Economic Freedom: Endangered in Pennsylvania

Only 5 states perform worse than Pennsylvania in a national ranking of “economic freedom,” according to a new study released today (in association with Forbes magazine) by the San Francisco-based Pacific Research Institute.

The U.S. Economic Freedom Index: 2004 Report — co-authored by Lawrence J. McQuillan, Ph. D. of the Pacific Research Institute, and Robert E. McCormick, Ph. D., and Ying Huang of Clemson University — was unveiled this afternoon at a Washington, D.C. event.

“Despite — or perhaps because of — Pennsylvania politicians’ attempts to generate economic prosperity through taxpayer subsidies and government intervention in the marketplace, the commonwealth ranks 45th among the 50 states in economic freedom,” said Grant R. Gulibon, senior policy analyst at the Commonwealth Foundation. “And that lack of freedom is shrinking Pennsylvanians’ paychecks.”

The Index explains how a state’s level of “economic freedom” — the right of individuals to pursue their interests through voluntary exchange of private property under the rule of law — has a tangible effect on the daily lives of all Americans by impacting their financial bottom line.

“Economic freedom allows people to make decisions that best promote their economic well-being,” said Commonwealth Foundation President Matthew Brouillette. “And it is the lack of economic freedom in our commonwealth that is harming families by severely retarding our economic growth.”

The Index rates Kansas as the most economically free state, followed by Colorado, Virginia, Idaho and Utah. These states are the best places to start a business or find a new job because they have the fewest regulatory roadblocks and fiscal obstacles. Illinois, Rhode Island, Connecticut, California and New York ranked at the bottom of the list, just behind Pennsylvania.

“This analysis of economic freedom confirms what many of us have been saying for years — Pennsylvanians are the victims of state government’s fiscal neglect, regulatory overload, and bad economic policy,” said Brouillette.

The Index measures economic freedom in five broad sectors — fiscal, regulatory, judicial, government size and welfare spending. It also uses an economic model to measure the correlation between economic freedom and personal income — and finds that a 10 percent improvement in a state’s economic freedom yields, on average, a one-half percent increase in annual per capita income.

“The link between economic freedom and financial prosperity is clear,” Gulibon said. “If Pennsylvania was as economically free as Kansas, the average family of four would see a $3,952 increase in its annual income. This is money that families could use for education, health care, or simply replacing a worn out refrigerator or washing machine.”

“This study explains the very real impact economic freedom — or the lack thereof — has on the lives of all Pennsylvanians,” said Brouillette. “Hopefully, policymakers who are truly serious about making our commonwealth an economic leader once again will embrace its call for policy reforms that advance economic freedom and, in turn, foster financial prosperity for all.”

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The Commonwealth Foundation ( is an independent public policy research and educational institute based in Harrisburg, PA.