WingRight

The Fraser Institute’s 2008 Economic Freedom of North America Annual Report is a must-read.

The Fraser Institute calculates an economic freedom index for each state in the US and each province in Canada. Quantitative measures in the following three areas are used:

1. Size of Government
2. Takings and Discriminatory Taxation
3. Labor Market Freedom

The Fraser Institute has been publishing its reports for five years. Over that five year period, the relationship between the economic freedom index and econometric measures such as per-capita GDP, per-capita GDP growth rate and, new for this year, per capita venture capital investment, has been very consistent. The relationship is the same for U.S. states and Canadian provinces.

Headlines

• As economic freedom increases, per capita GDP growth increases. A one-point increase in the economic freedom index increases per-capita GDP in the US by $6,232

• A 1.00% increase in the growth rate of economic freedom at the all-government level (e.g. from 4.00% per year to 4.04% per year measured by the combination of federal and state measures) will induce an increase of 1.08% of per-capita GDP in the U.S. states.

• Between 2000 and 2005, the five states with the worst economic freedom index grew per-capita GDP by 5%. The US as a whole grew GDP by 9% and the five states with the best economic freedom index grew by 18% per capita.

• A one-point increase in economic freedom results in:
  • an increase of $32.13 in venture capital investment per capita
  • an increase in the number of patents by 8.2 per 100,000 population
  • an increase of 4.2% in the growth of sole proprietorships

An excellent quantitative summary of the differences between Reaganomics and Obamanomics.

Tags: Economy, Taxes //