Economic Research That Validates My Biases
I am often very distressed when I hear meta debates about economic policy. In many ways, I’m an arch-capitalist. I believe that property rights, well functioning capital markets and a system that allows people to convert their skills into capital is probably responsible for some 90% of human well being. So I’m probably sounding like some sort of Friemdanite or at least a conservative when it comes to economics. But as you well know, I’m no conservative. I like progressive taxation, regulation, government involvement in health care, wage subsidies, anti-trust regulation and all that good leftie stuff. You’ll notice, as I have, that the list of economic policies I like and my meta-views on political economy aren’t necessarily contradicitory, in fact, liberal economists in Summers-Rubin-DeLong vein probably share most of the views I just stated.
Yet, many more orthodox free-marketers would say that my belief in the efficacy of some regulation, progressive taxes, wage subsidies, government provided health care is really just selling out to the collectivist hoards, and if you really believe that economic growth is the source of most social good, then you really have to slash taxes on capital and just ride with it. Well, according this new paper by Morris Altman, levels of “economic freedom” really only matter at stages and don’t have that much of a marginal effect on growth or well being except at certain levels. Here’s the abstract:
The hypothesis that economic freedom and related variables are significant determinants of
real per capita income and growth is critically evaluated. Economic freedom is found
necessary for higher levels of per capita income and growth largely in terms of threshold
effects as opposed to persistent marginal effects. More economic freedom does not appear to
yield higher levels of per capita income. And securing particular levels of economic freedom
does not guarantee higher levels of per capita income or growth. Secure private property
rights is found to be a most significant positive causal variable as is sound money, whereas
moderate amounts of labor regulation and big government are not found to be bad for the
economy. Also, good corporate governance, in addition to economic freedom, is of
considerable import.
Notice that the key variables he isolates for income growth, “secure private property rights” and “sound money” are not put in danger by implementing a standard left-liberal or Democratic economic policy. Instead, what’s likely to happen is more “labor regulation and big government”, which, according to Morris Altman, aren’t all that bad for the economy. And even more intriguingly is the importance of good corporate governance, an issue that Republicans are totally out to lunch on.
The importance of Altman’s findings, which I should add I can’t really evaluate, though they certainly sound true, is that the basics of “economic freedom” are on very firm ground in the United States, so thinking that implementing a moderate-left economic agenda a la Obama or Clinton is going to endanger America’s future as a freely functioning capitalist economy is just silly.
Via Tyler Cowen, of course.
