Do People Vote With Their Feet for Economic Freedom?

If libertarians value liberty so much, wonders New Zealand-based libertarian economist Eric Crampton, why don’t more of them move to New Zealand?

The latest Heritage [Foundation] survey puts New Zealand again above the US on economic freedom. If we care about a bundle of freedoms rather than just economic freedom, I think NZ does better than the folks above it on the Heritage list: Australia (widespread internet censorship, thuggish police), Singapore (heavy restrictions on personal liberties), and Hong Kong (much better than Singapore?).

How much libertarianism is just cheap talk? Or, rather, what price do libertarians put on liberty? I’d outlined some of NZ’s advantages on EconLog four years ago….

We’ve ranked at or above US levels of economic freedom since Heritage started keeping score. And I’m rather sure we’re still better on civil liberties. If you want to have your junk mauled by someone in uniform, you’d have to pay for it in one of our numerous legal brothels; you don’t get it for free at the airport.

By the general axiom of revealed preference, the increment of liberty isn’t worth the loss of income (and inconvenience of moving and living abroad) for the vast majority of libertarians.

Eric Crampton is right that New Zealand may be freer than the United States right now, and that few libertarians value the difference enough to move there. But I don’t think that proves that libertarianism is just “cheap talk.” The difference in economic freedom between New Zealand (82.3 on the Heritage scale) and the United States (77.8) is relatively small. Moreover, it has often been smaller still in past years, and could easily shrink again in the future. The difference in noneconomic freedom is probably also minor, and in some areas (especially freedom of speech and gun control) may cut in favor of the US.

The real test of whether libertarians (or anyone else) are willing to move to secure greater freedom is the pattern of migration when people have a choice between jurisdictions where the difference in freedom is substantial. Here, there is plenty of evidence that people tend to “vote with their feet” for societies with greater economic freedom.

In Europe, large numbers of Germans have fled high taxes and restrictive labor regulations and moved to neighboring Switzerland, the most free market nation in Europe according to the Heritage study (now ranking slightly above even the US). Switzerland (81.9, ranked 5th in the world) beats Germany (71.8, 23rd) on the Heritage scale by a hefty margin. The Swiss have even begun to complain about an “invasion” of “arrogant and rude” Germans.

Hundreds of thousands of French have moved to Britain for similar reasons. So many that French expatriates in the UK are about to get their own representative in the French parliament, and French President Nicolas Sarkozy even made a campaign appearance in London when he was running for the office back in 2007. Not surprisingly, the gap between Britain (74.5) and France (64.6) on the Heritage scale is similar to that between Switzerland and Germany.

Here in the United States, migration patterns strongly favor states with lower taxes and levels of government spending. New Hampshire, the American state with the highest level of economic freedom, has been inundated with migrants from its more statist neighbor Massachusetts, to the point where some 25% of the state’s population consists of my fellow former Bay Staters.

All of the above cases involve people moving from one reasonably prosperous, generally market-based polity to another. Migration patterns in favor of economic freedom are even more stark when we look more broadly, and consider people who risk their lives fleeing socialist or communist states such as Cuba.

For reasons I discuss in this new article, and Part V of this older one, people often make better-informed decisions when they vote with their feet than at the ballot box (where economic liberty is, of course, much less popular). And the verdict of “foot voting” generally favors societies with greater economic freedom. In assessing that verdict, it’s worth keeping in mind that even a person who values freedom very highly might still not move if they also face high moving costs (including the cost of finding a new job and adjusting to a new culture and society). In a world with little or no moving costs, foot voting for freedom would be even more common.

To be sure, few of these foot voters are ideological libertarians. Most just want greater opportunity for themselves and their families. They don’t value economic freedom for its own sake, but the prosperity and opportunity it creates for them. At the same time, the migration decisions of people without strong ideological commitments are in many ways a stronger indication of institutional quality than those of people who do.

Obviously, economic freedom is not the only factor driving migration patterns. Proximity and cultural compatibility also matter, for example. It’s not surprising that Germans pick nearby Switzerland, where German is the majority language, and many Massachusetts residents pick neighboring New Hampshire. At the same time, it’s also significant that Switzerland is by far the freest of Germany’s neighbors, and New Hampshire by far the freest of the states near Massachusetts.

High economic freedom countries that have only recently liberalized their economies after decades of statism (e.g. Estonia and Mauritius) are not going to attract as much migration as better-established states that have had free economies for longer periods, and have had more time to build up their prosperity.

It is also fair to observe that none of the relatively freer societies discussed above are perfectly libertarian or close to it. The available evidence doesn’t allow us to gauge the appeal of a society that scored 95 or 100 on the Heritage scale rather than 81 or 82. Finally, I’m not aware of any data on whether ideologically committed libertarians are more likely to move to more libertarian polities than otherwise comparable people who adhere to different ideologies. Despite these caveats, the evidence suggests that foot voters with a choice generally opt for more economic freedom over less.

UPDATE: I should note that I don’t mean to suggest that the Heritage ratings are perfect indications of relative economic freedom. Given the methodological difficulties involved, I wouldn’t put much stock in small differences between countries of 2 or 3 points on the 100 point scale. On the other hand, I do think that large differences on the scale are likely to be valid. I don’t doubt that there really is a big difference between Switzerland and Germany or Britain and France. For what it’s worth, the rival Cato/Fraser Institute survey, which uses a somewhat different methodology, gives fairly similar ratings for all the countries discussed in the post.

UPDATE #2: I have revised this post in order to correct a few minor, but in my view annoying, phrasing and organizational flaws.