Comments: Freedom Benchmarking

An interesting thing is that the scatterplot showing freedom & GDP suggests that there is little difference in GDP between completely unfree (5) states and somewhat unfree (3,5) states. What does this mean? Perhaps the use of having some unregulated sectors is minimal if you still have some part of the economy which is completely regulated, and thus hinders the economy in total?

Posted by Richard at February 7, 2004 03:17 PM

I did some experimentation, and I think it is mostly because GDP is so unequal; there is little room for variation at the bottom. If you plot the logarithm of GDP instead the diagram forms a rough line (correlation 0.66), indivating that the effect of freedom on GDP really seems to be an exponential increase.

Also, some of the true tyrranies like North Korea doesn't have GDP estimates in my dataset, so there may be a bias by the missing values.

Still, there are some oddities in the data. Libya seems to be too rich and have a too high life expectancy given its repression (official figures?). Belarus is probably living off its former industrialisation, and Iran seems to be a bit like Libya in the diagram.

I think the core idea of certain unregulated sectors allowing greater GDP than freedom holds, just look at Saudi Arabia. But very small economies are strongly affected by single industries and outside investment, so they are far less predictable than big economies.

Posted by Anders at February 7, 2004 08:16 PM

Nice work, Anders. Would you mind listing the tools you used? It'd also prove convient if you posted links to the data, instead of just to the websites of the source organizations.

Posted by Jay Dugger at February 8, 2004 06:06 PM

Thanks Jay, I have added them to the next post (as well as some other plots to delight and confuse).

Posted by Anders at February 10, 2004 08:05 PM