James Gwartney helped make the world more free and prosperous
On Sunday, Jan. 7, Professor James (Jim) D. Gwartney passed away at the age of 83. For more than half a century, Gwartney taught economics at Florida State University. And for more than a quarter-century he was the lead author of the Fraser Institute’s signature Economic Freedom of the World (EFW) index.
The origins of the Fraser Institute’s EFW report date to 1984 when a group of intellectuals met in Cambridge, England, to discuss economics, society and the fate of the free world. The occasion was the semi-annual Mont Pelerin Society meeting and in recognition of the year, the conference included a panel on George Orwell’s 1984. The panelists, including historian Paul Johnson, wondered whether freedom was waxing or waning. And Fraser Institute founder Michael Walker brought up the relationship between political and economic freedom, citing Milton and Rose Friedman’s hypothesis that political freedom depends on economic freedom. The participants lamented the fact that there was no good way to measure this relationship.
Afterward, Walker sat down with Milton and Rose Friedman and proposed what can only be described as an audacious idea: what if we measured economic freedom?
He proposed trying to develop an index that would empirically measure the level of economic freedom of every country in the world. With this data, researchers could assess the relationship between political and economic freedom. This was important because many intellectuals at the time believed that it was possible for the state to centrally direct the economy without quashing political or civil freedoms.
Milton and Rose were sold on the idea. With some assistance from the Friedmans, Walker organized a series of six conferences starting in 1986 to first define and then develop a way to measure economic freedom. The conferences included a who’s who of eminent social scientists including Milton and Rose Friedman and their son David Friedman, and Nobelists Douglass North and Gary Becker. A total of 61 eminent thinkers participated, including Peter Bauer, John Chant, Ramon Diaz, Thomas DiLorenzo, John Goodman, Herbert Grubel, Jim Gwartney, Arnold Harberger, Ronald Jones, William Hammett, Henri LePage, Assar Lindbeck, Tibor Machan, Henry Manne, Richard McKenzie, Charles Murray, William Niskanen, Michael Parkin, Robert (Bob) Poole, Alvin Rabushka, Alan Reynolds, Gerald Scully, Richard Stroup and Gordon Tullock.
The quality of the participants and the programs organized by Walker over the years was summarized by Stanford University’s Rabushka when he noted about the conference contributors that “it would be hard to find a more distinguished group of scholars concerned with economic freedom, or any other economic subject for that matter.”
The second conference focused on defining economic freedom and was largely based on Alvin Rabushka’s work coupled with Zane Spindler and Laurie Still’s preliminary efforts to measure economic freedom.
Jim Gwartney attended the second conference and became more actively involved with the project at the third meeting. An enthusiast for the work of Nobel Laureate James Buchanan, Gwartney had a deep understanding of economics and political economy. But he also had a solid grasp of empirical investigation, and, like others, wasn’t immediately sure that economic freedom could be measured. As he put it in an interview with Mitchell List and Kurt Schuler last August, “Who in the world thinks you can measure something as multi‐dimensional as economic freedom?” But the letter of invitation was signed by Milton Friedman. And “When you’re a relatively young professor and personally get an invitation from Milton Friedman to go to a conference like that, you accept it, even if you think it might be a harebrained idea.”
By the third meeting, a consensus had begun to emerge around the concept of economic freedom. Individuals are economically free, the group agreed, when they are able to choose for themselves how to use their talents, their time, and their resources, so long as their actions do not harm the person or property of others.
The earliest efforts to measure economic freedom, however, did not adequately capture the breadth of experience around the world. They included hundreds of indicators, but these indicators were only available in about a dozen wealthy countries. Those in the world’s least-free societies would have been left out.
In a conversation with the Fraser Institute’s senior economist, Walter Block, and guided by insights from Walker, Jim set on an alternative approach—collecting data from a wide set of countries on a relatively smaller set of indicators. Walker and the Friedmans encouraged him to get started and Jim went back to FSU and recruited a bright graduate student, Robert (Bob) Lawson, to work with him on it. They developed a plan to look at things like protection of private property rights, barriers to international trade, the extent of regulations, tax rates, and the government’s promise to maintain the value of money.
Based on the insights from the various conferences, the first working draft of the index was developed and presented at the 1990 conference. Walker commissioned a number of essays to provide feedback and suggestions for how best to improve and refine the index.
After a number of iterations, the first Economic Freedom of the World index was published by the Fraser Institute in 1996. Its authors were Jim Gwartney, Walter Block, and Bob Lawson. Today, the index is published annually and distributed globally. And thanks to better data availability, it manages to be both deep and broad, covering several dozen indicators in each of 165 countries.
Armed with the index, researchers could now answer the question that Walker had raised in 1984: is it possible for the state to quash economic freedom without limiting political freedom? Bob Lawson and J.R. Clark addressed this in a 2010 paper published in the Journal of Economic Behavior and Organization. They found that societies rarely achieve high levels of political freedom without high levels of economic freedom.
But while the initial impetus for the project was the connection between political and economic freedom, the index has been used by economists to tests hundreds of other relationships. To date, more than 1,300 peer-reviewed journal articles have used the index to assess the effects of economic freedom on various outcomes.
As Lawson has documented in a review of this literature, these studies find that economic freedom is associated with better outcomes along several dimensions. Those who live in economically free societies are happier, healthier and wealthier than those who live in less-free societies. They enjoy longer life spans, less corrupt government and greater social equality. They are more entrepreneurial, better educated and more tolerant. They are also less violent.
It’s not just the wealthy who benefit from more economic freedom. In economically free societies, unemployment is lower, low-income households see faster income growth, and people are less likely to be unhoused.
The report also gives hope to those who seek reform. Researchers have found that countries that grant their citizens greater economic freedom—from Botswana to Estonia to Nicaragua—experience significant improvements in living standards.
There are obviously a number of key people responsible for the Economic Freedom of the World project starting with Michael Walker and the Friedmans. But everyone linked with the project acknowledges the on-the-ground work completed by Jim and Bob to develop and then annually calculate the index. Thanks to these visionaries, the audacious idea of measuring economic freedom has been realized. The index is taught in development economics courses around the world, and it is used by governments to mark their progress toward freer and more prosperous societies.
Jim was at peace when he left this world, buoyed by his faith and his loving wife Amy. He can rest at ease knowing that the index is in the capable hands of his student, Bob Lawson. And we can take some solace from the knowledge that, according to the index, the world is freer today than it was in 1984.
Jim’s achievements as a scholar and a writer will be long remembered. He has more than 100 scholarly articles to his name, many in top journals including the American Economic Review and the Journal of Political Economy. With Richard Stroup, he coauthored one of the best introductory texts to economic thinking around, Common Sense Economics. The latest edition, coauthored with Dwight Lee, Tawni Ferrarini, Joe Calhoun and Jane Shaw Stroup is forthcoming.
Gwartney and Stroup also teamed up with Russell Sobel and David MacPherson to write the best-selling introductory textbook, Economics: Private and Public Choice. Well-written and informative, when the book was first released, it stood out among its peers for incorporating the sub-field of public choice into its analysis, which essentially applies economics to the government sector to better understand the reality of government and what it likely can and cannot do. Now the rest of the market has begun to catch up.
Over the years, Jim mentored and encouraged countless graduate and undergraduate students. To a person, they all describe him as unfailingly kind, gracious, humble, encouraging and grounded. We mourn Jim Gwartney but we are grateful for his contributions over the years and his lasting legacy.
