“Economic freedom” and economic growth: questioning the claim that freer markets make societies more prosperous
Joseph Cohen ()
MPRA Paper from University Library of Munich, Germany
Abstract:
A conventional reading of economic history implies that free market reforms rescued the world’s economies from stagnancy during the 1970s and 1980s. I reexamine a well-established econometric literature linking economic freedom to growth, and argue that their positive findings hinge on two problems: conceptual conflation and ahistoricity. When these criticisms are taken seriously, a very different view of the historical record emerges. There does not appear to be enduring relationship between economic liberalism and growth. Much of the observed relationship between these two variables involves a one-shot transition to freer markets around the Cold War’s end. Several concurrent changes took place in this historical context, and it is hasty to conclude that it was market liberalization alone that produced the economic turnaround of the 1990s and early-2000s. I also question market fundamentalists’ view that all forms of liberalization are helpful, arguing that the data show little to no benefit from reforms that did not attract foreign investment.
Keywords: Economic Growth; Economic Freedom; Economic Liberalization; Economic Development; Foreign Investment; Market Fundamentalism; Inflation; Governance (search for similar items in EconPapers)
JEL-codes: E61 O21 O4 P11 P17 (search for similar items in EconPapers)
Date: 2011-09-27
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Citations: View citations in EconPapers (1)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:33758
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