Hafer presents research on economic freedom and economic growth across states
States experiencing improvements in economic freedom over the last decades are more likely to be the states that experienced higher rates of economic growth, according to Economics and Finance Research Professor Rik Hafer.
Economics and Finance Research Professor Rik Hafer
In his last publication ‘Is there a link between economic freedom and state economic?,’ Hafer concludes that reductions in economic freedom may have negative effects on the ability of an economy to produce goods and services.
According to Hafer, economic freedom happens when individuals are able to engage in exchange without much outside interference and regulations. Hafer explains although some regulation is “undoubtedly called for,” when it gets too over-bearing, it reduces trading and economic well being can suffer.
“For example, in some countries it is very costly and time consuming to open a new business, one that supplies something that people want,” Hafer said. “If we allow our economic freedoms to be curtailed or reduced, we may face a future of diminished possibilities.”
Economic freedom “allows goods and resources to gravitate to their most highly valued use” and that produces economic growth at the local and state level, according to Hafer.
“If individuals are allowed to freely trade, within the boundaries of society’s laws, then economies are producing what individuals desire and the market allows producers and consumers to voice their opinions on what to produce and how to produce it,” Hafer said.
Studying economic freedom is important to be able to know how reduction in freedom can affect our everyday lives, according to Hafer.
“While increased government intervention may make life more predictable, ‘does it also reduce the ability of the economy to produce those goods and services that would improve the lives of its citizens?,’” Hafer said. “That is the debate that has been taking place for many years, and for many years to come.”
Education leads to productivity and faster economic growth since it makes it easier to learn new production techniques and be more flexible in the work market, according to Hafer.
“Figuring out how to use some technology in ways no one had ever thought of -think of using computer technology to do 3-D imaging in medicine- allows us to produce more and better health,” Hafer said. “And if we produce more giving the existing resources, that defines an increase in productivity.”
Labor, capital, technology, and knowledge are crucial for economic growth in a community, according to Hafer.
“We need carpenters to use capital -hammers, nail guns, circular saws- to produce houses and we need their knowledge of how to use those tools the most efficient way,” Hafer said. “Given all that, if technology improves, the invention of the nail gun to replace the hammer, and the ability of workers to understand how to use the new technology, we get even more homes built. And that is economic growth.”
Filed Under: Economics
