Freedom in the 50 States

I’ve just gotten back from a Cato Institute event discussing the new study, Freedom in the 50 States, with my coauthor William Ruger, John Samples, and Michael Barone. I’ll post the video when it’s available. The Mercatus site for the study allows you to download the study and to use a calculator to see how states would change on the index if they made certain policy reforms. They’ve also put together this nice little video for the project:

5 thoughts on “Freedom in the 50 States

  1. Dear Jason,

    Your work here is critically important. It serves to underscore the centrality of state competition within a federal system. I cannot praise your efforts enough.

    That said, surely there is a problem measuring both personal and economic freedoms when policies are often dictated or leveraged by massive incentives/disincentives by the general government. How do you, in this index, disentangle those aspects that are under the control of states and those which are not? Or perhaps, how do you measure the degree of their control? And for those with the stamina to really buck the national government’s carrots and sticks, shouldn’t there be more points given? But I could not find where or if this problem was directly dealt with.

    I imagine that both you and your coauthor must worry about such recent machinations as the NLRB on Boeing and HHS on Planned Parenthood.

    ( http://seattletimes.nwsource.com/html/businesstechnology/2014961873_boeing05.html ; and, http://www.huffingtonpost.com/2011/06/05/indiana-abortion_n_871526.html).

    At one level, you can argue that some federal measures may enhance personal liberty, even over the objections of a state. On the other hand, surely the freedom of local communities to be different is impaired. While such may not offend against personal freedom, isn’t it just as important to avoid centralization, to preserve the federal structure as a necessary barrier to concentrated political power?

    The index really is then primarily a measure of individual liberty. Bravo! Yet can we rest there?

    For liberty to be secure, it must grow from the ground up within the communities in which we live. To usurp authority as the two examples here illustrate, even if they furthered liberty by some lights, would still be the negation of the states, the negation of federalism, and ultimately the negation of your index.

    Indeed, if this sort of exercise of power continues to expand, measuring what little is left to the states will simply become…irrelevant. Alas.

    1. A fair point. The more centralized the U.S. becomes, the less relevant policy differences across the states will be. However, I would argue that the U.S. system still has a meaningful amount of decentralization in it. Policies like home school and private school regulations, most gun control, marriage laws, occupational licensing, public utility regulation, smoking bans, alcohol regulation, gambling laws, and even prostitution laws are primarily state and local.

      I agree the two recent attempts by the federal government to overrule state decisions that you mention are disturbing, in that they interfere blatantly and coercively with states’ legitimate sphere of autonomy. Should they succeed, it would be an important diminution of state autonomy.

      Another example is Obamacare. Obamacare essentially nationalizes health insurance regulation, which was formerly a state responsibility. Once Obamacare’s community rating and guaranteed issue regulations come into effect in 2014, we will drastically cut the weighting of health insurance policies in our index. So yes, we do take into account the extent to which states really can differ meaningfully – but we also realize that these differences may not remain meaningful forever.

  2. Jason,

    I wasn’t able to attend the Cato event in person, but I was thrilled to follow it online.

    I had a few questions that, if you have the time, I’d appreciate your thoughts on.

    You say that economic freedom is correlated with growth, both in terms of population and in terms of personal income. For personal income, are you looking at per capita personal income or overall? I’m curious if you’re looking at economic freedom attracting individuals, which in turn is growing the state’s economy, or if you’re also seeing a correlation between economic freedom and actual growth in per capita income.

    When I was listening to your presentation the push back I could think of from someone like Ed Glaeser is that your index isn’t really capturing anything that’s separate from regulations that enable or inhibit easy housing construction. I know you’re arguing that the index is the primary factor and that it produces the easy construction policies, but I suspect the counterargument is that easy housing construction policy is correlated with a laissez-faire approach across the board. So your index is still in effect measuring the ease for new housing starts, which would explain the population growth.

    This is related to the question on personal income. Although I think you’ve noted in other posts that urbanization is not correlated with the size of libertarians in a state, controlling for unionization and other factors, there’s a strong argument that the most productive economic activities in our country still take place in the large urban environments in your less free states. When you find a correlation between freedom and population growth are you really picking up a sectoral shift in which the most productive aspects of society are in essence driving out less productive aspects into Western/Southern/Sunbelt cities that are more economically free and allow more housing starts. Basically, how would you respond to Ryan Avent’s “Moving Toward Stagnation” theory: http://www.ryanavent.com/blog/?p=2383

    A few other questions just to round this out.

    You don’t look at foreign migration. Have you considered doing so?

    You mention in the report not wanting to tackle the very difficult issues of abortion and the death penalty. You also mention dropping some measurements of environmental regulation because you could see them being justified from a libertarian perspective. Are there other policies you felt like you could measure but that you avoided because they could arguably divide the libertarian community? Alternatively, are there areas where you wished you could measure but you couldn’t figure out how best to measure the level of state intervention?

    Thank you in advance for taking the time to address these questions.

    1. Appreciate the thoughtful comments! In our paper we just look at aggregate personal income. In other work yet unpublished, we construct a full structural model that includes per capita personal income. What we find there is that economic freedom does directly increase per capita personal income growth, but indirectly reduces it a bit through migration. When a state attracts more people through higher economic and personal freedom, the labor supply increases, putting downward pressure on per capita personal income, even though overall income increases. By the same token, a state that overregulates until the middle class flees can actually raise its per capita income, even as overall income declines.

      I think Glaeser’s argument should imply that cost of living would soak up most of the residual variance in a net migration model. If freedom is correlated with development regulations, and development regulations drive up cost of living, which drives net out-migration, then including cost of living in a regression model should cause the result on freedom to disappear. But it doesn’t. And in fact, the coefficient on cost of living generally isn’t quite statistically significant. So that implies to me that it’s freedom that’s driving migration, rather than just development regulations that affect the cost of living.

      I haven’t checked out Ryan Avent’s argument, but I will. Offhand, it doesn’t sound very plausible, since the marginal productivity of capital will be highest where labor supply is highest and total factor productivity is highest. Neither of those considerations would imply that capital should flee to low-density, low-productivity locations – quite the opposite.

      It would be interesting to look at foreign migration too. We’d have to control for being a border or coastal state, since they are going to receive the lion’s share of direct migrants from abroad.

      Other policies excluded/to be included… We didn’t code same-sex marriage as such as an increase in freedom. If you have same-sex civil unions, that’s just as good as calling it marriage in our index. Some people will disagree with that. We’d like to measure the scope of prosecutorial abuse, the sort of thing that Radley Balko exposes in places like Mississippi. I have a feeling it’s actually correlated with what business managers think aboutt he tort system (MS is also very low in that survey). But it’s difficult to figure out how to measure. There are some things that local governments do, like zoning, strip club regulation, and taxicab regulation, that would be ideally included, but we’d have to collect data on every local jurisdiction in the country.

      1. I look forward to the study on personal income per capita. From my shallow familiarity with the more pro-urban/pro-density/pro-creative class faction of economic development, they focus more on growth in income per capita than population growth. I suspect that there could be more happening than just the downward pressures on per capita income through migration and labor supply increases. Are the folks who are moving more likely to be on the lower end of the socioeconomic scale (above a threshold that gives them the economic resources to move in the first place)? So are we seeing a geographic sort of higher earning individuals staying in the less economically free states and lower earning individuals moving to the more economically free states? Why wouldn’t the higher earning individuals be the first to move to economically free states, in a sort of geographic going Galt?

        In thinking about the relationship between economic freedom and migration, are there other narratives you’ve thought of testing? I think feed back from more liberal economists would be interesting. Your results may still hold, but it would be nice to hold it up against some sort of hostile criticism.

        In talking about Ryan Avent’s theory and how it could relate to your research, I’m essentially trying to tie your findings in with a wider discussion of stagnating median income vs. continued rising per capita income. We have a growing class of high-earning, high-skilled individuals with rising income concentrated in the urban cities that seem to be located in your economically unfree states. Actually, they seem to be located in certain metropolitan areas that happen to be in economically unfree states. Perhaps there’s something else going on that I’m missing. I may be wrong to assume that there’s a correlation between the creative cities and economically unfree states. It’s not just California and New York, it’s also Colorado, Virginia, Oregon, and others, which also rank highly.

        I’m trying to find the study, but I do recall a previous attempt to look at freedom in a state and/or city and its appeal to both domestic and international migrants. If I recall the study correctly, the study found a link between personal freedom/social diversity/something they labeled similarly and international immigrants, but economic freedom/lack of regulation and domestic migrants. Which I think sets up a nice narrative that could fit into your study. Compared to the international environment, the United States is economically free even when looking at more economically unfree states. Larger metropolitan areas with diverse and existing immigrant communities are first to attract immigrants. But when you look at domestic migration it’s being driven more by economics.

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