The American Thinker | 12.18.16
By Alan W. Dowd
Institute has released its 12th edition of the Economic Freedom of North America index (EFNA), which ranks and compares the levels of economic freedom
across North America and within the U.S., Canada and Mexico by measuring taxation,
regulation, labor market restrictions and the size of government. The bad news
for those of us in the “land of the free” is that the top jurisdiction and two
of the top three are in Canada. The good news is that several states are
applying the commonsense principles of economic freedom, enabling their
citizens to deploy their talents, pursue their goals, and use their wealth free
of unnecessary government restriction and regulation.
A little more bad news—at least for Americans—before we get to some more good
news: On the 2010 EFNA index, there was only one Canadian province in the top
47 jurisdictions measured. Today, there are five Canadian provinces in the top 22. Since 2004, the
average score for U.S. states on the EFNA measure has fallen from 8.26 to 7.70
(out of a possible 10). California’s score, for instance, has plummeted from
6.4 in 2000 to 5.9 today.
other words, too many states are following D.C.’s lead by over-spending,
over-taxing, over-subsidizing, over-regulating and undercutting individual
liberty. As a result, many U.S. states are falling behind their Canadian
neighbors in economic freedom, just as the U.S. is falling behind its global
neighbors. Indeed, this downward trend is reflected in the international rankings, where the U.S. has
fallen from 2nd in the world in 2000 to 16th in the 2016 rankings. (By
economic freedom ranking has jumped from 14th in the late 1990s to fifth today.)
U.S. tumble from the top of the international rankings was inevitable given the
increasing government encroachments on private property rights, numerous government interventions, an
ebbing of the rule of law, expansion of federal government spending and
regulations, and consequent shrinking of the space for free economic exchange. Indeed, at both the
state and national level, the falling U.S. rankings are the result of more
regulation, more constrained labor markets, higher taxation and less economic
On the U.S.-only component of this year’s EFNA, the
top-ranked states are New Hampshire (1st), Florida (2nd), South Dakota and
Texas (tied at 3rd), and Tennessee (5th). At the other end of the spectrum are
New York (50th), California (49th), and Alaska, Hawaii and New Mexico (all tied
The differences between high-economic-freedom states and low-economic-freedom
states (and countries) can be seen in far more than numbers on a graph, which
brings us to some good news: In the most-free states, the average per capita
income is 4.7 percent above the
national average, while the average per capita income in the least-free states
is 3.3 percent below the national
Moreover, as my colleague Dean Stansel, an SMU economics
professor and lead author of the report, points out, people (and businesses)
are voting with their feet. The reason can be traced to vastly different
approaches to economic freedom. “Over the last three years, population in
Texas and Florida has grown more than two-and-a-half times faster than it has
in New York and California,” he observes. “Employment and income have also grown
faster in Florida and Texas.” According to Stansel, high-growth states like
Texas and Florida “maximize economic freedom by keeping the burden of taxes,
spending and regulations low.
The benefits extend beyond higher incomes and higher employment rates. Fred
McMahon, a colleague who heads the Fraser Institute’s family of economic
freedom research programs, notes that higher economic freedom correlates with higher
economic growth, higher levels of life satisfaction and higher levels of wealth
on both the richer and poorer ends of the spectrum (in other words, in jurisdictions
with more economic freedom, the poor are wealthier than their counterparts in jurisdictions
with less economic freedom).
Sharing the Message
In short, economic freedom is one of the main drivers of prosperity, and the evidence
shows that states with low levels of economic freedom reduce the ability of
their citizens to prosper economically, while states with high levels of
economic freedom maximize their citizens’ ability to prosper economically.
This is a message
that needs to be heard. The challenge, until recently, was spreading this
message at the state and local level.
That began to change
in 2014, when we launched a partnership of U.S. organizations, with the
aim of spreading the news about economic freedom at the state level.Starting
with 10 partners in nine states, our EFNA
Network now comprises
32 partners in 28 states. These partners collaborate with us in disseminating
EFNA’s findings in their states (see page 87 of this year’s EFNA report), and they are doing so with
gusto: EFNA media mentions in the U.S. increased 243 percent after the network
was launched. Thanks to this network, EFNA 2015 (published in December 2015)
was featured in prominent statewide outlets in Texas, New York, Pennsylvania,
Kentucky, Michigan, Nebraska, Alabama, Arkansas, Florida and Hawaii—some 20
states in all in the past 12 months.
The result: the EFNA Network is
raising awareness about economic freedom in each state.
For example, the Buckeye
Institute (Ohio) distributes EFNA info sheets to state policymakers and
posts EFNA findings on social media. “The Economic Freedom of North America
index gives us a valuable measuring stick so we can advise policymakers how
their actions are making Ohio more or less free,” Rea Hederman of the Buckeye
Institute explains. Ohio’s ranking has improved from 46th in 2009 to 38th on
this year’s index.
Michael LaFaive of the Mackinac
Center (Michigan) uses EFNA findings “to remind lawmakers and others that
mountains of data exist that show positive correlations between economic
liberty and human wellbeing.” Michigan has jumped from 42nd in 2009 to 27th on
this year’s index.
Economist Vance Ginn, Ph.D., says
he and his colleagues at the Texas Public Policy Foundation “rely on the EFNA
to craft free-market reforms to improve the standards of living for all
The Grassroot Institute (Hawaii)
leverages EFNA findings and authors for “Skype-cast” interviews discussing
policies Hawaii needs to implement to lift itself out of the EFNA cellar.
The list goes on. Add it all up,
and the result is more state policymakers and more concerned citizens hearing and
learning about the benefits of economic freedom. This, too, is good
news. Spreading the word about the benefits of economic freedom promotes it at
the state level.
Perhaps the best news of all is that states
don’t need a wealth of natural resources, a highly educated or highly skilled
workforce, a great climate, stunning tourist attractions, or gleaming
infrastructure to rate highly on economic freedom—and thus unleash the
creativity, talents and energy of their citizens. All they need is the common sense to adopt
and practice policies that allow their citizens to act in the economic sphere
free from stifling restrictions.