The world is falling behind on economic freedom. Even before the Covid lockdowns, citizens in most developed countries were subject to growing regulatory burdens, taller trade barriers, and higher taxes. Governments through the pandemic years of 2020 and 2021 – not least in the UK – accelerated the process, and are now reluctant to reverse it despite its substantial costs. We cannot claim ignorance, because the long-run consequences of such policies are well documented by two and a half decades of international research. Had it not been for James Gwartney, we might not have had such a precise empirical understanding of the importance of economic freedom, though.

Jim, who passed away on the 7 January at his home in Tallahassee, was born in rural Kansas in 1940 and worked on the family farm before getting an undergraduate degree in economics at Ottawa University. He later earned his PhD at the University of Washington, focusing on discrimination in US labour markets, which resulted in his first publication in the prestigious American Economic Review. After taking up a position at Florida State University in 1969, Jim would throughout the 1970s contribute important insights by providing accurate numbers documenting how substantial a problem discrimination against black Americans was in the US labour market at the time.

In the 1980s, Jim’s work mainly turned to economic policy and development, much of it with the Cato Institute’s James Dorn. His interests led him to take part in a series of conferences in the late 1980s and early 1990s, organised by the Fraser Institute’s Michael Walker on the possibility of measuring economic freedom. Jim would always tell the story of how he thought it a preposterous idea to measure something as multidimensional as economic freedom, until he realized that the invitation to do so was formulated by Milton Friedman himself. After that, he couldn’t get his positive reply out fast enough. Following discussions with several luminaries of the economics profession, including Milton and Rose Friedman, Walter Block and Gary Becker, Jim and his colleagues realised that the only way to avoid endless policy debates would be a quantitative index, which he argued should be entirely composed of elements available from secondary sources.

It would be Jim’s finest hour, but not one that would propel him into the premier league of public fandom. That status is, perhaps unjustly, reserved for professors at a few top US institutions with a particular ideological view of economic policy. With Robert Lawson, his former research assistant, co-author of the index, and collaborator over many years, Jim spent years developing a set of measures of citizens’ economic freedom across the world. The first edition of the Economic Freedom of the World (EFW) index was published in 1996 covering 100 countries at the time. In the most recent edition, the index has not only become more precise and detailed, but also now covers 165 countries and is published once a year by the Canadian Fraser Institute. As part of the original development, Jim, Randall Holcombe and Robert Lawson wrote a study about the optimal size and scope of government for the Joint Economic Committee (JEC) of Congress in 1998, and Jim went on to head the JEC as Chief Economist in 1999-2000.

Over the years, the economic freedom index has changed our knowledge of the broad consequences of economic policy and private property rights. According to Google Scholar, the annual reports have been cited almost 7000 times by academic articles, government reports, and think tank analyses since the first edition. Without the set of measures that Jim would never have argued were perfect, but simply the best one could do, the vast literature using cross-country comparisons and careful event studies would not have existed, at least not in the same manner. One could even argue that the EFW index was, in many ways, a precursor of the many institutional indicators that are now widely being used to make institutional performance comparable across countries, such as the well-known Worldwide Governance Indicators by the World Bank. Yet, practically no one outside specialised public choice and political economy circles knows the name James Gwartney.

Jim thus became one of the unsung heroes of the economics profession by enabling hundreds of academics to write thousands of studies providing accurate assessments of how effective, politically independent judiciaries cause faster economic growth and innovation, how overly large governments deter entrepreneurial activity, and how regulation intended to stabilise markets can lead to longer economic crises.

In addition to this monumental task, Jim also co-authored an important undergraduate textbook that was the first to incorporate Public Choice insights of government failure to an introductory economics text. Although published now in its 18th edition and widely used in the United States, this textbook is largely unknown in Europe, where it would arguably be an important complement to the many undergraduate texts that almost exclusively focus on the diverse ways that markets can fail. The textbook was a good reflection of Jim’s overall passion for economic education, which he was highly committed to over his entire professional career, and beyond. In the early 1990s, he had actually taken a year long leave from Florida State to teach market economics at the then recently established Central European University in Prague. As chief economist of the Joint Economic Committee, he probably also influenced a set of important economic reforms in Russia, which were driven by a young and reform-oriented leader at the time (yes, it is hard to remember that version of Vladimir Putin today).

Everyone who knew Jim agrees that he was one of kindest people they had ever met. Jim was deeply religious, but would never judge others by the moral standards he had set for himself. He would always lead by his humbling example, inspiring others to overcome the obstacles of life. He certainly knew obstacles, from growing up in the rural Midwest, to his progressive blindness over the years. At a time when trust in ‘experts’ has fallen considerably, and science is often regarded with scepticism by growing parts of the general public, the economics profession (and economic policymaking) is perhaps in dire need of some more unsung heroes like Jim Gwartney.

 

This article was first published on CapX.