Economic Freedom

James Gwartney has been compiling a cross country list of economic freedom for around thirty years now -- enough data to come to some robust conclusions. Countries that are more economically free are more prosperous. The correlation is causative. Compare Argentina with Chile. Under Peron, Argentina went from a first world country to a third world country. Under Pinochet, Chile went from third world to first. Compare West Germany with East Germany, South Korea with North Korea, Hong Kong with China, America with Canada.  And so on and so forth. Time and again, history has thrown us the next best thing to controlled experiments. The conclusion is monotonous in its regularity. Freedom produces prosperity. 

Gwartney’s index includes five clusters of components: size of government, legal structure, free trade, sound money, and credit-labor-and- business regulation. In his presentation at Cato, Gwartney reports that legal structure -- respect for property rights and enforcement of contracts by independent courts -- is the component most strongly related to prosperity. 

Three cheers for the rule of law.

Source: Economic Freedom of the World