http://news.ft.com/cms/8f7e2266-9b02-11d9-90f9-00000e2511c8.gif
http://news.ft.com/cms/8d286ff8-9b02-11d9-90f9-00000e2511c8.gif

concluding…

“What, then, do the charts show about the link between government spending and economic performance? There is none, is the answer.”

“What does indeed matter is the efficiency with which money is both raised and spent. But tax levels are only one of many determinants of economic performance. Far more important are: the quality of institutions, particularly of public administration and the judiciary; the security of property; the probity and public spiritedness of politicians; the soundness of money; the quality of education, health and infrastructure; and the extent of arbitrary regulation of economic activities.”

In making the decision on what to put into the public sector and how much to spend on it, we have to place substantial weight on underlying social and political values. But we must also ask, first, what we must do through the government (defence and law and order, for example); second, what we want, for reasons of social solidarity, to do through government (provision of basic incomes for all, of universal education and of basic health services, for instance); third, whether we wish to pay for services through general taxation or user fees; fourth, what is the least costly way of raising revenue; and, finally, whether we want services to be paid for and provided by government or merely paid for by government and provided by competitive private suppliers.”

“What matters here, as elsewhere, is not what you do but the way that you do it.”also fwiw :D

cheers!

I’d guess that third variables like “degree of armed conflict” might predict both FI and GDP better than either predict each other.

Would have been, were it “I just ran four million regressions, and all I got was this stupid t-score.”

Correlation between:

1999 score and growth 1999-2003: 0.14
change in score 1999-2003 and growth 1999-2003: -0.25
1999 score and growth relative to average: 0.12
change in score and growth relative to average: -0.25

Remember that lower scores mean more freedom, so the correlations between the 1999 score and 1999-03 growth have the “wrong sign”. I conclude that there is basically no relationship here, other than that possibly Doug is right in saying that the influence of growth on freedom seems to have a bit of explanatory power over the drift in the Freedom scores.

The very low rank correlation is likely to be a far better indicator of the true relation than an OLS regression (which of its nature must make strong implicit assumptions about functional forms and error structures).