Thursday 10 January 2013

Kiwi Freedom

New Zealand is the best country in the world if you weigh up a bundle of economic and personal liberties. I've argued this more than a few times, and I've teased American libertarians about their commitment to liberty if they're unwilling to consider emigrating here because of the drop in income or difficulty in convincing relatives to come along. This is no problem for a pluralist who weighs liberty up among other values, but it is a problem for folks who claim to put a very strong weight on freedom and who wear Live Free Or Die t-shirts.

For rather a while, we've had world economic freedom rankings that have placed New Zealand at or near the top. The Fraser Institute, the Cato Institute, and the Liberales Institut have today released an aggregate Human Freedom Index.
Using indicators consistent with the concept of negative liberty—the absence of coercive constraint—we have tried to capture the degree to which people are free to enjoy classic liberties in each country: freedom of speech, religion, individual economic choice, and association and assembly. The freedom index is composed of 76 distinct variables including measures of safety and security, freedom of movement, and relationship freedoms such as assembly or legal discrimination against gays. In this preliminary index New Zealand ranks as the most free country in the world, followed by the Netherlands and then Hong Kong. Australia, Canada, and Ireland follow, with the United States ranking in 7th place.
I have a few quibbles with the index (here is the full index), but I expect that they're all things that would be tough to incorporate with data for any large number of countries.

The index of government threats to individuals rightly includes extrajudicial killings, torture, political imprisonment and disappearances. But it doesn't include the number of individuals imprisoned for victimless crimes like prostitution and drug use. The US would fare poorly here, but New Zealand wouldn't do well on the drugs side either. Potential variables here could include an indicator for whether sex work is legal or illegal; an indicator for whether drug possession is legal or illegal; annual expenditures on drug enforcement; proportion of the prison muster whose offending relates to drug use or drug trafficking.

Threats to private property rightly include theft, burglary and inheritance takings, but miss civil asset forfeiture. I can't easily see how this could be quantified in a big cross-section.

One of the biggest regularly experienced differences in personal freedom between New Zealand and America is airport security. There is zero risk that this kind of thing happens in New Zealand. Again, I don't know how you could quantify this for any large number of countries.

Further, our police are unarmed and remain so despite the police rather frequently asking the government that they be allowed to carry weapons. One option that might capture the overall level of "police state" impositions would be to include the total police budget as a bad while also counting experienced crime rates as a bad. I suppose that America's ranking of 5 on "Extrajudicial killing" captures some of this (NZ scores a 10).

Finally, there's no accounting for the growing scourge of paternalistic regulation around alcohol, tobacco, and the like. Sin taxes as proportion of aggregate government revenues could be a start, and should be feasible, but it would be harder to get comprehensive data on whether you're allowed to brew your own beer, ease of starting a brewery, and restrictions on smoking on private property. I love that, in New Zealand, people can move really easily from goofing around in their garage with a completely legal home still or beer-making kit to selling their product to willing customers. In America...

The index a great start though, and I'm especially glad that this data has come out in this, the "setting honours projects" time of year. I'm consequently putting this up as a potential honours project; incoming Canterbury honours students, take note, but also note that this is my working draft of the project and that I might improve it based on comments.
The weight of freedom: economic and personal liberties in a gravity model of international migration.

We typically assume that people move from country i to country j because doing so makes them better off. But what precisely proves attractive? Karemera et al (2000) show that a modified gravity model can explain a decent share of international migration: origin-country population, destination-country income, and origin-country restrictions on emigration explain much. Lewar and Van den Berg (2008) show that institutions and distance also matter. Ashby (2007) shows that, within the United States, those states with greater economic freedom draw more migrants, but only because of increased expected income rather than because of the direct effects of freedom per se.

In this project, you will start by figuring out gravity models. Your supervisor has no experience with them either, but we can likely work things out.

Next, you’ll take the Fraser Institute’s newly created Freedom Index which compiles both economic and personal liberties to develop an aggregate freedom score: note that New Zealand is the best country in the world by this measure. The index compiles 76 separate variables relating to economic and personal liberties.

You will add these personal and economic liberties as explanatory variables into a gravity model of international migration to find out:
  1. Does liberty enter positively into migration decisions? 
  2. What’s the elasticity of migration with respect to economic and personal liberties?
  3. What is the value of freedom? A standard deviation increase in personal or economic liberty counts as much as what in a gravity model? I want you to be able to say something like “All else equal, a standard deviation increase in personal freedom [economic freedom] is the equivalent of reducing (or increasing, who knows) the distance between two countries by XXX kilometres or increasing the expected income jump from migration by $YYY.” How much less attractive would New Zealand be to international migrants were we to fall in this ranking? People deciding to emigrate often have choice among country destinations. Singapore is richer than New Zealand but ranks 39th in overall freedom and scores only a 6.6 in personal freedoms. How much extra income does a move have to provide, in expectation, to make it worth dropping a point in personal freedom?
You’re going to have to sort out how to work with the OECD migration database, figure out what scope is feasible given that data within an honours project, and then run things. Do not select this project unless you have done reasonably well in undergraduate econometrics. But it’s going to be hellafun and I think it could be publishable if you do a decent job of it.

Initial Sources:

Ashby, N. 2007. “Economic freedom and migration flows between U.S. states”. Southern Economic Journal 73:3 (January), 677-97.
Karemera, D., V.I. Oguledo, and B. Davis. 2000. “A gravity model analysis of international migration to North America”. Applied Economics 32:13, 1745-55.
Lewer, J. and H. Van den Berg. 2008. “A gravity model of immigration”. Economic Letters 99:1 (April), 164-7.
OECD Migration Database available at [or, if you can find a better database, go for it]
Watkins, T. and B. Yandle. 2010. “Can freedom and knowledge economy indexes explain go-getter migration patterns?” Journal of Regional Analysis & Policy 40:2, 104-15.
I love setting honours projects.


  1. This reminds me of something I read ages ago about the "Pareto curve of freedom":

    I thought it would be interesting to see which countries, according to this new table, might be on the Pareto curve of freedom. Because it's spread over three pages of a pdf, it doesn't paste well into a spreadsheet, but a glance at likely candidates suggests that probably only the top three countries are on the Pareto curve, with the Netherlands beating New Zealand on personal, but not economic freedom, and Hong Kong beating New Zealand on economic, but not personal freedom.

  2. I tend to say that NZ is getting worse more slowly than are other places.

  3. Great graph.

    But it compares the situation in counties at present.

    From personal experience I know that in the seventies Australia was a lot freer than the Netherlands. It has since fallen behind. Big bummer !

    In ten years time, will we be asking which dictatorship allows the most freedom ?

    It would be great to see on the same graph, measured in the same way, the positions the freest nations occupied 20 or 30 years ago.