Americans Flee Economic Tyranny

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Americans Flee Economic Tyranny

It's one of the first lessons learned in Economics 101:  the difference between elasticity and inelasticity.  It appears some state administrators and legislators have either forgotten that lesson, or never learned it. 

As they continue to create environments that are increasingly hostile to affluence and business, they seem to ignore the fact that these individuals and companies still enjoy elasticity — that is, the ability to react to a changing environment.  This includes the ultimate reaction of moving to states that are friendlier.

Anti-business states act as if their borders are nonporous and that no matter what restrictions, taxes, and regulations they impose, businesses won't leave — that the relationship is inelastic.  But of course, it's not, and in some cases the only choices are to leave the state or to go out of business.  Either way, the state loses.

The degree of business freedom found in a state often reflects the degree of personal freedoms as well.  To quantify these differences on a state-by-state basis, George Mason University's Mercatus Center has developed two indices.1  The first index is a "knowledge economy index" that assesses a state's standing in the emerging knowledge economy. 

The other is an "overall freedom index" which addresses economic freedom as well as personal freedom.  Economic freedom is measured in terms of government size and spending, regulation, as well as tax burden.  Personal freedom is a function of "state paternalism," which restricts people's activities. 

The Mercatus study shows that people relocate in response to these indices. 

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However, the implications are somewhat different when we compare international migration vs. domestic relocation.  Whereas international moves are driven by both the knowledge index and overall freedom index, domestic moves only correlate with the overall freedom index. 

Freedom In The 50 States

Freedom In The 50 States

That is, states that have high economic and regulatory freedom act as domestic relocation magnets.

But, even there, the researchers discovered differences, stating, "We found that international movers seem to be sensitive to personal freedom, whereas domestic movers are not...

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