The cause of freedom lost one of its foremost champions earlier this year when Dr. James Gwartney passed away in January at the age of 83.
Dr. Gwartney lived a remarkable life, rising from humble beginnings to become one of the most important scholars and teachers of economics in his generation. His work in the measurement of economic freedom and its effects on social welfare are among the most widely cited and influential research in all of economics. His innovative textbook, currently in its 17th edition, changed the way economics was taught to generations of undergraduate students. In his role as chief economist for the Joint Economic Committee of Congress from 1999-2000, he helped promote public policies that increased economic freedom both here and abroad. He maintained his demanding pace of scholarly and educational activities into his 80s, despite the gradual loss of eyesight that left him virtually blind for the last three decades of his life.
Northwood students will be familiar with Gwartney through his textbook, “The Economics of Public and Private Choice,” used in all introductory economics courses at Northwood. Although the current edition includes the work of other authors, it was Gwartney alone who produced the original edition. When he first began teaching, economic textbooks of the time portrayed a benevolent and omniscient government able to fine-tune the economy and correct “market failures.” Yet common sense as well as the emerging research on public choice indicated that was far from the case. Political decisions, like private decisions, are influenced by the informational constraints and incentives created by social institutions. As Gwartney opined, “It is clear that institutions matter and they matter a great deal.” His textbook was the first to include this more realistic account of public choice, and in my opinion, still the best. But in a highly competitive market, other textbooks eventually had to address this issue as well.
This interest in institutions carried over into his economic research as well. While arguments about the consequences of economic freedom had been going on for decades in the economics profession, for many years, they lacked a sound empirical basis. What is economic freedom? How is it measured? Is there a statistically significant correlation between economic freedom and income, decreased poverty, health, and other measures of social welfare? In order to answer these questions, Gwartney, along with his colleague Robert Lawson, developed the “Index of Economic Freedom.” He and his colleagues developed measurements for monetary stability, openness to trade, government spending, government regulation, and private property rights. These numbers are combined into a single indicator that can be used to rank countries in terms of economic freedom. These can be found in the Economic Freedom of the World Report published annually by the Fraser institute since 1996. These have greatly increased our understanding of the importance of economic freedom, demonstrating beyond question that economic systems that granted government a larger role in the economy produced worse results than those that rely more on private property owners interacting in a free market. In general, the more economic freedom its members have, the better the economic outcomes in that society.
As a concrete example, consider the economic performance of the two countries currently ranked as the most free and least free by the Fraser Institute: Singapore and Venezuela. When it first gained its independence in 1965, Singapore was among the world’s poorest countries. At that time, real income per person was about $3000 in today’s money. But Singapore’s leadership prioritized wealth creation over redistribution, and today Singapore has of the world’s highest living standards with more than $66,000 per person. (Maybe it should change its name to Singa-rich!)
Unlike Singapore, which has no natural resources to speak of, Venezuela is blessed with some of the world’s most productive oil reserves. It also started from a much higher level of development than Singapore. Despite these advantages, its living standards have barely budged over the period, growing from approximately $12,000 over the period to only $14,000 today. In 1960, Venezuelans enjoyed a living standard that was about four times higher than Singapore, but today that ratio has been reversed: Singapore enjoys a living standard that is about four times higher than Venezuela. Because the index of economic freedom compares data from all countries of the world, we know the example I’ve used here is not just a special case. The relationship between economic freedom and prosperity holds up when all countries are included in the comparison.
But economic freedom does more than promote economic growth. It promotes all kinds of outcomes that people care about. Take poverty for example. Poverty rates are much lower in the mostly free economies, and the incomes of poorest people in the mostly free quartile of countries are about 10 times higher than the poorest people in the least free countries. Infant mortality is lower, gender equality and civil rights are higher, literacy and education rates are higher, and perhaps most importantly, self-reported life satisfaction is higher. Readers interested in seeing the full range of outcomes related to economic freedom can find more information here: https://www.fraserinstitute.org/studies/economic-freedom.
Dr. Gwartney’s professional success carried over into his personal life as well. He was born into a farming family in rural Kansas and attended a one-room school as a child. He attended Ottawa University, Kansas, primarily because it was close to home. There, he met his wife, Amy, to whom he was happily married to for 61 years. He was a man of great faith, and taught adult Sunday School regularly. He was the keynote speaker at the Northwood University Freedom Seminar several times, and he was always gracious in his interactions with faculty and students, a true “gentleman and a scholar.” He will be missed, but fortunately, his research and writings will continue to have a profound impact on our future.
ABOUT THE AUTHOR
Dr. Dale Matcheck chairs the Economics Department at Northwood University. A Cornell University graduate, Dr. Matcheck has taught economics at Northwood University since 1996. He currently serves in the role of the David E. Fry Professor in Free Market Economics at Northwood.
