A SPECIAL MEETING THE MONT PELERIN SOCIETY...Authors: James Gwartney, Robert Lawson, Joshua Hall,...
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HOOVER INSTITUTION • STANFORD UNIVERSITY A SPECIAL MEETING THE MONT PELERIN SOCIETY JANUARY 15–17, 2020 FROM THE PAST TO THE FUTURE: IDEAS AND ACTIONS FOR A FREE SOCIETY CHAPTER TWENTY-ONE ECONOMIC FREEDOM: OBJECTIVE, TRANSPARENT MEASUREMENT FRED McMAHON
Transcript of A SPECIAL MEETING THE MONT PELERIN SOCIETY...Authors: James Gwartney, Robert Lawson, Joshua Hall,...
11 1H O O V E R I N S T I T U T I O N • S T A N F O R D U N I V E R S I T Y
A S P E C I A L M E E T I N G
THE MONT PELERIN SOCIETY
J A N U A R Y 1 5 – 1 7 , 2 0 2 0
FROM THE PAST TO THE FUTURE: IDEAS AND ACTIONS FOR A FREE SOCIETY
C H A P T E R T W E N T Y - O N E
ECONOMIC FREEDOM: OBJECTIVE, TRANSPARENT MEASUREMENT
FRED McMAHON
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Economic Freedom:Objective, Transparent Measurement
Fred McMahonMichael Walker Chair of Economic Freedom ResearchFraser Institute
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What is Economic Freedom
Individuals have economic freedom when property they acquire without the use of force, fraud, or theft is protected from physical invasions by others and they are free to use, exchange, or give their property as long as their actions do not violate the identical rights of others. An index of economic freedom should measure the extent to which rightly acquired property is protected and individuals are engaged in voluntary transactions.
James Gwartney et al. 1996
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Components of the Economic Freedom of the World Index
• Size of government and taxation• Private property and the rule of law• Sound money• Trade regulation and tariffs• Regulation of business, labour and
capital markets
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What is the Economic Freedom of the World Index?
Originated by Michael Walker and Milton and Rose Friedman over 35 years ago in 1984.
Decade long research phase involved over 60 top scholars in a variety of fields and produced three volumes of studies.
An annual compilation of data representing 42 variables which determine the economic freedom of a jurisdiction.
All data are from third party sources for objectivity. Fraser has no political affiliation—the focus is on policy
not politics. Thus no conflict of political interest in measuring Canada or other nations.
Transparent formulas are used to manipulate the data.
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What’s New The index includes a Gender Disparity Adjustment,
based on 41 variables from the World Bank’s gender discrimination data, to recognize women too often do not have the same freedom as men.
Authors: James Gwartney, Robert Lawson, Joshua Hall, and Ryan Murphy.
Scoring for many nations projected back to 1950. In cooperation with the Atlas Network and the Friedrich
Naumann Foundation for freedom, we have conducted economic freedom audits in nearly 20 nations.
Data now includes historic estimates of economic freedom for 111 countries back to 1950, 113 to1955, 116 to1960, and 118 to 1965 using a newly available dataset.
Now a collaboration of Institutes in nearly 100 nations and territories.
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Why is Economic Freedom Important?
• Economic rights are fundamental rights in the sense that without them there can be no political freedom or civil freedoms
• They are a prerequisite for growth and development
• They are a prerequisite for broader human development
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Importance of objective, transparent measurement
• We have a great story to tell: the advances in human welfare created by economic freedom.
• However, in an era of fake news and lies accepted as truth (and vice versa), it is essential to be as clear cut and honest as possible.
• The slides to follow tell the human story of economic freedom; you will be familiar with many of the statistics, but I hope to add some value added.
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The Age of Global Free Trade,
Free Market Economies, and Economic Freedom
Have Brought Huge Benefits to Humankind
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Global poverty
0
1
2
3
4
5
6
7
8
People not in extreme poverty People living in extreme poverty
Billions
1 11 1 11
While the human condition has improved immensely—in prosperity, health, education, and any number of other good outcomes—only those that live in nations with high levels of economic freedom have fully benefitted. Those in nations with low levels of economic freedom live in conditions often little changed from the 1950s.
The human condition has improved immensely
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Poverty headcount ratio at $3.20 a day (PPP, 2016) (% of population)
0%
5%
10%
15%
20%
25%
30%
Most FreeQuartile
2ndQuartile
3rdQuartile
Least FreeQuartile
Least Free ……………. Most Free
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Income of the Poorest 10% and Economic Freedom
(PPP, 2016)
$0$1,000$2,000$3,000$4,000$5,000$6,000$7,000$8,000$9,000$10,000$11,000
Most FreeQuartile
2ndQuartile
3rdQuartile
Least FreeQuartile
Least Free ……………. Most Free
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Per capita GDPConstant US$
$0
$2,000
$4,000
$6,000
$8,000
$10,000
1950
1952
1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
1 51 5 15
Per Capita Income and Economic Freedom Quartile
$0
$6,000
$12,000
$18,000
$24,000
$30,000
$36,000
Most FreeQuartile
2nd Quartile3rd QuartileLeast FreeQuartile
PPP
cons
tant
201
1 in
tern
atio
nal $
Least Free ……………. Most Free
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Literacy: Billions
0
1
2
3
4
5
6
7
8
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
2016
Literate Illiterate
Billions
1 71 7 17
Literacy (% of population)Male Female
50
55
60
65
70
75
80
85
90
95
100
Most Free Quartile2nd Quartile3rd QuartileLeast Free Quartile
Least Free ……………. Most Free
Sources: The Fraser Institute; World Development Indicators 2013
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Life Expectancy: Years
45
50
55
60
65
70
75
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
2016
1 91 9 19
Life expectancy at birth
60
65
70
75
80
Freest Quartile2nd Quartile3rd QuartileLeast FreeQuartile
Least Free ……………. Most Free
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Not just due to time• In the economically freest nations, the top quarter, only 1.8
percent of the population live in extreme poverty ($1.90 a day) and 5.1 percent in moderate ($3.20 a day) poverty compared to 40.5 percent in extreme poverty and 27.2 percent in moderate poverty in the quarter least free nations.
• Life expectancy is 79 years in the freest nations compared to 65 in the least free nations.
• Average per capita GDP in the freest nations is $36,770 (purchasing power parity adjusted US$) compared to $6,140in the least free nations.
• Literacy is 95.1 percent among men and 94.1 percent among women in the freest nations but only 64.7 percent and 59.7 respectively in the least free nations, with such outcome gaps between men and women typical comparing free to unfree nations.
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One last thing
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Economic Freedom and Life Satisfaction
4.0
4.5
5.0
5.5
6.0
6.5
Most FreeQuartile
2nd Quartile3rd QuartileLeast FreeQuartile
Life
Sat
isfa
ctio
n ou
t of 1
0
Least Free ……………. Most Free
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Some of the great longer-term successes
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Asia Economic Freedom Scores
5
5.5
6
6.5
7
7.5
8
8.5
9
1970
1975
1980
1985
1990
1995
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Southeast AsiaKorea, SouthSingapore
2 52 5 25
Per Capita GDPConstant 2010 US$
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
East Asia & Pacific Korea, Rep. Singapore
2 72 726
Europe Economic Freedom Scores
5
5.5
6
6.5
7
7.5
8
8.5
9
1970
1975
1980
1985
1990
1995
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
EUIreland
2 72 7 27
Per Capita GDPConstant 2010 US$
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
Ireland Euro area Greece Spain Portugal
2 92 928
Per Capita GDPConstant 2010 US$
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
Ireland Euro area Greece Spain Portugal
2 92 9 29
Economic Freedom Score
4
4.5
5
5.5
6
6.5
7
7.5
8
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Sub SaharaBotswana
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Per Capita GDPConstant 2010 US$
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
Sub-Saharan Africa Botswana
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www.freetheworld.com
www.fraserinstitute.org
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FRED MCMAHONFRASER INSTITUTE
Fred McMahon is the Dr. Michael A. Walker Research Chair in Economic Freedom at the Fraser Institute in Vancouver, Canada. He manages the Economic Freedom of the World Network, an alliance of think tanks in nearly one hundred nations and territories. The network produces the Economic Freedom of the World Report, an annual study that ranks nations on economic liberty.
McMahon is coauthor of Economic Freedom of the Arab World and Economic Freedom of North America. He has worked on economic reform programs in more than a dozen nations and has authored several books and many articles
on economic reform, both academic and in the popular media. His book Looking the Gift Horse in the Mouth, about damaging government intervention and spending, won the Sir Antony Fisher Memorial Award.
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PAST AS PROLOGUE TO THE FUTURE
An Opening Conversation
Chapter 1. Why Choose Economic Freedom?..................................................................................................................6 George P. Shultz and John B. Taylor
Free to Choose: 1980 to 2020 and the Network
Chapter 2. Introduction to Free to Choose 1980 to 2020 and the Network.........................................................14 Robert Chatfield
Chapter 3. Milton, Rose, me and Poetry.........................................................................................................................16 Robert Chitester
Removing Obstacles on the Road to Economic Freedom: 1947 to 1980
Chapter 4. Removing Obstacles on the Road to Economic Freedom.......................................................................24 Eamonn Butler
Chapter 5. Milton Friedman: The Early Years...............................................................................................................26 Jennifer Burns
Chapter 6. Mont Pelerin 1947........................................................................................................................................32 Bruce Caldwell
Chapter 7. The Road Not Taken of “Nuovo liberalismo”...........................................................................................85 Alberto Mingardi
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Spread of Free-Market Ideas in the 1980s
Chapter 8. The Reception of Free to Choose and the Problem of Tacit Presuppositions of Political Economy......................................................................................................................................................102 Peter Boettke
Chapter 9. The Spread of Free-Market Ideas in the 1980s (With a Nod to the Late 1970s)...............131 David Henderson
Chapter 10. Ideas of Freedom and Their Role in Active Policymaking.........................................................142 Condoleezza Rice
Lessons Learned from History for the Future of Freedom
Chapter 11. Assaults on Freedom and Citizenship............................................................................................147 Victor Davis Hanson
Chapter 12. Fed Chair Agonistes..........................................................................................................................152 Amity Shlaes
Chapter 13. Keynes v Hayek: The Four Buts......................................................................................................160 Robert Skidelsky
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IDEAS FOR A FREE SOCIETY
The Role of Law as Protector of Liberty
Chapter 14. Capitalism, Socialism and Nationalism: Lessons from History..................................................168 Niall Ferguson
Chapter 15. Magna Carta, the rule of law, and the limits on government..................................................200 Jesús Fernández-Villaverde
Chapter 16. The Commerce Clause, the Takings Clause, and Due Process..................................................208 Douglas Ginsburg
How to Deal with the Reemergence of Socialism
Chapter 17. The rise and fall of environmental socialism: Smashing the watermelon...............................221 Jeff Bennett
Chapter 18. Understanding the left....................................................................................................................226 John Cochrane
Chapter 19. Economic systems between socialism and liberalism and the new threats of neo-interventionism.................................................................................................................................................233 Lars Peder Nordbakken
Measures of Economic Freedom
Chapter 20. Economic Freedom Matters & Charts............................................................................................248 Anthony Kim
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Chapter 21. Economic Freedom: Objective, Transparent Measurement.......................................................279 Fred McMahon
Chapter 22. The World Bank’s Doing Business Indicators................................................................................310 Valeria Perotti
Restraining Expansions of Government
Chapter 23. Common Sense Approach to Addressing America’s Entitlement Challenge..........................318 John Cogan
Chapter 24. Key Milestones in Regulation..........................................................................................................339 Susan Dudley
Chapter 25. A Quest for Fiscal Rules...................................................................................................................343 Lars Feld
ACTIONS FOR A FREE SOCIETY
Taking Ideas to Action around the World
Chapter 26. Turning Freedom into Action: Some Reflections on Reforming Higher Education.................371 Ayaan Hirsi Ali
Chapter 27. Culture and the Free Society..........................................................................................................380 Samuel Gregg
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Chapter 28. Taking Ideas to Action Around the World....................................................................................394 Bridgett Wagner
What Happened in Chile?
Introduction...............................................................................................................................................................402
Chapter 29. Presentation I....................................................................................................................................403 Axel Kaiser
Chapter 30. Presentation II...................................................................................................................................406 Ernesto Silva
Chapter 31. Presentation III..................................................................................................................................409 Arnold Harberger
Taking Ideas to Action: Making the Case for Freedom
Chapter 32. Restoring Liberty for American Indians.........................................................................................411 Terry Anderson
Chapter 33. The Effect of Economic Freedom on Labor Market Efficiency and Performance.................434 Lee Ohanian
Chapter 34. Making the Case for Liberty...........................................................................................................466 Russell Roberts
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Taking Ideas to Action in the Private Sector
Chapter 35. Brexit: Taking a Good Idea into Action........................................................................................473 Jamie Borwick
Chapter 36. Taking Ideas to Action in Central Governments—The US Case..............................................476 Tyler Goodspeed
Chapter 37. Ideas and Actions for a Free Society............................................................................................487 Ruth Richardson
Taking Ideas to Action in the Private Sector
Chapter 38. Public Policy, Private Actor..............................................................................................................491 Dominique Lazanski
Chapter 39. Libertarianism is Dysfunctional but Liberty is Great..................................................................508 Joe Lonsdale
Chapter 40. The False Promise of Medicare for All........................................................................................514 Sally Pipes
A Closing Conversation
Chapter 41. China, Globalization, Capitalism, Silicon Valley, Political Correctness, and Exceptionalism.................................................................................................................................................527 Peter Thiel and Peter Robinson
