America's Dwindling Economic Freedom(online.wsj.com)

30 pointsby f_salmon13 tahun yang lalu58 comments

online.wsj.com

http://online.wsj.com/news/articles/SB10001424052702303848104579308811265028066

56 comments

bazzargh13 tahun yang lalu

Huge pinch of salt and 'citation needed' on this. The Heritage Foundation is a self-described conservative think tank, and just seems to be relabelling 'low tax' as economic freedom here.

The purported benefits: "Countries achieving higher levels of economic freedom consistently and measurably outperform others in economic growth, long-term prosperity..." really? From 2000-2008, Ireland held 3rd or 4th spot in the list[1], and is now 11th. Worked out great for them, what with the recession, the bailout, and the 2nd highest level of household debt in the world[2].

To those who would reply 'but that's outside forces, economics is complicated,', well, exactly. Reducing it to a list like this is wishful thinking.

[1] https://en.wikipedia.org/wiki/Index_of_Economic_Freedom [2] https://en.wikipedia.org/wiki/2008%E2%80%932013_Irish_financ...

brc13 tahun yang lalu

I think the point there is not that fact that Ireland had a major economic crisis, but what the response to that crisis was. My memory on this is imperfect, but I recall all the banks getting nationalised and the losses being pinned on the taxpayer. That would demonstrate a loss of economic freedom in the way the index seems to weight it (lower public debt and lower taxes = higher economic freedom). So I don't see a particular problem there.

If Ireland had followed more of the Iceland model post-crisis (dissolve the entities, prosecute the execs, reneg on debt) then I think the results for Ireland would probably be different.

bazzargh13 tahun yang lalu

The problem isn't that the rating for Ireland went down when the economic indicators did, it's that HF claim the rating is a predictor of economic performance, without a shred of evidence.

brc13 tahun yang lalu

The way I see it, if Ireland hadn't pinned the taxpayer with the losses, their economic freedom would be higher, and their economic growth would probably be better. Certainly Iceland has fared better than Ireland in terms of economic growth since the 2008 crash - though Iceland appears further down the list of Economic Freedom. If Ireland had acted differently, it would likely have had better growth, and would be higher in the list as in the past. I think this case is fine in terms of the methodology.

bazzargh13 tahun yang lalu

You're not seeing the wood for the trees. Ireland is just one example among many where it is a poor predictor of growth. I could pick out China, India, Brazil (and complain about the weighting given to small countries), or just point at...all of the data:

http://www.leftbusinessobserver.com/Freedom1996.gif

It's comically bad. Random things like penis size correlate better with economic growth http://static1.businessinsider.com/image/5008876deab8ea62620...

(that's from a real paper from the Helsinki Center of Economic Research, btw, though it's obviously tongue in cheek)

Even its correlation with GDP is pretty shaky: http://www.heritage.org/index/book/images/in-2014-chapter-1-...

This is nothing but a list to write press releases around. There is no science to it, and we shouldn't take it any more seriously than articles about the mathematical formula for the perfect sandwich.

DGrutt13 tahun yang lalu

It would take less than 5 minutes of research to learn that it was not just about low taxes. Also cherry picking one country on there does nothing to disprove the notion that in general countries with higher economic freedom have higher economic growth. I don't think they are trying to say it is the one and only factor as that would be ridiculous. If it were purely ideological the list would look nothing like that anyway so I don't see why people are getting bent out of shape.

yummyfajitas13 tahun yang lalu

...seems to be relabelling 'low tax' as economic freedom here.

Taxation is 10% of the index, government spending another 10%.

http://www.heritage.org/index/about

elipsey13 tahun yang lalu

I'm annoyed. I came here to point out who the heritage foundation is, but bazzargh has it covered: https://news.ycombinator.com/item?id=7062656

TFA complains about "marginal income rates of %43" as though this were the general case. For what it's worth, %43 is the highest capital gains rate, the highest income rate is %39, which is for incomes of over 1.8MM: http://en.wikipedia.org/wiki/Income_tax_in_the_United_States

With that out of the way, the highest marginal tax rate was around %90 during the boom of the 50's and 60's, and is lower now than during Regan administration for example: http://www.ntu.org/tax-basics/history-of-federal-individual-...

If one is a member of the very highest tax bracket, then one might be tempted to measure freedom by the myopic comparison of income tax rates. It would be unsurprising if the Heritage Foundation were concerned about the very highest tax rate in great disproportion to it's nominal consequence.

There are other economic freedoms: freedom from excessive gov't granted monopolies (patent/copyright), freedom from protectionism, tariffs, limited work visas, etc. Even rich guys driven to distraction by high tax rates ought to be able to find something say about these sorts of things in an article about economic freedom, but no specific structural reforms are proposed. News flash: partisan think tank doesn't like taxes, president.

For the rest of rest of us, real freedom also means not being imprisoned for interacting with other consenting adults in ways that are illegal, and not being denied due process in various ways such as: torte reform, civil asset forfeiture, being spied on by agencies who are immune from judicial review, etc. Could we take a break from wringing our hands about the welfare of the ultra-rich, and work some of that stuff too?

yummyfajitas13 tahun yang lalu

For the rest of rest of us, real freedom also means not being imprisoned for interacting with other consenting adults in ways that are illegal...

You mean interactions like paying a consenting adult $7.24/hour to clean your bedroom? Selling a consenting knowledgeable adult a substance which has not passed FDA review? Paying a person without a medallion to drive you to a different location?

As far as I know, you don't escape from patent/copyright or work visa issues by travelling to other nations. Incidentally, those things are included in the Heritage rankings, and collectively get more weight than tax/govt spend.

http://www.heritage.org/index/about

elipsey13 tahun yang lalu

>> You mean interactions like paying a consenting adult $7.24/hour to clean your bedroom? Selling a consenting knowledgeable adult a substance which has not passed FDA review? Paying a person without a medallion to drive you to a different location?

When I said the article proposes no particular structural reforms, and ought to take on protectionism, &c. I meant that these are exactly the sort of issues I would like to have seen addressed.

It seems like we have in common more than you think :)

DGrutt13 tahun yang lalu

The index is by a conservative think tank but its certainly not just about taxes. I understand its been impacted in the past by things like the Kelo decision. Anyway it says its these four things equally weighted:

Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labor freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom).

elipsey13 tahun yang lalu

I see. I may have failed to really understand the index; In my defence the article seemed to dwell unduly a small part of it's composition.

At the least, these guys need better PR. That article seemed pretty out of touch with those of us in the rest of the tax brackets. Instead of complaining about top tax rates they should be convincing me that net prosperity will increase, even for middle class chumps like me, if we deregulate, lower _everyone's_ taxes, abolish the minimum wage, get rid of medicare/medicaid, get rid of public health insurance and unemployment insurance and welfare and food programs and social security, and &c.

That sounds like a hard sell, and I think these guys are afraid to address those issues head on in a public forum like WSJ, so they complain about other stuff that's less relevant.

brc13 tahun yang lalu

It's probably more the slant that the WSJ put on the ranking and what makes up the ranking.

I think making a link between economic freedom and economic growth is a tough enough sell without giving individual policy prescriptions. Ideally people should be informed enough to know what tradeoffs they are making when they vote for policy choices. It's OK to vote yourself a bit less economic growth for other things you want, but for many they aren't aware of those tradeoffs.

jasonkester13 tahun yang lalu

Hmm. You know those dozen or so countries even further down the list than the US do sorta seem like nice places to live. Germany, Sweden, Japan and so forth. Maybe there are just a lot of countries in the world, and not everybody can be in the top 10 for everything every year.

The reasons the author lists for why my freedom is suddenly so limited don't seem like they would really impact me all that much. So there's more health care regulation. And now I'm supposed to be panicking?

Perhaps not.

ddeck13 tahun yang lalu

>those dozen or so countries even further down the list than the US do sorta seem like nice places to live

Precisely. I'm not sure topping the economic freedom charts is such a desirable goal for the average citizen.

Here in Hong Kong (#1 on the list) for example, I have the freedom to legally discriminate against employees based on age, appearance, religious beliefs and sexual orientation. I have the freedom to engage in anti-competitive mergers and monopolize the market. I have the freedom to pay peanuts, demand unpaid overtime, require a 6-day workweek, give one-week leave per year and not pay you for breaks. Freedom to run a toxic bus fleet and burn bunker fuel in my ship while anchored 24/7 1-mile from the center of town.

One can argue cause and effect, but I don't think it's coincidence that Hong Kong has the highest income inequality in the developed world[1] and one of the unhappiest populations[2].

[1] https://en.wikipedia.org/wiki/List_of_countries_by_income_eq...

[2] http://unsdsn.org/files/2013/09/WorldHappinessReport2013_onl...

hc81113 tahun yang lalu

Don't you also have the freedom to not take a job you're not happy with?

zimbatm13 tahun yang lalu

What makes you think that other jobs would be better ? Not everyone is as well equipped in life as you are (an assumption based on the fact that you have a computer and time to post on HN).

Freedom != opportunities

hc81113 tahun yang lalu

Hong Kong enjoys one of the lowest unemployment rates in the world among developed countries.[1]

Maybe freedom leads to opportunities.

[1] http://www.tradingeconomics.com/hong-kong/unemployment-rate

ddeck13 tahun yang lalu

Correct, and yet the poverty rate is higher than the US, with 33% of the elderly living in poverty. The unemployment rate is not a good measure of opportunity.

nirnira13 tahun yang lalu

Rubbish. It's nobody's responsibility to pay low-skilled humans higher than market rates in an over-saturated market. As long as labour transactions occur are transparent, free and mutually consenting, why is it your right to force buyers to pay more than the price available sellers are willing to settle for? Potato sellers don't get to force you to buy their goods for $10 a kilo just because they don't like it that their competitors are happy with $2. Labour is a commodity like any other, despite the ridiculous emotionalisation of the market.

zimbatm13 tahun yang lalu

Where did you see me talking about employer responsibility ? I'm just saying that these people might have a legal freedom but it doesn't necessarily mean they have opportunities to find better jobs. It's just an observation from the real world.

VLM13 tahun yang lalu

sure do, just don't eat, drink, get medical care, shelter, or education. Other than that, no problemo!

hc81113 tahun yang lalu

Exactly how many citizens in Hong Kong are dying because of hunger or shelter?

By the way, "Hong Kong is one of the healthiest places in the world. Hongkongers enjoy a life expectancy of 85.9 for females and 80 for men, which is the third highest in the world, and an infant mortality rate of 3.8 deaths per 1000 births, the fourth lowest in the world." [1]

[1] http://en.wikipedia.org/wiki/Health_in_Hong_Kong

bane13 tahun yang lalu

> Exactly how many citizens in Hong Kong are dying because of hunger

Depending on how you count it, measures of food insecurity in HK show about 1.5 million [1] (in a population of ~7 million). Oxfam in 2011 [2][3], for example, tracks 16% of poor households with children suffer from frequent starvation and 30% from simply not being able to afford enough food.

Homelessness is less severe...relatively. Surveys in the city find ~1000 people sleep in the streets -- and local weather makes this a less severe option than say...Toronto. You probably won't die on the streets in HK from exposure. But HK also offers a surprisingly unregulated housing market that allows for people to sublet incredibly small spaces and even stack rental units in a single dwelling like kennels. Estimates put 100,000 people living in these conditions [5] Significantly more live in apartments between 24-40 square feet. [6]

But this you could find out for yourself with a minute of googling, that you didn't shows you are simply trying to reinforce some preconceived notion.

1 - http://feedinghk.org/the-big-issues/hunger-101/

2 - http://www.oxfam.org.hk/en/news_1630.aspx

3 - http://www.oxfam.org.hk/filemgr/1630/FoodSurveyReportAug2011...

4 - http://www.cityu.edu.hk/youeprj/hope/homelessness.html

5 - http://www.dailymail.co.uk/news/article-2084971/Hong-Kongs-c...

6 - http://abcnews.go.com/blogs/headlines/2013/02/shocking-photo...

[deleted]13 tahun yang lalu

yummyfajitas13 tahun yang lalu

New health care regulations significantly complicate the lives of those trying to start or grow a business (at least businesses smaller than big corporations).

At the very early stage, the cost is high. I'm obligated to pay overinflated prices for insurance to support the life choices (pregnancy, drug addiction, fatness) of others. The cost is also highly unpredictable - it's based on my future income and the exchange website is designed to obfuscate it in order to avoid sticker shock. Good luck predicting future income if you don't work for the government/bigcorp.

And there are all sorts of edge cases where the regulations don't even make sense. For example, I live outside the US, but if I enter the US for 31 or 36 days (different websites give different numbers), I'm obligated to buy 365 days of obamacare or pay the obamacare tax. This drastically curtails my ability to make sales visits.

At the growing a business stage, it makes your 50'th employee very expensive.

Anechoic13 tahun yang lalu

New health care regulations significantly complicate the lives of those trying to start or grow a business (at least businesses smaller than big corporations).

I must be missing something because as someone who is growing a small business, the ACA (and its Massachusetts predecessor) has significantly simplified my life.

cm201213 tahun yang lalu

If your new business has lower than 50 employees, obamacare does not effect it in any way except to subsidize your low paid employees healthcare if they take their own plan.

yummyfajitas13 tahun yang lalu

Re-read my post. I didn't claim otherwise.

cmdkeen13 tahun yang lalu

Except the US public debt requires growth to stop a very nasty hard landing when it comes home to roost. The article's assertion that economic freedom is tied to economic growth should cause worry in that regard. Germany and Sweden have anaemic 0.7% GDP growth for the year, Japan is at the end of a lost decade where there have been significant economic consequences.

It isn't about what the quality of life will be like tomorrow or next year, it's the consequences a decade hence.

Those countries all have significantly better social security safety nets. The US does not because it is supposed to be economically successful for the majority, if that ceases to be the case things like a lack of public healthcare is going to become a significant problem.

arethuza13 tahun yang lalu

What about Singapore - #2 on that list of economic freedom but it ranks pretty poorly in press freedom:

http://sg.news.yahoo.com/singapore-falls-to-record-low-place...

And they have rather brutal corporal punishment for quite trivial things (swearing on an airline flight??):

http://www.news.com.au/national/beyond-excruciating-when-it-...

mpweiher13 tahun yang lalu

"...nice places to live...why my freedom is suddenly so limited don't seem like they would really impact me all that much"

Economic freedom, that is the freedom of companies to do as they please, is often in conflict with individual freedom. For example, I find myself with much greater freedom as an employee or as a consumer in Germany than in the US, because the inherent imbalance in power between the two parties is leveled by regulations curtailing the corporations' freedom.

ahomescu113 tahun yang lalu

> Economic freedom, that is the freedom of companies to do as they please, is often in conflict with individual freedom.

These seem orthogonal to me. You can have individual economic freedom.

[deleted]13 tahun yang lalu

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brc13 tahun yang lalu

Economic Freedom is the freedom for you as an individual to follow your own path. It has nothing to do with individuals vs corporations. Regulations do not make you free.

How free are you to start up a company in any given field? To earn income doing a task of your choosing? To spend your income on items of your own choosing?

That is the essence of economic freedom.

In the details it shows that the USA is still very high in certain areas - like personal freedom in labor mobility - but is getting marked down for continued and excessive debt.

I think the list is somewhat imperfect (Hong Kong is no longer a country, despite it's commendable history of low taxation and personal freedoms, now lost to being a chinese micro-state).

The discussions around healthcare seem to muddy the waters - although it is a hot topic I don't think it really counts for much as most of the countries above the USA have much more regulated or state owned health care.

Jare13 tahun yang lalu

> Regulations do not make you free

Regulations prevent more powerful others from removing my own freedom as they want.

brc13 tahun yang lalu

See my other reply, but the only 'more powerful other' that has the ability to remove your economic freedom is a government. A large corporation cannot remove your ability to change jobs, spend your income how you like or start up a new business unless they do it through the government.

Microsoft or Apple can't prevent me from starting up a new company or buying some other product unless they get the government to regulate my other choices out of existence - which means they can only harm me by decreasing my economic freedom. The exact opposite to what people seem to be trying to say here.

twobits13 tahun yang lalu

"Economic Freedom is the freedom for you as an individual to follow your own path. It has nothing to do with individuals vs corporations."

On the right, we have the toddler. He is 2 years old. On the left, we have the heavy weights world champion.

Ladies and gentlemen, please make your bets. The fight is about to begin!

brc13 tahun yang lalu

Well, no.

I'll restate again: Economic Freedom gives you, the individual, the freedom to pursue your own economic choices. That is the type of job you'd like to do, the type of business you'd like to start, how you'd like to spend your income.

It has zero to do with David vs Goliath, Corporation vs Individuals.

Case in point. Would you like to start a community bank, to better serve yourself and your local community? Have you got the freedom from regulations to do so?

Regulations, as we all know, are often written by lobbyists and passed by politicians. Frequently these regulations are designed to entrench power and escape from competition.

Let's look at a common discussion point on this site - Uber. High economic freedom means you're free to start your own Uber-like service. You're free to create a car service, and free as a consumer to purchase a ride from them. Low economic freedom means there are barriers from either starting the company or buying it's products. From such freedoms springs economic growth. Entrepreneurs require economic freedom so that they can find new paths, so that they can pivot around looking for the right business model.

That is why it has nothing to do with 'big vs small' or anything like that. Regulations do not make you free.

magicroundabout13 tahun yang lalu

It is also worth noting that countries that are alleged to have spiralled downwards in terms of economic freedom are now far more pleasant places to live. From personal experience, I would cite Ecuador. The same streets of Quito that were mortally perilous are now must-see features of package tourism; the bus journeys that would have taken 14 hours across the country now take 8. Income taxes are still far lower than many who make the top of the index and even the wealthiest have enjoyed the benefits of sustained growth and a relatively stable political climate (given the country's previous history).

Yes, it is starting to look like these 'crony-populist regimes' that threaten economic freedom actually make people a good deal freer in material terms.

alipang13 tahun yang lalu

If you're up for a longer read about Sweden's economic history, you can check out http://www.libertarianism.org/publications/essays/how-laisse....

There is of course some possible bias in this article that should be derivable from the domain name.

spindritf13 tahun yang lalu

Here's the actual index http://www.heritage.org/index/

It's a pretty well made website. You can export filtered data in csv, there are profiles for each country, etc.

thecolorblue13 tahun yang lalu

I think its two difficult to put the US and UK (as examples) on the same scale as other countries. Miller suggests that tougher regulation has caused the US to loose points. I would argue the US needs more regulation, compared to smaller countries, for stability.

cmdkeen13 tahun yang lalu

I think the point being made is the blunt nature of the regulation - "entire industries" are being regulated. More regulation doesn't necessarily mean better regulation.

iterative13 tahun yang lalu

That's not an argument, it's an assertion.

pessimizer13 tahun yang lalu

tldr; Arbitrary number made up by conservative think tank not known for intellectual rigor is declared to have risen, press released.

ChristianMarks13 tahun yang lalu

Unscientific rubbish. Discourse about economic justice is "value laden" but talk of economic freedom is based on "economics without values."

xradionut13 tahun yang lalu

Norway, which is the "happiest" country is ranked number 32 on this list.

nirnira13 tahun yang lalu

Seems like bullshit. Australia has ludicrous regulations on competition, including a massive minimum wage, with all sorts of knock-on distortionary problems, yet it makes the top five.