Casual Correlations

We've done a very bad thing.

We've done a very bad thing. We've made an assumption based on little data, and drew correlations casually without the proper statistics to back us. Call us sloppy, slovenly analysts if you want. Call us data-miners, liars and traitors to our country. We've cautioned against the dangers of making casual correlations in the past, but we just couldn't help it and did it ourselves…please forgive us.

Forever now we've maintained this relationship is true: that the freer the market, the more prosperity and individual freedom for everyone. Conversely, the more overbearing government regulation there is, the more suffering is caused. But how to prove such a philosophy?

Thankfully, our statistical savior today arrived. The 2007 Heritage Foundation and Wall Street Journal's Index of Economic Freedom was released, and the results have us giddy. The report includes measures of property rights protection, tax rates, government intervention in the economy, and monetary, fiscal and trade policy. We quote from today's WSJ:

"As it has in past editions, the 2007 Index also looks at income levels around the globe and finds that economically free countries enjoy significantly greater prosperity than those burdened by heavy government intervention. The per capita GDP of the top quintile of countries, ranked according to economic freedom, is now almost $28,000 while the bottom quintile is less than $5,000."

The Poor Get Richer
By Mary Anastasia O'Grady, The Wall Street Journal (*Site requires registration)

Whew. So that's cleared up. Turns out we were right after all and now we've got some fresh data to prove it. The top five economically free countries: Hong Kong, Singapore, Australia, the United States, and New Zealand.* All five pretty decent places to put up a tent and scratch out a living.

Just fascinating, then, that the US, a leader in economic freedom, also happens to be a leader in world innovation. Whoops! There's another casual correlation already! Far be it from us to draw another of these dangerous, unfounded conclusions—but we feel like there's a pretty good chance incentive for innovation and economic freedom are connected, too. Or are we just being silly again?

U.S. Leads the Way in Innovation Among Businesses, Study Finds
By Robert Guy Matthews, The Wall Street Journal (*Site requires registration)


*Note: Also, our warmest congratulations to Cuba, who came in 156 out of 157 on this year's list. They once again staved off total futility and kept North Korea in the basement, at 157.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.