On Economic Freedom and “Socialism”

In response to the Heritage Foundation’s ridonkulous “Index  of Economic Freedom,” Wilkinson:
…it’s insane that Americans who profess to care about economic freedom fixate on government spending.

Intuitive factor analysis seems like it would suggest that government spending is not part of a coherent construct of “economic freedom”. If a large portion of spending reflects services like health care that most citizens of a country have elected to “buy” through government, then in some sense this spending is an expression of economic freedom. If the government system of provision works by prohibiting or otherwise regulating a private market, THAT’s a restriction on economic freedom, but then the regulatory measures ought to already pick that up.

One obvious hypothesis is that Denmark and Canada do so well on other measures of economic freedom, and beat the US overall, BECAUSE of government spending. But of course it’s not spending per se, but the composition of spending. The U.S. squanders trillions on feckless imperialism, which only makes things worse. However, really reliable universal health care and social insurance remove much of the risk of low-regulation dynamism and so reduce electoral opposition to it.

… How would offering a free choice restrict economic freedom? Crowds out private business? Tax burden? The index already captures tax burden (then double counts it in govt spending). Would be useful to have an independent estimate of crowding out in the index. Some public spending is competitive with private investment and some is complementary, so you’d want to tease it out.


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