# Research and Evidence: economic freedom and prosperity Back to [[Economic Freedom and Prosperity]] · [[Post Analysis - Handre on Economic Freedom Case Studies (2026-10-23)|Post analysis]] · [[Vocabulary]] · [[Related Trends]] Key: ✔ I opened or confirmed the source (publisher, abstract, official page or data API) this session. ◻ Cited from standard knowledge and not opened this session. ⚠️ The detail is unconfirmed. ## History of the idea - **Classical roots:** Adam Smith, *Wealth of Nations* (1776): "peace, easy taxes, and a tolerable administration of justice" ◻ (the well-known line, from Dugald Stewart's account of a 1755 lecture). This is the post's thesis in its earliest form. - **Austrian school:** Mises (1920) and Rothbard (1962/1970) argued the case deductively and rejected statistical "proof." See [[Topics/Murray Rothbard/Murray Rothbard|Murray Rothbard]], [[Topics/Murray Rothbard/Collaborators/Ludwig von Mises|Ludwig von Mises]], [[Topics/Murray Rothbard/Book Outlines/Man, Economy, and State (1962)|Man, Economy, and State]]. The post argues by country case, closer to Friedman's style. - **Friedman and Hong Kong:** *Free to Choose* (1980) used Hong Kong as its showcase ◻. Friedman's 1998 memoir is the source of the Cowperthwaite statistics anecdote ◻. - **Indexes:** the Fraser Institute's *Economic Freedom of the World* (first report 1996, with data back to 1970) ◻ and the Heritage Foundation / *WSJ* *Index of Economic Freedom* (from 1995) ◻. Both ranked Hong Kong first for decades. Heritage stopped scoring Hong Kong separately from China in 2021 ◻⚠️. - **Washington Consensus:** John Williamson's 1989/90 list of ten reforms (fiscal discipline, trade liberalisation, privatisation, deregulation and so on) ◻. Argentina in the 1990s was its showcase until 2001. ## Evidence for the post's thesis | Source | Finding | Check | |---|---|---| | Hall & Lawson, "Economic Freedom of the World: An Accounting of the Literature," *Contemporary Economic Policy* 32(1), 2014 | Of 198 empirical studies using the EFW index as an independent variable, 134 (about two-thirds) found it associated with "good" outcomes (growth, income, investment), 56 were mixed, and 8 (under 4%) found "bad" outcomes | ✔ [Wiley](https://onlinelibrary.wiley.com/doi/10.1111/coep.12010) (abstract via search) | | Acemoglu, Johnson & Robinson, "The Colonial Origins of Comparative Development," *AER* 2001; *Why Nations Fail* (2012) | Inclusive institutions (secure property, constraints on rulers) cause long-run prosperity. Nobel Prize 2024 | ◻ | | Douglass North, *Institutions, Institutional Change and Economic Performance* (1990) | Transaction costs and property rights drive growth | ◻ | | Kleven, Landais, Saez & Schultz, *QJE* 129(1), 2014 | Denmark's preferential scheme for foreigners more than doubled the number of high-paid foreigners. Migration elasticity 1.5–2 for that group | ✔ [NBER w18885](https://www.nber.org/papers/w18885) (abstract via search) | | Kleven, Landais & Saez, "Taxation and International Migration of Superstars: Evidence from the European Football Market," *AER* 2013 | Footballers' choice of country responds strongly to top tax rates | ◻ | ## Evidence against or complicating it | Source | Finding | Check | |---|---|---| | Alice Amsden, *Asia's Next Giant* (1989); Robert Wade, *Governing the Market* (1990) | South Korea and Taiwan grew with directed credit, import controls, export targets and state-guided conglomerates | ◻ | | Dani Rodrik, "Getting Interventions Right," *Economic Policy* (1995) | Coordinated investment by the state was central to Korea and Taiwan's take-off | ◻ | | Ha-Joon Chang, *Kicking Away the Ladder* (2002) | Today's rich countries, including the UK and US, used tariffs and industrial policy while they developed | ◻ | | Young & Varner (*National Tax Journal* 2011; Young et al., *ASR* 2016) | US millionaire migration in response to state taxes is small (semi-elasticity under 0.1) | ✔ [NTJ](http://www.journals.uchicago.edu/doi/10.17310/ntj.2011.2.02); [ASR PDF](https://cristobalyoung.com/wp-content/uploads/2018/11/Millionaire_migration_Jun16ASRFeature.pdf) (via search) | | Piketty, Saez & Stantcheva, "Optimal Taxation of Top Labor Incomes: A Tale of Three Elasticities," *AEJ: Policy* 2014 | Top-rate cuts since the 1970s track rising top pre-tax income shares without faster growth. They argue the revenue-maximising top rate is high | ◻ | | Conway & Meehan, NZPC 2013 | After the reforms, NZ GDP per capita stabilised at about 20% below the OECD average, and productivity kept lagging | ✔ [PDF](https://www.treasury.govt.nz/sites/default/files/2024-05/pc-rp-nzpc-conway-meehan-productivity-by-the-numbers.pdf) (opened) | | Nordic economies | High tax-to-GDP ratios with high income and high scores on property rights and trade freedom. Shows that "economic freedom" is several things, with tax level only one of them | ◻ | **Method caveats:** reverse causality (rich countries can afford better institutions), and index construction (EFW mixes size of government with rule of law, sound money, trade and regulation; the size-of-government area correlates weakly or negatively with growth in some studies ◻⚠️). Case studies chosen to fit a thesis prove little. ## Data used in this folder | Dataset | Use | Check | |---|---|---| | Maddison Project Database 2023 (GGDC), via Our World in Data | HK/UK ratios for 1960 and 1997; Argentina's rank in 1913, 1929 and 1930 | ✔ [OWID CSV](https://ourworldindata.org/grapher/gdp-per-capita-maddison-project-database), downloaded Oct 23, 2026 | | Eurostat `nama_10_pc`, unit CLV_PCH_PRE_HAB | EU growth ranking, 1996–2000 and 2003–07 | ✔ API, Oct 23, 2026 | | World Bank BX.KLT.DINV.CD.WD | Ireland FDI net inflows | ✔ API, Oct 23, 2026 | ## Bottom line Broad agreement: secure property, open trade, stable money and predictable rules go with long-run prosperity. Real disagreement remains about tax **levels**, industrial policy and sequencing. The post presents the contested parts as if they were as settled as the agreed parts.