Tuesday, November 25, 2008

More Economic Freedom = Lower Jobless Rate

SAN FRANCISCOThe Pacific Research Institute (PRI), a free-market think tank based in California, recently released the U.S. Economic Freedom Index: 2008 Report, a ranking of economic freedom in the 50 states. Published in association with Forbes, the Index scores states based on 143 variables, including regulatory and fiscal obstacles imposed on businesses and residents.

South Dakota, which ranked 15 in 2004 (the last time the Index was published), has assumed the notable spot as the nation’s most economically free state, while New York consistently remains the most economically oppressed state, ranking 50 in all three editions of the Index.

The net migration rate for the 20 freest states was 27.36 people per 1,000, while it was a low 1.17 people per 1,000 for the 20 most economically oppressed states. “People are moving to the freest states and fleeing the least free states as our market-based migration metric of economic freedom predicts,” said Lawrence J. McQuillan, Ph.D., director of Business and Economic Studies at PRI and director of the project.

“By measuring economic freedom and studying its effects, people will gain a fuller appreciation of the important imprint it makes on the economic and political fabric of America and will encourage new state legislation that advances economic liberty.

The Index score ranges from 1 (most free) to 50 (least free), and state rankings were derived from the index scores. The Index collected and ranked 143 indicators comprised of 209 underlying variables from five sectors (fiscal, regulatory, judicial, size of government, and welfare spending) for each state to measure how friendly, or unfriendly, each state’s government policies are toward free enterprise and consumer choice.

MP: The chart above shows my own analysis of the the average unemployment rates for each of the four quartiles of states (state unemployment rates here), ranked by economic freedom. For the quartile of states that are most economically free, the October 2008 unemployment rate was 4.7%, compared to the 6.7% average jobless rate for the quartile of states that are the least economically free.

Bottom Line: The more economically free a state is, the lower its unemployment rate. The less economically free a state is, the higher its unemployment rate. The difference in average unemployment rates between the quartile of states with the greatest economic freedom and the quartile of states with the least economic freedom is a whopping 2%.

HT: Joe Armendariz

24 Comments:

At 11/25/2008 2:39 AM, Anonymous Scott said...

This kind of thing is painfully obvious to me. I just dont get how people can think Big Government is better.

 
At 11/25/2008 7:31 AM, Anonymous Anonymous said...

MP: Why don't you rank the states by per capita income?

For example, Connecticut and New Jersey rank 1 and 2 by per capita income but 38 and 49 by economic freedom. Mississippi and West Virginia rank 50 and 49 by per capita income but 19 and 38 by economic freedom.

My hunch: "More Economic Freedom = Lower Per Capita Income".

 
At 11/25/2008 7:44 AM, Blogger K T Cat said...

This analysis is just fine if you like working for a living and want to know where to move, but what about those of us that like to just lay around all day? What state is best for that?

 
At 11/25/2008 10:51 AM, Anonymous Anonymous said...

Anon 7:31,

It's because they can get away with it. Rich folks who work in NYC finances and live in the suburb states = juicy plumb.

Why not check the negative job growth or the population exodus from New Jersey? It has the worst business tax environment in the nation, as well as the highest property taxes, and people are getting fed up with it.

Sincerely,
AnonNJresident

 
At 11/25/2008 11:00 AM, Anonymous Anonymous said...

but what about those of us that like to just lay around all day?

Connecticut and New Jersey fit that profile. 1 and 2 in income, 34 and 29 in unemployment rate and 38 and 49 by economic freedom.

Rich folks who work in NYC finances and live in the suburb states = juicy plumb.

Rich folks who work in Biloxi casinos and live in the suburb counties = juicy clementines. Ceteris paribus.

Otherwise, go freeze your butt in South Dakota for the next 6 months for below national average per capita income.


Btw, how can one make quartiles from 50 states?

 
At 11/25/2008 11:42 AM, Blogger Colin said...

Well, cost of living is higher in CT and NJ than MS or WV. Higher income means less if you also have commensurately higher expenses.

 
At 11/25/2008 11:52 AM, Blogger Sid said...

Which are truly the top 5 most free nations in the world?

 
At 11/25/2008 11:57 AM, Blogger VH said...

Colin has a good point. Living in California, our wages tend to be higher than the rest of the country but cost of living is so high that the margin b/w the two is very tight. Someone making 70K in San Francisco isn't living like a king. Don't get me started on housing costs too.

 
At 11/25/2008 12:00 PM, Blogger Arman said...

The correlation quite strained, and as pointed out by someone too lame to use a name, there is much more to the economic picture than the seasonally adjusted (ie concocted) unemployment rate.
This is a hunt for ANY indication that the conventional economist knows what might be good for the economy. He doesn't.

 
At 11/25/2008 3:06 PM, Blogger Patrick said...

Anonymous,
I think you have to look at Colin's point if you're going to make a comparison of per capita income to economic freedom.

There is another possible inference from the data:

Less economic freedom = higher taxes, greater social program burdens, etc. = higher cost of living

However, you can usually bend statistics to prove whatever point you wish to make.

 
At 11/25/2008 4:57 PM, Blogger 1 said...

anon @ 7:31 AM says: "MP: Why don't you rank the states by per capita income?"...

Hey anon, post that ranking by income on your site and we'll check out... Just a thought...

"This is a hunt for ANY indication that the conventional economist knows what might be good for the economy"...

conventional economist?!?!

Is that an economist that doesn't find anything good about excessive taxation or pandering to parasites?

 
At 11/25/2008 5:06 PM, Blogger DB said...

"Which are truly the top 5 most free nations in the world?"

Sid,

Heritage Foundation ranks them as:
1. Hong Kong
2. Singapore
3. Ireland
4. Australia
5. U.S.

 
At 11/25/2008 5:46 PM, Blogger Richard Rider, Chair, San Diego Tax Fighters said...

In California, ranked 48th in business climate by the Tax Foundation, we have for the last five years experienced an ANNUAL NET DOMESTIC (movement between states) OUTMIGRATION in excess of 250,000. And it's rising.

With the third highest state unemployment and the nation's highest income tax, California is in a long term decline, with little prospect of a reversal of direction.

Correlation doesn't prove causation, of course. It must be the terrible CA weather.

One thing is clear -- higher per capita income in CA does NOT translate to a higher standard of living here.

 
At 11/25/2008 7:53 PM, Blogger Arman said...

Is that an economist that doesn't find anything good about excessive taxation
Love how you guys come out with definitions that mean nothing. This would probably describe the average citizen, and says nothing as to how conventional economics is somehow superior to common instinct.

or pandering to parasites?
Who is the parasite? This all depends on your point of view. To some, the overpaid CEO, to most, the politician. You are of course referring to those who consume more than they actually produce, but this description applies to both these groups. I am certain that there is someone that thinks of you as a parasite in some way.

 
At 11/25/2008 8:06 PM, Blogger Arman said...

>Correlation doesn't prove causation, of course.<
There is no clear correlation. The qualifiers are selected and weighted as needed to validate the message desired. Even so, you do not get a clear and clean correlation. The inference that economic freedom leads to better economies is not at all shown, but it is still firmly held to by the faithful.

 
At 11/25/2008 8:39 PM, Blogger Richard Rider, Chair, San Diego Tax Fighters said...

Arman, the "faithful" are those such as yourself who, overwhelming evidence to the contrary, still support central planning, high taxation, heavy regulation and variations on socialism.

Gee, is it possible you just might be a government employee, Arman? That and/or an academic -- where the censoring selection process has hired 90+% "progressives."

Your unspoken premise concerning Big Government is -- "THIS time it's just gotta work."

One thing is clear -- when free market advocates are faced with such religious views, no amount of evidence or facts will persuade you faithful to reject your belief system.

 
At 11/26/2008 12:49 AM, Blogger Arman said...

One thing is clear -- when free market advocates are faced with such religious views, no amount of evidence or facts will persuade you faithful to reject your belief system.
Ha ha ha! Right back at ya guy!

 
At 11/26/2008 6:35 AM, Anonymous Anonymous said...

Hey anon, post that ranking by income on your site and we'll check out... Just a thought...

Hello again juandos aka 1.

This is just another in a long list of dumb blog posts from MP and you know it. Thou doth protest too much, methinks.

Let's take Missouri, the gateway to the west and your home state.

It ranks 31st in income, 34th in unemployment rate and 15th in economic freedom.

I suppose that you are not shackled to the gulag ("economic freedom") like New York state, but the "show me" state residents have below average per capita income (even lower than the parking lot attendant at Mt. Rushmore) and above average unemployment rate (even higher than the elevator operator in the "empire state").

 
At 11/26/2008 9:27 AM, Anonymous Anonymous said...

Yo, Dickie from Escondido (you aren't a La Jolla type)says:

overwhelming evidence to the contrary, still support central planning, high taxation, heavy regulation and variations on socialism.

The world economy is teetering on the edge of the abyss (at last count the Fed plus the Treasury has guaranteed $7.7 trillion) after 30 years of low taxation, low regulation and variations on capitalism.

Zip it, Dickie.

 
At 11/26/2008 10:07 AM, Blogger Richard Rider, Chair, San Diego Tax Fighters said...

One thing I've discovered in such flaming online exchanges is that inevitably I'm arguing with government employees -- people whose very livelihood depends on high taxes, make-work regulation the shifting of power to the public sector. There are exceptions -- people indirectly dependent on government, such as private university professors whose colleges exist because of government subsidies, professors who seek government grants -- but these exceptions are few and far between.

Occasionally the Big Government supporters are students -- the young in the reeducation camps of academia. Having never paid meaningful taxes and being semi-wards of the state, it is only natural they they fervently believe in statism. Rarely are they exposed to a prof who presents the free market viewpoint in anything but derisive fashion.

The battle lines between overcompensated government employees who rely exclusively on coercion for a living and everyone else are clearly drawn.

Moreover, most such online commentors (often commenting from work) like to hide who they are. Few will expose their greedy conflict of interest.

 
At 11/26/2008 10:29 AM, Anonymous Anonymous said...

Please, Dickie from Escondido, spare me your outrage. You are a pretender.

The money in La Jolla votes for the donkeys. The lack of money in Escondido votes for the elephants.

Did you just join the online community yesterday? The message, not the name, is germane. You are such a car wash jockey, you wouldn't even know McLuhan.

Once again, zip it Dickie; otherwise, you will turn out to be a retard like "club for growth" Rickie.

 
At 11/26/2008 11:02 AM, Blogger Richard Rider, Chair, San Diego Tax Fighters said...

Mr Zip It serves a valuable function on this board, demonstrating the academic mindset at most universities -- censorship. Shutting up and shouting down any opposition is the operative plan. Over the last 40 years, the faculty selection process has effectively weened out almost all such diversity, so the indoctrination of the young can proceed without dissent.

Obviously I hit a nerve with my comment on who he is -- a government employee, and probably an academic one. You can smell his effete elitism, with his silly snobbery referencing McLuhan.

Diversity is highly valued in our colleges and universities -- except diversity of thought.

 
At 11/26/2008 11:46 AM, Anonymous Anonymous said...

Dickie is another SoCal moron with bandwidth access.

Piss off, escondido hood! Take your tax revolt to the gates of LaJolla. Be prepared to die in your revolution. A peashooter launched by a preschooler should take care of you.

Sheesh, I used to perform this service with obloodyhell (OBH).

Where is OBH, juandos aka 1? Is he keeping a warm bed in the asylum for Dickie?

 
At 11/26/2008 1:55 PM, Blogger Arman said...

Moreover, most such online commentors (often commenting from work) like to hide who they are. Few will expose their greedy conflict of interest.
The faithful will grasp at any straw as excuse to dismiss comment or correlation that will not fit their mindset. You are dismissing ideas as irrelevant. You are dismissing people as irrelevant. If you declare me irrelevant to you, how do you deign assume your relevance to anyone else?
I am not a government employee, nor a recipient of any government handout. I have for the past 5 years mainly been living off an inheritance while I work on my inventions. I currently drive taxi at night for a bit of extra mad money. I walked away from a government job without any compensation 9 years ago because I clashed too severely with my supervisor.
But the point is, you dismiss me, not because of who I am or what I do, but because I disagree with you. If there is ANYONE who FULLY agrees with you, then they have partaken of the same brainwashing or they are too cowardly to voice their real opinion. You think I am suspect because I disagree!! So then too will be the other 6 billion people! Make up more excuses. They don't all work for the government!

 

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