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Fraser Institute

U.S. election should focus or what works and what doesn’t work

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From the Fraser Institute

By Matthew D. Mitchell

As Republicans and Democrats make their final pitch to voters, they’ve converged on some common themes. Kamala Harris wants to regulate the price of food. Donald Trump wants to regulate the price of credit. Harris wants the tax code to favour the 2.5 per cent of workers who earn tips. So does Trump. Harris wants the government to steer more labour and capital into manufacturing. And so does Trump.

With each of these proposals, the candidates think the United States would be better off if the government made more economic decisions and—by implication—if individual citizens made fewer economic decisions. Both should pay closer attention to Zimbabwe. Yes, Zimbabwe.

Why does a country with abundant natural resources, rich culture and unparalleled beauty have one-sixth the average income of neighbouring Botswana? While we’re at it, why do twice as many children die in infancy in Azerbaijan as across the border in Georgia? Why do Hungarians work 20 per cent longer than their Austrian neighbours but earn 45 per cent less? Why is extreme poverty 200 times more common in Laos than across the Mekong River in Thailand?

Or how about this one: Why were more than one-quarter of Estonians formerly exposed to dangerous levels of air pollution when the country was socialist while today nearly every Estonian breathes clean air in what is ranked the cleanest country in the world.

These are anecdotes. However, the plural of anecdote is data, and through careful and systematic study of the data, we can learn what works and what doesn’t. Unfortunately, the populist economic policies in vogue among Democrats and Republicans do not work.

What does work is economic freedom.

Economic freedoms are a subset of human freedoms. When people have more economic freedom, they are allowed to make more of their own economic choices—choices about work, about buying and selling goods and services, about acquiring and using property, and about forming contracts with others.

For nearly 30 years, the Fraser Institute has been measuring economic freedom across countries. On one hand, governments can stop people from making their own economic choices through taxes, regulations, barriers to trade and manipulation of the value of money (see the proposals of Harris and Trump above). On the other hand, governments can enable individual economic choice by protecting people and their property.

The index published in Fraser’s annual Economic Freedom of the World report incorporates 45 indicators to measure how governments either prevent or enable individual economic choice. The result reveals the degree of economic freedom in 165 countries and territories worldwide, with data going back to 1970.

According to the latest report, comparatively wealthy Botswanans rank 84 places ahead of Zimbabweans in terms of the economic freedom their government permits them. Georgians rank 107 places ahead of Azerbaijanis, Thais rank 60 places ahead of Laotians, and Austrians are 32 places ahead of Hungarians.

The benefits of economic freedom go far beyond anecdotes and rankings. As Estonia—once one of the least economically free places in the world and now among the freest—dramatically shows, freer countries tend not only to be more prosperous but greener and healthier.

In fact, economists and other social scientists have conducted nearly 1,000 studies using the index to assess the effect of economic freedom on different aspects of human wellbeing. Their statistical comparisons include hundreds and sometimes thousands of data points and carefully control for other factors like geography, natural resources and disease environment.

Their results overwhelmingly support the idea that when people are permitted more economic freedom, they prosper. Those who live in freer places enjoy higher and faster-growing incomes, better health, longer life, cleaner environments, more tolerance, less violence, lower infant mortality and less poverty.

Economic freedom isn’t the only thing that matters for prosperity. Research suggests that culture and geography matter as well. While policymakers can’t always change people’s attitudes or move mountains, they can permit their citizens more economic freedom. If more did so, more people would enjoy the living standards of Botswana or Estonia and fewer people would be stuck in poverty.

As for the U.S., it remains relatively free and prosperous. Whatever its problems, decades of research cast doubt on the notion that America would be better off with policies that chip away at the ability of Americans to make their own economic choices.

Alberta

Schools should go back to basics to mitigate effects of AI

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From the Fraser Institute

By Paige MacPherson

Odds are, you can’t tell whether this sentence was written by AI. Schools across Canada face the same problem. And happily, some are finding simple solutions.

Manitoba’s Division Scolaire Franco-Manitobaine recently issued new guidelines for teachers, to only assign optional homework and reading in grades Kindergarten to six, and limit homework in grades seven to 12. The reason? The proliferation of generative artificial intelligence (AI) chatbots such as ChatGPT make it very difficult for teachers, juggling a heavy workload, to discern genuine student work from AI-generated text. In fact, according to Division superintendent Alain Laberge, “Most of the [after-school assignment] submissions, we find, are coming from AI, to be quite honest.”

This problem isn’t limited to Manitoba, of course.

Two provincial doors down, in Alberta, new data analysis revealed that high school report card grades are rising while scores on provincewide assessments are not—particularly since 2022, the year ChatGPT was released. Report cards account for take-home work, while standardized tests are written in person, in the presence of teaching staff.

Specifically, from 2016 to 2019, the average standardized test score in Alberta across a range of subjects was 64 while the report card grade was 73.3—or 9.3 percentage points higher). From 2022 and 2024, the gap increased to 12.5 percentage points. (Data for 2020 and 2021 are unavailable due to COVID school closures.)

In lieu of take-home work, the Division Scolaire Franco-Manitobaine recommends nightly reading for students, which is a great idea. Having students read nightly doesn’t cost schools a dime but it’s strongly associated with improving academic outcomes.

According to a Programme for International Student Assessment (PISA) analysis of 174,000 student scores across 32 countries, the connection between daily reading and literacy was “moderately strong and meaningful,” and reading engagement affects reading achievement more than the socioeconomic status, gender or family structure of students.

All of this points to an undeniable shift in education—that is, teachers are losing a once-valuable tool (homework) and shifting more work back into the classroom. And while new technologies will continue to change the education landscape in heretofore unknown ways, one time-tested winning strategy is to go back to basics.

And some of “the basics” have slipped rapidly away. Some college students in elite universities arrive on campus never having read an entire book. Many university professors bemoan the newfound inability of students to write essays or deconstruct basic story components. Canada’s average PISA scores—a test of 15-year-olds in math, reading and science—have plummeted. In math, student test scores have dropped 35 points—the PISA equivalent of nearly two years of lost learning—in the last two decades. In reading, students have fallen about one year behind while science scores dropped moderately.

The decline in Canadian student achievement predates the widespread access of generative AI, but AI complicates the problem. Again, the solution needn’t be costly or complicated. There’s a reason why many tech CEOs famously send their children to screen-free schools. If technology is too tempting, in or outside of class, students should write with a pencil and paper. If ChatGPT is too hard to detect (and we know it is, because even AI often can’t accurately detect AI), in-class essays and assignments make sense.

And crucially, standardized tests provide the most reliable equitable measure of student progress, and if properly monitored, they’re AI-proof. Yet standardized testing is on the wane in Canada, thanks to long-standing attacks from teacher unions and other opponents, and despite broad support from parents. Now more than ever, parents and educators require reliable data to access the ability of students. Standardized testing varies widely among the provinces, but parents in every province should demand a strong standardized testing regime.

AI may be here to stay and it may play a large role in the future of education. But if schools deprive students of the ability to read books, structure clear sentences, correspond organically with other humans and complete their own work, they will do students no favours. The best way to ensure kids are “future ready”—to borrow a phrase oft-used to justify seesawing educational tech trends—is to school them in the basics.

Paige MacPherson

Senior Fellow, Education Policy, Fraser Institute
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Business

Fuelled by federalism—America’s economically freest states come out on top

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From the Fraser Institute

By Matthew D. Mitchell

Do economic rivalries between Texas and California or New York and Florida feel like yet another sign that America has become hopelessly divided? There’s a bright side to their disagreements, and a new ranking of economic freedom across the states helps explain why.

As a popular bumper sticker among economists proclaims: “I heart federalism (for the natural experiments).” In a federal system, states have wide latitude to set priorities and to choose their own strategies to achieve them. It’s messy, but informative.

New York and California, along with other states like New Mexico, have long pursued a government-centric approach to economic policy. They tax a lot. They spend a lot. Their governments employ a large fraction of the workforce and set a high minimum wage.

They aren’t socialist by any means; most property is still in private hands. Consumers, workers and businesses still make most of their own decisions. But these states control more resources than other states do through taxes and regulation, so their governments play a larger role in economic life.

At the other end of the spectrum, New Hampshire, Tennessee, Florida and South Dakota allow citizens to make more of their own economic choices, keep more of their own money, and set more of their own terms of trade and work.

They aren’t free-market utopias; they impose plenty of regulatory burdens. But they are economically freer than other states.

These two groups have, in other words, been experimenting with different approaches to economic policy. Does one approach lead to higher incomes or faster growth? Greater economic equality or more upward mobility? What about other aspects of a good society like tolerance, generosity, or life satisfaction?

For two decades now, we’ve had a handy tool to assess these questions: The Fraser Institute’s annual “Economic Freedom of North America” index uses 10 variables in three broad areas—government spending, taxation, and labor regulation—to assess the degree of economic freedom in each of the 50 states and the territory of Puerto Rico, as well as in Canadian provinces and Mexican states.

It’s an objective measurement that allows economists to take stock of federalism’s natural experiments. Independent scholars have done just that, having now conducted over 250 studies using the index. With careful statistical analyses that control for the important differences among states—possibly confounding factors such as geography, climate, and historical development—the vast majority of these studies associate greater economic freedom with greater prosperity.

In fact, freedom’s payoffs are astounding.

States with high and increasing levels of economic freedom tend to see higher incomesmore entrepreneurial activity and more net in-migration. Their people tend to experience greater income mobility, and more income growth at both the top and bottom of the income distribution. They have less poverty, less homelessness and lower levels of food insecurity. People there even seem to be more philanthropic, more tolerant and more satisfied with their lives.

New Hampshire, Tennessee, and South Dakota topped the latest edition of the report while Puerto Rico, New Mexico, and New York rounded out the bottom. New Mexico displaced New York as the least economically free state in the union for the first time in 20 years, but it had always been near the bottom.

The bigger stories are the major movers. The last 10 years’ worth of available data show South Carolina, Ohio, Wisconsin, Idaho, Iowa and Utah moving up at least 10 places. Arizona, Virginia, Nebraska, and Maryland have all slid down 10 spots.

Over that same decade, those states that were among the freest 25 per cent on average saw their populations grow nearly 18 times faster than those in the bottom 25 per cent. Statewide personal income grew nine times as fast.

Economic freedom isn’t a panacea. Nor is it the only thing that matters. Geography, culture, and even luck can influence a state’s prosperity. But while policymakers can’t move mountains or rewrite cultures, they can look at the data, heed the lessons of our federalist experiment, and permit their citizens more economic freedom.

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