National Survey of Economic Freedom

| January 3, 2014

fraser_institute_studyThe Fraser Institute released its annual report, Economic Freedom of North America, on December 12, 2013. The report measures the impact government restrictions have on economic freedom in the United States and Canada, on a state by state (and province by province) basis.

The study ranks the states from those with the greatest economic freedom to the least, by looking at the following factors: (1) size of government, (2) discriminatory taxation, (3) regulation, (4) legal system and property rights, (5) sound money, and (6) freedom to trade internationally.

The research found that the states with more freedom are doing better economically by any measure, including per capital income, growth rates, and entrepreneurial activity. Fred McMahon, the co-author of the study noted that “Overall, the strength of the statistical fit of this relationship is remarkable.”

To quote the study: Free economies produce the greatest prosperity in human history for their citizens. Even poverty in these economically free nations would have been considered luxury in unfree economies.

The study set out to find if this correlation between economic freedom and prosperity clearly evident on a national scale would also hold true on a state by state basis, and concluded that it did. A considerable body of research shows that the relationship between prosperity and economic freedom holds in narrower ranges of the spectrum. 

The five states with the greatest economic freedom are Delaware, Texas, Nevada, Wyoming, and South Dakota. The five states with the least economic freedom are New Mexico, West Virginia, Mississippi, Vermont, and Kentucky.

The rankings seem to defy the traditional “red state/blue state” categories. The states with the greatest economic freedom include “very blue” Delaware, while the least economic freedom can be found in “very red” West Virginia.

So – how free is your state? Check the map at the end of this article, which is available with the full study at issuu.com/econfree/docs/efna.

The Fraser Institute (www.fraserinstitute.org) is an independent, non-partisan research and educational organization based in Canada that publishes peer-reviewed research on economic and policy issues.

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Category: Finances