Thursday, October 25, 2018

Economic Freedom, Part 2

Most of us have an intuitive or common-sense notion of the meaning of economic freedom.  A smattering of features or attributes includes free markets, private enterprise, voluntary exchange, capitalism, limited government, laissez-faire, free trade, low taxes, free movement of capital, and other dimensions of economic life.

But we want to go beyond these descriptors to measures of economic freedom.  How much more economic freedom does South Korea have compared with North Korea?  Hong Kong with China?  China 35 years ago with China today?  Has economic freedom increased or decreased in Sweden during the last 10 years?  It would be ideal to develop a rating system that permits quantitative comparisons across nations and over time.

A first step is to develop a philosophy or definition of economic freedom in order to identify common (as well as divergent) elements that should be measured.

Political philosophers and thinkers have explored the notion of freedom from the beginning of recorded history.  The first use of the word “liberty” is traceable to ancient Sumer.  Cuneiform writing on clay cones excavated at Lagash, in Sumer, contained the freedom laws of the good King Urukagina that he promulgated to rid the land of tax collectors.

Ancient and medieval philosophers were largely concerned with the political dimensions of freedom:  a voice in collective decision making (Greek democracies).  Political freedom meant self-rule, or the absence of external control.  It did not emphasize the rights of the individual to non-interference from the state or protection under the rule of law.

The modern notion of freedom signifies non-interference in the private affairs of individuals in a society governed under the rule of law.  The freedom to own a certain amount of property was seen as a necessary condition for being able to maintain personal independence.  The development of property rights went hand-in-hand with longstanding provisions of human rights that were proclaimed in the Magna Carta in 1215, in thousands of medieval charters in England and continental Europe, and in the procedural safeguards of person and property that developed in the common law.

Against this backdrop, economic freedom seriously developed into a coherent and powerful intellectual tradition with the publication of John Locke’s Second Treatise of Civil Government (1689). which emphasized freedom of association, private property, and the sacrosanct nature of individual liberty secured under the rule of law.  David Hume reinforced Locke’s emphasis on the right to property as the foundation of society and government.

Locke was followed nearly a century later by Adam Smith with the publication of Inquiry into the Nature and Causes of the Wealth of Nations (1776), which emphasized a system of individual and commercial liberty based on private property.  Nineteenth-century England was governed by the principles of Locke and Smith.  Its hallmarks were free trade, laissez-faire, low taxes, low state expenditure, and a minimally interventionist government.

Milton Friedman was a modern-day Locke,  He asserted the primacy of the individual as the ultimate entity in society, focusing on the role that private property plays in fostering economic and political freedom, and economic prosperity.  Friedman, with the assistance of his wife Rose, set forth  a coherent statement of economic freedom in 1962 in a collection of essays entitled Capitalism and Freedom.  The book explains the role of competitive capitalism as a system of economic freedom.  It also discusses the legitimate role of government in a free society, identifying those areas where government intervention in the private affairs of individuals is warranted, but also where it goes beyond the limited legitimate tasks of government harming both economic freedom and efficiency.

The legitimate tasks of government include the maintenance of law and order to prevent physical coercion of one individual over another, to enforce contracts voluntarily entered into, and to regulate activities where one individual’s economic activity imposes harm or losses on another (externalities).

In a later volume Free to Choose (1980), the Friedmans set forth an Economic Bill of Rights, a counterpart to the political Bill of Rights in the Constitution.  These include a tax or spending limitation as a share of national income, freedom to import and export (free trade), a ban on wage and price controls, a ban on occupational licensure, a requirement for proportional taxation (flat-rate tax), and others.

A third approach to economic freedom is embodied in the libertarian work of Murray Rothbard, the purest expression of economic freedom.  Rothbard grounded his political philosophy of liberty on a natural law foundation, especially Locke’s treatment of property and ownership.  His theory of liberty rests on the establishment of the rights of property, which determines each individual’s sphere of free action.  His society of pure freedom is based on free and voluntary exchanges.  The free market economy thus depends on upon a free society with a certain pattern of property rights and ownership titles.  He departs from Friedman on the need for the state to enforce contracts.  It is not the function of law to enforce morality or promises made to each other.  Enforcement is only appropriate when one party steals the property of another.

Going further, Rothbard defines taxation as theft.  The use of coercive taxation to acquire revenue and the compulsory monopoly of force and ultimate decision-making power over a given territorial area on the part of the state constitute criminal aggression and depredation of the just rights of private property of its subjects.  Rothbard also contends that the services generally thought to require a state, from the coining of public money to police protection to the development of law in the defense of private property rights (all part of Friedman’s legitimate role for government) can be and have been supplied with greater efficiency and morality by private persons.

Rothbard’s libertarian vision is more utopian than practical.  Other philosophers, from John Locke to Adam Smith to Milton Friedman, grant specific, if limited, powers to government or the state, including the power to tax, enforce laws, maintain order, and defend the nation, which reflects the real world activities of government.

A fuller discussion of this synopsis of the philosophical aspects or definition of economic freedom is found in the Books section of my website, alvinrabushka.com, in Chapter 2, pp.23-55, of Economic Freedom:  Toward a Theory of Measurement.  See my article “Philosophical Aspects of Economic Freedom” and accompanying discussion, which can be downloaded here.  I encourage you to read the chapter.

The next post sets forth possible measures with which to rate economic freedom.

Tuesday, October 23, 2018

Economic Freedom, Part 1

In October 1986, with support from the Liberty Fund in Indianapolis, Indiana, the Fraser Institute convened the first of four conferences in Napa Valley, California.  The Fraser Institute published the proceedings in 1988, Economic Freedom, Democracy and Welfare.  Edited by Michael A. Walker, Director of The Fraser Institute, and co-chaired with Milton and Rose Friedman, the conference was organized as a counterpart to do for economic freedom what Freedom House did for political freedom:  to calculate the amount of economic freedom that exists in various nations of the world.

Its origins can be traced to a conversation in 1984 at the Mont Pelerin Meeting in Cambridge, England, between Michael Walker and Milton Friedman, whose book Capitalism and Freedom had been extant since 1962.  However, there had been no serious attempt to explore the relationship between economic and political freedom in a scholarly way.  That conversation led to the idea of broadening the analysis to also include civil freedoms, which can often be more important than political freedoms.

The conference consisted of several conceptual, historical, and statistical papers, most notably those Nobel Laureates in Economics Douglass C. North and Milton Friedman.  These were fleshed out with case studies on economic freedom in East Asia (Alvin Rabushka), Africa (Lord Peter Bauer), Latin America (Ramon Diaz), and Sweden (Ingemar Stahl).  Another paper dealt with property rights (Svetozar Pejovich).  Discussants included Armen Alchian, Walter Block, Herbert J. Grubel, Arnold Harberger, Brian Kantor, Assar Lindbeck, Michael Parkin, Gordon Tullock, and Sir Alan Walters.  It would be hard to find a more distinguished group of scholars concerned with economic freedom, or any other economic subject for that matter.

A second conference was convened in July 1988 in Vancouver, Canada.  Edited by Walter E. Block, the proceedings were published in 1991, Economic Freedom:  Toward a Theory of Measurement.  (The volume is available for free download on my website alvinrabushka.com.)  This conference was designed to set forth the philosophical foundations of economic freedom and its conceptual definition that would provide a basis for measurement.

Michael Walker set the background for the proceedings with a summary of the preceding conference held in Napa Valley.  Alvin Rabushka wrote the next three papers:  “Philosophical Aspects of Economic Freedom,” “Freedom House Survey of Economic Freedoms“ (for comparative purposes), and “Preliminary Definition of Economic Freedom.”  I will discuss the contents of these papers in subsequent posts.  The final paper was an initial attempt by Zane Spindler and Laurie Still to calculate “Economic Freedom Rankings” for 145 countries on a five-point scale based on Rabushka’s “Definition” paper.

Conference participants, in alphabetical order, also included James Ahiakpor, David Friedman, Milton Friedman, Rose Friedman, James Gwartney, William Hammett, Henri LePage, Henry Manne, Richard McKenzie, Antonio Martino, Charles Murray, Ellen Paul, Robert Poole, and Gerard Radnitsky.

The third and fourth conferences were held in Banff, Alberta, Canada in 1989, and Sea Ranch, California in 1990.  The two were melded into the third volume in The Fraser Institute Rating Economic Freedom Project.  Stephen T. Easton and Michael A. Walker edited the volume, Rating Global Economic Freedom, published in 1992.

Papers in this volume focused on more precise measures of economic freedom for countries around the world for which data were available.

Authors and participants included James C.W. Ahiakpor, Juan F. Bendfelt, Walter E. Block, Jack L. Carr, John F. Chant, Edward H. Crane, Arthur T. Denzau, Thomas J. DiLorenzo, Stephen T. Easton, Milton Friedman, John C. Goodman, James D. Gwartney, Edward Lee Hudgins, Ronald W. Jones, Robert A. Lawson, Richard McKenzie, Joanna F. Miyake, Charles Murray, Alvin Rabushka, Richard W. Rahn, Alan Reynolds, Laurie Rubner, Gerard W. Scully, Bernard H. Siegan, Zane A. Spindler, Alan C. Stockman, Richard L. Stroup, Melanie Tammen, and Michael A. Walker.

The first comprehensive report based on the four conferences and three conference volumes was Walter Block, James Gwartney, and Robert A. Lawson, Economic Freedom of the World, 1975-1995, published on January 1, 1996.  Thereafter subsequent annual reports were published for 1997, 1998-1999, and then annually through 2018 (published in conjunction with the Cato Institute since 2001).  Separate periodic reports for North America were published from 2002 and for the Arab World from 2005.  Altogether, about a dozen individuals have helped to edit the series of annual reports on Economic Freedom.

In 1995, The Heritage Foundation, in conjunction with the Wall Street Journal, created a rival Index of Economic Freedom.  The Heritage/WSJ index was conceptually and empirically simpler than the Fraser Index.

Subsequent posts in this series will discuss in greater detail the philosophy, concepts, and measures of Economic Freedom that make up the Fraser Institute Annual Report

Thursday, October 4, 2018

Academic Freedom Hangs By A Thread

In a previous post comparing Chinese and American universities, I noted that applicants for a faculty position at the University of California must submit a Diversity Statement.

This is no minor detail.  In the section on Academic Diversity Statements under Academic Personnel for UC Santa Cruz, the last sentence unequivocally states that “Applications that do not include a Diversity Statement will not be forwarded to the search committee for consideration.”

What should be included in a Diversity Statement?  “Describe any experience or background that has made you aware of challenges faced by historically underrepresented populations.”  These include mentoring activities, committee service, research activities, teaching activities, and other activities that show how you have advanced Diversity, Equity, and Inclusion among underrepresented groups.  In addition, applicants must describe the role they envision in contributing to Diversity in the next two to five years.  Applicants are also encouraged to discuss their philosophy of Diversity as a potential UC Santa Cruz faculty member.

Similar guidelines are posted on the web sites of UCBerkeley, UC San Francisco, UCLA (page 5), and other campuses in the UC system.

Applications will not be accepted for consideration without a loyalty oath to Diversity.  Diversity and Inclusion do not permit questioning or criticizing Diversity and Inclusion as official doctrine of the UC system set forth by the Office of the President overseeing all nine UC campuses and the Chancellor of each campus.  Of course, prospective professors can avoid taking an oath to Diversity.  Do not apply for a faculty appointment in the UC system. 

UC campuses are ranked numbers 1, 2, 5, 7, 10, 12, 26, and 35 among the top 50 public universities in the United States.  It’s only a matter of time until Diversity Statements are required for faculty positions for the 23 campuses of the California State University System, all California Junior Colleges, and most universities and colleges throughout the United States.  Can Academic Freedom survive if the oath is required in the colleges and universities in most or all of the 50 states and federal territories with colleges and universities?

In Defense of Academic Freedom


Closer to home, on November 7, 2017, and February 21, 2018, Stanford’s president and provost posted articles on the Stanford's concomitant commitment to the free exchange of ideas and an inclusive campus culture.  Provost Drell acknowledged that it is extremely difficult to balance the principles of free expression with ideals of an inclusive community.  It is even harder to implement in practice.  When does Diversity and Inclusion curtail or give way to Academic Freedom?

In a statement released on July 20, 2018, Thomas Gilligan, director of the Hoover Institution, announced the Institution’s support of professor Mike McFaul, who the Russian government was seeking to interview.  Gilligan said, “The free expression of ideas is absolutely central to the academic life of the Hoover Institution at Stanford University.  We stand behind professor Mike McFaul’s freedom of inquiry, thought, expression, speech, and publication—ideals that are fundamental to the mission of the university and to the Hoover Institution,  An assault on Mike McFaul’s academic freedom for the purpose of retribution and intimidation cannot and should not be tolerated.” 

A history conference held at Hoover during the 2017-18 academic year was criticized by the provost because it failed to include any female historian paper givers.  The provost stated that she did not want to see any more Hoover conferences with all male presenters.  The Academic Freedom of Hoover fellows to organize conferences as they deem intellectually appropriate was not defended as an exercise of Academic Freedom as it was for McFaul.

In practice, Inclusion trumps Academic Freedom.  It is likely to do so in the overwhelming majority of cases when the two principles conflict.

In marked contrast, conferences consisting of all Black, all Hispanic, or all female paper givers generally proceed without objection.  Over the past 8 years, I attended four events at Stanford’s Clayman Center for Gender Research.  None included a male of any racial or ethnic background.  No problem.

Time will tell if Academic Freedom can coexist with Diversity and Inclusion.  The spread of a required Diversity Statement has already eroded Academic Freedom in California.  Can Chicago hold firm or will it be “Apres Chicago, la deluge.”

It’s only a hop, skip, and a jump to extend the doctrine of Diversity and Inclusion to encompass Inequality Reduction.  Some campuses already use the broader phrase of Diversity, Equity, and Inclusion.  Applicants for a faculty appointment at the University of California and other schools could soon be required to complete an Inequality Statement, reporting what they have done to reduce Inequality, and how their research and teaching in the next two to five years will reduce it.

The best artistic representation of the Diversity and Inclusion requirement at the University of California is French painter Jacque Louis David's Oath of the Horatii.