Cor Baby, That’s Really Free!

by Daniel on July 11, 2003

The Cato Institute has published a new edition of its annual report on The Economic Freedom Of The World, endorsed by Milton Friedman and not to be confused with about a million other such reports produced by rival thinktanks (I seem to remember that Heritage were the first to get into this game, but their index is based on subjective scoring and is really bad, while Cato’s is based on publicly available economic and survey data and is only quite bad, from a scientific point of view.)

Lovers of liberty will be pleased to know that the forward march of human civilisation continues unabated and we are all precisely 0.15% freer than we were at the time of the 2002 Report; the Index of World Economic Freedom apparently increased from 6.34 to 6.35 in 2001. Is it me, by the way, or is it pretty pathetic that such a self-important document is only produced with a two year lag? Anyway, as usual the dominance of the rankings by a bunch of incredibly rich free-ports and tax havens at the top and a bunch of horribly poor kleptocracies at the bottom, means that they can publish their usual diatribe about how “economic freedom is closely correlated to wealth, equality, development, relief from aching piles etc”. But the interesting thing to me is the extraordinary level of philosophical incoherence of the whole exercise.

As Kieran said, we’re not necessarily all Isaiah Berlin fans on this site. But some of us are, including me, and I’d like to make use of one of his biggest contributions; the distinction between negative and positive liberty. Basically it’s pretty intuitive; negative liberties are the absence of forcible restrictions on you doing something, positive liberties are the provision of the means for you to actually do something. As one might imagine, the libertarian half of the internet, on which Cato can reliably be located, tends to slag off positive liberties and claim that only negative liberties can legitimately be described as “Freedom!“.

So let’s look at the categories under which countries are scored. There are five major headings.

  1. Size of Government: Expenditures, Taxes and Enterprises
  2. Legal Structure and Security of Property Rights
  3. Access to Sound Money
  4. Freedom to Exchange with Foreigners
  5. Regulation of Credit, Labor and Business

Of these, 4 and 5 are pretty straightforwardly negative liberties, 1 is a negative liberty under a charitable interpretation which allows the taxation of income to be considered a form of restriction on liberty, but 2 and 3 are quite clearly positive liberties. A sound and stable medium of exchange (including a stable financial system), and an honest and impartial judiciary and legal system are things that the government provides for you, so that you can make decent use of your economic freedom. Now one might possibly argue that in a perfect anarchocapitalist world these could be provided by someone other than the government, but even granted that incredibly arguable proposition, Cato have given away far too much. Including the two positive liberties in their index of economic freedom is equivalent to the admission that economic freedom is not really worth anything unless you have the ability to make use of it. Which opens the door for everyone else to point out that “access to sound money and security of property rights” are all that you need in the way of positive liberties if you happen to be rich, but that if you aren’t then you also need education, basic healthcare and social security.

This is, if I remember, what Isaiah Berlin ended up concluding; that once you let in any sort of positive liberty, it is powerfully difficult to avoid ending up with a concept of liberty that includes all and any of the compenents of what people need to live a good life. Which is not necessarily a bad thing, but it does mean that the philosophical usefulness of the concept of “Liberty!” as a motivating force for theories of political morality, is rather more limited that the rhetorical attractiveness of the word would suggest. As it stands, Cato have constructed an index of what rich people need in order to enjoy their money. Which is exactly what they’re paid to do, but it doesn’t really have all that much to do with economic freedom in anyone’s sense of the word.

{ 21 comments }

1

Jimmy Doyle 07.11.03 at 10:41 am

Battlecry for negative libertarians: “Beware of the powers, ‘cos I’m sure they’re gonna get you, yeah”.

2

Rico 07.11.03 at 10:57 am

Brilliant!

3

Becky 07.11.03 at 11:05 am

There has been a huge debate over this issue on http://www.samizdata.net/blog – you might want to check it out (it’s about half way down the page – “The Anglosphere and Economic Freedom”)

4

dsquared 07.11.03 at 11:24 am

Gawd you guys are really hung up on GDP aren’t you? Remember, in John Quiggin’s catchy mnemonic, the problem with GDP is that it’s Gross (of depreciation of the capital stock and nonrenewable resources), it’s Domestic (doesn’t include income from ownership of overseas assets, the inclusion of which would clear up a lot of silly assertions about France vs. Australia) and it’s a Product (measuring outputs without taking into account the inputs). You don’t have to sign up to the whole Human Development Index bill of goods to know that GDP is a very bad measure for many purposes.

5

John James 07.11.03 at 12:25 pm

On Becky’s advice I checked out the discussion on samizdata.net. They are exultant about the fact that eight of the top ten ‘economically free’ countries in the world are English speaking. The implication seems to be that english speaking = economic freedom = rich. Bingo! It hardly needs to be pointed out that, the logical correlation between choice of language and material wellbeing is breaking new theoretical ground. If true, the problems of the Third World could be eradicated within a single generation by a new missionary movement led by English schoolmasters. Lets all brush down our TEFL certificates. An invasion of Milton-wielding dons would inevitably lead to economic freedom and hence, wealth. As the lingua-franca theory is breaking new ground, it requires, of course, some refinement. The position of poor, but predominantly English speaking countries, like Sierra Leone, Liberia, Jamaica and Nigeria may be just anamolies, but do, I think, require some explanation. Maybe it is because they speak English with strange musical accents, or because, they sometimes also speak in a native tongue. I’m sure answers will be found.

6

Jeremy Osner` 07.11.03 at 1:16 pm

Nice entry (as usual) Daniel — I believe you meand “0.05%”. I didn’t (couldn’t bear to) follow the link to Samizdata.net — I’m a little surprised though, to read John’s note about English language cheerleaders there — I thought tribalism and libertarianism were a bit contrary to one another.

7

dsquared 07.11.03 at 1:28 pm

I’m dividing 0.01 by 6.34 and getting 0.001577287. So I have already rounded incorrectly, but I can’t get 0.05%. But I have an enviable reputation for getting these things wrong; a colleague tells me that he can’t remember a single draft I’ve ever produced which didn’t have at least one major arithmetic error.

8

Jeremy Osner 07.11.03 at 2:14 pm

Sorry, nevermind, after I made that last post I drank my morning coffee — ought to have done so beforehand. Live and learn.

9

wbb 07.11.03 at 3:25 pm

Don’t be dissuaded by John James warnings about samizdata.net. There is much to learn there, including why Lee Kwan Yu is a hero to libertarians. Don’t try to follow it – just enjoy the human mind at its freest.

10

Russell L. Carter 07.11.03 at 5:33 pm

Wow! That Singapore thread is really something. The ancient desire to justify authoritarianism as the most efficient means to social stability is alive and well. I just never would have guessed that it would be described as libertarian.

11

dsquared 07.11.03 at 5:40 pm

>>There is much to learn there, including why Lee Kwan Yu is a hero to libertarians

I’d imagine it’s because he keeps income tax low and chucks communists in jail. Have I saved myself five minutes?

12

Jeremy Osner 07.11.03 at 6:33 pm

>Have I saved myself five minutes?

O longer, longer.

13

Guessedworker 07.11.03 at 11:30 pm

Daniel,

The Cato Institute is surveying economic freedom and nothing more. Your criticisms are predicated on the false basis that the Institute’s report is some kind of manual for poor countries to advance. But the Institute does not claim that.

The fact that wealth and economic freedom are related should inspire all men towards freedom. It seems to inspire you, Daniel, only to vent your spleen. Well, if that’s your game, don’t mess with the Cato Institute. Try reading “IQ And The Wealth of Nations” by Richard Lynn and Tatu Vanhanen, a survey of wealth and its causes that no liberal can afford to miss.

14

Perry de Havilland 07.12.03 at 2:09 am

The whole ‘Anglosphere’ thing has very little to do with language (which is only an incidental historical marker) and if you think that post on Samizdata.net was about language, rather than culture, prehaps your should re-read it. It has rather more to do with having a civil society that is not completely dominated by the State.

15

John 07.12.03 at 2:21 am

Should people really be congratulating themselves that an index composed on the basis of a set of values largely developed in England (classical liberalism, basically), is most strongly followed in the anglophone world? Wow, the English-speaking world does best in the things valued by the English-speaking world! Astonishing, that.

16

bradley s. felton 07.12.03 at 2:44 am

i thought this was released by the canadian fraser institute, am i wrong?

http://www.fraserinstitute.ca/shared/readmore.asp?sNav=pb&id=551

or is fraser canadian for cato?

17

Jeremy Osner 07.12.03 at 3:40 am

>The fact that wealth and economic freedom are related
should inspire all men towards freedom.

You could as well say it should inspire all men towards wealth. Daniel’s point (or rather, what I took from Daniel’s post) is that “economic freedom” means little without wealth — to think that wealth will spring forth with the institution of a low-tax, gold standard regime is beyond delusory.

The presence of wealth in the countries which came in at the top of Cato’s list is attributable to other factors.

18

Shai 07.12.03 at 9:32 am

There’s something wrong with your methodology when the sultinate of Oman is more economically free than Japan.

19

Guessedworker 07.12.03 at 8:42 pm

Jeremy,

You are making the same methodological error. Obviously, all men are inspired towards wealth. This is true in even the most basic society and, in all probability, springs from the male genetic drive for status as a means of selection.

My point was that wealth’s relation to freedom should inspire men, who already seek to be wealthy, to be free. This is also the meaning of the Cato Institute’s report, I think. This, of course, is a broad point. You can quibble about the detail of the Cato Institutes five freedoms, if you like. Every good lawyer knows that’s the way to get his hooks into the opponent’s case. But the broad case stands, and that’s the end of it.

I am more interested in why liberal opinion is driven to deny, deny, deny the benefits of freedom. It feels like psychopathy. Defend it if you can.

20

Anarch 07.13.03 at 11:50 pm

>> My point was that wealth’s relation to freedom should inspire men, who already seek to be wealthy, to be free. < < This, to me, represents the crux of my problems with the basic libertarian position: Does a system in which each person strives to individually maximize their wealth/freedom necessarily produce an environment in which everyone is wealthy/free? [I don't buy the tendency to conflate "wealth" with "freedom", either, but that's for another time.] Libertarians, in my experience, tend to say that this is true but I don't buy that such local optimizations inevitably lead to global optimizations under any metric that I would consider "fair". [Yes, that's necessarily a value judgment.] I can conceive any of a number of dystopian situations where someone trying to maximize their wealth/freedom diminishes someone else's. I've known enough people in my time whose pursuit of wealth/freedom has curtailed others' to believe that such dystopian situations are not only possible but probable... -without- some kind of external (i.e. governmental) intervention. In short: I'm not, nor is anyone that I'm aware, "denying the benefits of freedom." What people are contesting is whether a simple granting of negative liberties produces a "fair" outcome, or whether the granting of some positive liberties to some -- and the collateral restricting of some liberties in others -- produces a "better" one. And if some positive liberties are necessary... which ones, and how much? As always, Your Metric May Vary. :) - Anarch PS: I'd also pointedly argue against "all men are inspired towards wealth". I'm not to any great degree, although I am most definitely inspired towards freedom. And I suspect that my female friends who are racking up big bucks in the corporate world wouldn't care for your assertion that the pursuit of wealth "springs from the male genetic drive for status as a means of selection".

21

Alan K. Henderson 07.14.03 at 10:10 pm

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