venezuela
Freedom Index (1-10)
5.9
5.9
5.9
5.9
5.7
5.7
5.6
5.6
5.6
5.5
5.5
5.5
5.5
5.4
5.2
5.1
5.0
4.8
4.6
3.1
33
Poverty
www.antonydavies.org
34
Economic Freedom of the World
(79 countries, 2000-2014)
Less free: 59%
More free: 17%
Data source: World Bank, Economic Freedom of the World, Fraser Institute
www.antonydavies.org
35
Counterargument
Rich countries tend to be more free and
have less poverty because they are rich.
Look at the poor countries.
www.antonydavies.org
36
Economic Freedom of the World
(25 poorest quartile countries, 2000-2014)
Less free: 81%
More free: 64%
Data source: World Bank, Economic Freedom of the World, Fraser Institute
www.antonydavies.org
37
Outcome Inequality
www.antonydavies.org
38
Economic Freedom of the World
(123 countries, 1995-2014)
Less free: 43
More free: 35
Data source: CIA World Factbook, Economic Freedom of the World, Fraser Institute
www.antonydavies.org
39
Economic Freedom of the World
(129 countries, 1995-2014)
43 Least Economically Free
43 Most Economically Free
Data source: UN Development Programme, Economic Freedom of the World, Fraser Institute
www.antonydavies.org
40
Child Labor
www.antonydavies.org
41
Economic Freedom of the World
(75 reporting countries, 2000-2014)
Less free: 28%
More free: 13%
Data source: Childinfo.org, Economic Freedom of the World, Fraser Institute
www.antonydavies.org
42
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
43
Economic Freedom of the World
(26 poorest quartile countries, 2000-2014)
Less free: 41%
More free: 27%
Data source: Childinfo.org, Economic Freedom of the World, Fraser Institute
www.antonydavies.org
44
Environment
www.antonydavies.org
45
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
46
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
47
Rich country effect?
www.antonydavies.org
48
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
49
Peace
www.antonydavies.org
50
Economic Freedom of the World
(133 countries, 2009)
(inverse scale)
Global Peace Index
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
51
Conclusion
www.antonydavies.org
52
Across countries, states, and time, societies with
more economic freedom enjoy…
Less unemployment
Higher incomes
Less poverty
Less income inequality
Less gender inequality
Less child labor
Better environments
More peace
www.antonydavies.org
53
But…
Free people will act selfishly!
www.antonydavies.org
54
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
55
Economic Freedom
or
Why Limited Government is Good
www.antonydavies.org
56