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Category Archive: Economic Growth

  1. From Rags to Riches: The Cayman Islands Revolution

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    The rule of law, Hayek wrote, is “a rule concerning what the law ought to be”: It ought to be general and abstract; equally applied, with legal privileges for none; certain, not subject to arbitrary changes; and just. In this Learn Liberty Academy, Andrew Morriss sets sail to show how the law of the Cayman Islands conforms with Hayek’s ideals, how it got that way through astute political entrepreneurship, and how the world at large benefits from its legal wisdom. The benefits of Caymanian rule of law are so diffuse and far-reaching that we can even attribute the American poor’s high consumption of healthcare to it.  Embark on Morriss’s expedition — read, watch lectures, and discuss!

    Song credit: “Coconut Water” – Dan O’Connor

    Archival images courtesy of the Cayman Islands National Archive

  2. Stealing from the Poor to Give to the Rich: An Anti-Robin Hood Story

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    Have you ever thought much about property rights? Many believe ownership protections primarily favor the wealthy, but it turns out that the wealthy and politically connected actually benefit more when ownership is vulnerable. Without strong property rights, those with the power are able to take property from those who lack such political connections. In places like Zimbabwe—where the government is able to confiscate profits, merchandise, and even businesses with ease—the lack of property protections has been one cause of the country’s decline. Today, Zimbabwe is the poorest country in the world, and eroded property rights are at least partially to blame. Prof. Dan Russell argues that “doing less to protect ownership turns out to be a really effective way to create poverty.” Perhaps property rights deserve protecting. Except, maybe, among Finnish race car drivers.

  3. How to Fight Global Poverty

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    Have you heard the news? The number of people living in abject poverty—defined as living on less than $1.25 per day—has been halved since 1990. How did that happen? Prof. Stephen Davies explains that extreme poverty has been on the decline in part because two of the world’s most populous countries, China and India, have embarked on a path of economic liberalization and development over the past two to three decades. As more countries have embraced free trade and market-friendly policies, we have seen encouraging news of poverty reductions and greater access to clean drinking water. If such policies continue, Prof. Davies says, it’s not out of the question for extreme poverty to be eradicated in the foreseeable future. These gains are likely to be lost, however, if we make poor economic decisions that take us back toward protectionism and economic controls. With good economic policies and free markets, we can help many of the poorest people in the world.

  4. What’s So Great about Economic Freedom?

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    Economic freedom is about the freedom to buy and sell things, says Professor Antony Davies, but it’s also about the freedom to interact with people, to converse with others, to travel, and to say what we want to say. Evidence shows that economic freedom is associated with many positive things in society. This holds true among states in the United States and across the countries of the world.
    Countries that have more economic freedom also tend to have higher GDP per capita. They tend to take better care of the environment. They also tend to have less child labor and more gender equality. Prof. Davies examines the data on these factors and several of the arguments people have raised about the data to show the many benefits of economic freedom. Economic freedom is about being free to make your own choices. It allows us to:
    - Do what we love
    - Create wealth
    - Protect the environment
    - Improve equality
    - End child poverty

  5. Is There Income Mobility in America?

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    We often hear that the rich are getting richer and the poor are getting poorer. While a surface-level examination of U.S. households by quintile from 1967 to 2009 would seem to support this claim, Professor Sean Mulholland uses other data to show that this measure overlooks two vital pieces of information that should concern those who care about the welfare of the poor.

    First, the share of total income does not tell us anything about whether income increased or decreased when adjusted for inflation. From 1967 to 2009, the real mean household income of the top quintile increased by 71 percent, meaning the rich became much richer. Over the same period. The real mean household income in the bottom quintile increased by 25 percent. This means the poor became richer as well. This measure shows that Americans in the lowest quintile could afford more goods and services in 2009 than in 1967.

    Second, these measures do not tell us what happened to particular households. Household income can change from year to year, but these measure do not track that. If we look at the households in the bottom quintile in 1987 and follow those households until 1996, we find that about 45 percent of them have moved up to a higher quintile. If we look at the next 10-year period, we find that 40 percent of households move up. Professor Mulholland also discusses income mobility from the top quintile down and across generations. He argues that these facts suggest that more improvements have been made for the poor in the past 40 years than many people believe. “To continue these improvements,” he says, “we should seek ways to expand opportunities for income growth and, with it, greater absolute mobility for those across the income distribution.”

    Sources:

    1. Data on household income shares by quintile come from here: http://www.census.gov/hhes/www/income/data/historical/household/. U.S. Census Bureau, Current Population Survey, Annual Social and Economic Supplements, Table H-2.  Share of Aggregate Income Received by Each Fifth and Top 5 Percent of Households, All Races: 1967 to 2009

    2. Data on mean household income levels by quintile come from U.S. Census Bureau, Current Population Survey, Annual Social and Economic Supplements, Table H-3.  Mean Household Income Received by Each Fifth and Top 5 Percent, All Races:  1967 to 2009. These data can be found here: http://www.census.gov/hhes/www/income/data/historical/household/.

    3. Data on relative household income mobility by quintile comes from: U.S. Treasury Department, (2008). Income Mobility of the United States from 1996 to 2005, Washington, D.C. It can be found here:
    http://www.treasury.gov/resource-center/tax-policy/Documents/incomemobilitystudy03-08revise.pdf.

    4. Data on generational income mobility comes from: Isaacs, Julia B. (2007). Economic Mobility of Families Across Generations. The Brookings Institutions. It can be found here: http://www.brookings.edu/~/media/research/files/papers/2007/11/generations%20isaacs/11_generations_isaacs.pdf

  6. Does Stimulus Spending Work?

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    After the housing bubble burst, both the Bush and Obama administrations turned to stimulus spending in an effort to improve U.S. economic growth. Stimulus spending is often justified by the thought that it is the government

  7. Did Markets Fail in Post-Soviet Economies?

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    According to Prof. Pavel Yakovlev, several post-Soviet economies have struggled to obtain prosperity since the breakup of the Soviet Union. Many argue that this is a failure of capitalism. To Prof. Yakovlev, this has not been a failure of capitalism, but rather, has been a failure to create the conditions necessary for capitalism.

    To see whether or not this is true, Prof. Yakovlev looks for differences in GDP growth rates between post-Soviet countries. He finds that Azerbaijan and Poland have performed well, with average GDP growth rates of over 4% per year. These countries, in comparison to the other post-Soviet countries, have more economic and political freedoms, lower levels of corruption and inflation, and more transparent institutions. They also happen to be located on the outer edge of the soviet bloc, where corrupt Soviet style institutions did not take root.
    Other post-Soviet countries like Russia, Ukraine, Belarus, Uzbekistan, and Turkmenistan have experienced dismal economic performance because they have failed to create a market friendly environment. They also, in comparison to the top performing post-Soviet economies, have high rates of corruption and inflation, low economic and political freedoms, and poorly defined and enforced property rights.
    Markets did not fail in poorly performing post-Soviet economies, but rather, were never actually given a chance to succeed.
  8. An Introduction to the Industrial Revolution

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    What was the industrial revolution? According to Dr. Stephen Davies, it was an extraordinarily innovative period in history that generated the highest living standards the world had ever seen. For instance, over the course of the 19th century, average per capita income in the United Kingdom rose by a factor of six. To put this in perspective, prior to the industrial revolution, it typically took 300-400 years for the standard of living to rise by a factor of 0.5. Why did this explosion of human flourishing take place? Dr. Stephen Davies claims that people began to embrace an engineering culture along with a respect for trade and business. It was this synergy of trade and engineering that led to a revolution in production and business organization.

  9. Economic Freedom of the World

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    Do you prefer the world of Adam Smith or the world of Karl Marx? Prof. Robert Lawson tells the story of his numerous discussions about this very question with his friends in college. Even after years of theoretical discussion with his friends, a conclusion was never reached between them.  Prof. Robert Lawson now works on the Economic Freedom of the World project, which is an empirical study that attempts to answer this same question. In order to do this, the study compares data related to economic freedom and quality of life. It finds that countries with institutions resembling those advocated by Adam Smith tend to provide the highest quality of life to its citizens.

    Read the latest edition of the Economic Freedom of the World report.

    Credits: This lecture was delivered in 2009 at the Metropolitan State College of Denver School of Business, as part of the Exploring Economic Freedom Lecture Series, directed by Prof. Alexandre Padilla. This video was produced and directed by Scott Houck, and edited by Adrienne Christy. Video production provided by the Educational Technology Center at Metropolitan State College of Denver. Video used by LearnLiberty.org with permission.

  10. A Tale of Two Countries: Botswana and Zimbabwe

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    According to Prof. Scott Beaulier, when most people think of Africa and the standard of living it provides, they tend to think of the entire continent as a whole rather than the individual countries. This type of thinking, however, overlooks some large differences that exist between African countries. Specifically, when comparing Botswana to other African countries, there is a stark contrast in living conditions. Prof. Scott Beaulier analyzes the data and explains why these differences in living standards exist.

    Credits: This lecture was delivered in 2009 at the Metropolitan State College of Denver School of Business, as part of the Exploring Economic Freedom Lecture Series, directed by Prof. Alexandre Padilla. This video was produced and directed by Scott Houck, and edited by Adrienne Christy. Video production provided by the Educational Technology Center at Metropolitan State College of Denver. Video used by LearnLiberty.org with permission.
  11. The Shackled Continent

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    Robert Guest, through a series of personal travel stories, explains the causes and his proposed solutions to Africa’s poverty. Africa’s poverty, he claims, is primarily the result of authoritarian governments. His solution is to encourage African governments to enforce the rule of law and provide basic necessities such as education, roads, and water.

  12. Top Three Policy Reforms to Grow the Economy

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    Economist Jeffrey Miron of Harvard University outlines three policy reforms that he thinks would promote economic recovery and growth in the United States: cutting entitlements, freezing regulation, and replacing the existing tax code with a flat tax on consumption.