Welcome to Cato Audio for January 2024. I'm Caleb Brown. Happy New Year. In this month's offering, Will Ruger and Jason Sorens evaluate freedom in the 50 states. Amy Kayaza and Daniel Gorfine discuss how regulators could muck up the works of finance with proposed rules meant to rein in artificial intelligence. And author Alexandra Hudson discusses her new book, The Soul of Civility. Also, I speak with Cato's Ian Vasquez about the Human Freedom Index. First up, this month's Cato Roundtable.
As Cato's own Deidre McCloskey has pointed out, globalization is a bit of a fraught word. It invites criticism, but it deserves attention. And to talk about Cato's project, Defending Globalization, I'm here with Scott Linscombe, Vice President for General Economics at the Cato Institute, and Deidre McCloskey, Distinguished Scholar and Isaiah Berlin Chair in Liberal Thought at the Cato Institute. Scott, if I could begin with you. I came up in the 90s. I think you came up in the 90s, too, where we had an awareness of the world around us beyond our neighborhoods in the 90s. And that seemed to be a very optimistic time with respect to opportunities for trade, for engagement among countries that under normal circumstances in years earlier would have been viewed as adversaries. And it seemed like there was a critical mass of thinking that would have led us to believe that we were entering.
a golden age in terms of the world engaging, people of the world engaging with one another commercially, culturally, and we were not there anymore. So help me understand sort of what happened, and we'll talk about some of the more nitty gritty details of why that kind of vision of the world is still possible. Sure. Well, yeah, I mean, I think the first place to start is what were the kind of policy changes in the mid-1990s? Because, you know, there's this idea that The things we saw in the 90s, like the creation of the North American Free Trade Agreement or NAFTA and the World Trade Organization coming into existence. And like you said, the proliferation of these globalization pro-trade ideas, that this was something brand new, that it was just a bunch of intellectuals sitting in a room deciding we're going to have free trade someday. But it really actually emerged after...
decades of bad policy, a lot of industrial policy, a lot of protectionism, you know, in the 1980s in the United States, you know, Japan was the big scary thing. And of course, the 70s saw this inflation and the rest. And so, you know, it was only a after failing a lot at this sort of go it alone, unilateralist might makes right style that we landed on a somewhat better approach with some of these trade agreements and more embracing of globalization. in the 1990s. But of course, you know, 1999 was a bit of a landmark year for the anti-globalization movement with those big protests in Seattle against the World Trade Organization and subsequent protests in D.C. shortly thereafter.
And so the seeds of some of that discontent were already being planted, even during those halcyon pro-globalization days in the 90s. And then what happened? Well, you had a recession in 2001. You had the Iraq War. You had the Great Recession. And then you had the rise of Donald Trump. And suddenly, and the rise of China, I should say, as well, suddenly all of those good ideas in the 90s and all that optimism gave way to a lot of pessimism, particularly in the United States, right? We're losing at trade. China's eating our lunch at the rest. And, you know, that's basically...
where we still are, especially given the pandemic and the war in Ukraine. You know, it really is a far more pessimistic place. And quite frankly, a big reason why we launched the Defending Globalization Project is that there just aren't a lot of people out there, you know, with a full-throated embrace of allowing people to do business and to move with each other without regard for not just, you know, race, religion, and income, but also national borders. And that's really what globalization is, as Deirdre can discuss more about. Deidre, you have an essay in this globalization project, and I believe it's entitled Globalization Creates a Global Neighborhood. And when we think of trade at its most basic level or exchange, economic exchange that people like to engage into truck and barter, what happens?
Does something change fundamentally when we scale that up and include all of the various resources and talents that the world can bring to bear? Yeah, well, I came up not in the 1990s, but I'm old. I came up in the 1960s in eastern Massachusetts, which was fiercely protectionist in the early 1960s for its shoe factories and its cotton mills, which had started to move south, actually. And there was a belief that... National borders were really worth protecting in every way that you can name. I mean, the immigration laws were not good, even worse than they are now. And we hadn't had the so-called Kennedy Round, which incidentally turned out to be kind of an insider accident in American politics that turned us away from being an old protectionist country as we had been through the whole of the 19th century and large slices of the early 20th century to the force behind free trade.
internationally. And in the 1950s and 60s, there were capital constraints. You couldn't invest easily in other countries. And it's kind of, as we just said, this kind of crazy period from 1914 to the Kennedy round in the 1960s. crazy policies where with the notion that it's a zero sum and if we don't protect ourselves from the Germans or the Japanese or the Chinese or whoever, our lunch is going to be eaten. And there are long cycles in this because in the late 19th century, at the height of the first globalization, the first great globalization with free trade in people and in capital and in goods in large parts of the world, there grew up in reaction, this terrible fear in, say, Britain.
Made in Germany was the name of a notorious book that I think in a small way contributed to the coming of the First World War. This kind of fear that Germany was... In the same way we fear China now, from the economic point of view, completely irrationally, we fear the British feared the Germans. Here's the basic point. If you really believe in protection and capital controls and crazy immigration policies...
Why don't you make your accordion at home? I have this nice little Czechoslovakian accordion, which I play very incompetently. And I couldn't make an accordion. So if it's true that protection at the U.S. border or the French border or any border is a good idea, why not in, I don't know, Maryland? Why doesn't Maryland make a tariff border? Of course, that's illegal under a constitution. Why doesn't Washington, D.C. have tariff walls as big European cities like Paris and Berlin did have in the 19th century? If that's a good idea, why not your neighborhood? Don't trade with anyone else.
Just trade with people in your neighborhood because they're the people you love. And then ultimately close the doors of your house and stay at home all the time. So that's sort of the inverse of my question, which is about scaling up. That's right. Trade. Scaling up. But to the extent that...
I think everybody falls into this trap, at least even as a rhetorical matter. That is, we're concerned about the Japanese. We're concerned about the Chinese. But of course, it's individuals who are creating things and wanting to move those things to another place to get paid for those. They want to discover where the thing that they know how to do can best be shipped around the world. To buy or sell.
It's individuals who buy or sell. Among the worst contributions of economics to world economic policy is constructing balance of payment statistics. Because if we didn't know how much the Japanese or the Chinese were sending to us, no one would know that these inexpensive hammers would show up at the big retailers. Instead of being $15, they're $5. And we wouldn't know anything about it. And we'd just buy them.
And so it's highly artificial, this whole thing. It's all these boogeymen are created, namely, Chinese. And I would add that, you know, it's been going on since basically the dawn of recorded history, right? It's just the big developments in terms of... trade and globalization are technological, right? We have container ships and computers and the internet and the rest. And I think, again, falling into traps, the big thing we do in the trade policy space is we talk about trade agreements. I mean, I just did it, right? I talked about NAFTA and the WTO. But really what these are is just government kind of getting out of the way of what individuals want to do, what they've been doing in some capacity forever. And then via these agreements, binding their own hands because they can't be trusted. Protectionism is so intoxicating that they want to basically prevent themselves from reimposing those barriers that prevented people from doing that.
business. That's right. Well, you know, the structure of these negotiations on trade agreements are, to use the old-fashioned term, mercantilist. We'll let you send stuff to us if you allow us to send stuff to you. So it's export maximizing. Now, ask yourself, as an individual at your work, would you negotiate with your boss to give your boss more work? That would make you better off, right? Work twice as hard.
It's a crazy framework, but that's the only thing that people will accept because most ordinary people, and certainly politicians, just don't understand that a neighborhood is what we want. We want people to be trading with each other. It's just better for them. There is, you make, in your essay, Deidre, at the Defending Globalization Project, you sort of take stock of a lot of the historical justifications for restrictions on trade. And as, like so many other things, you don't ever fully slay the beast of the doubters, right, when it comes to trade. You can make, look, economists have been making...
The arguments that my colleague and I make for two or three centuries, starting in France, basically, and moving to Scotland and so forth. We keep saying, have you noticed you like to buy stuff? You don't want to export more of your work. You want to export less of your work for the same stuff you can get from someone in the next neighborhood. And they say, oh, yeah, yeah, but I want to protect my job. And it's very hard to get through on that. The irony of the Massachusetts shoe factory. Yeah.
demanding protection is not lost on me. Yeah, why is that? Sabotage. Sabotage, indeed. Sabot, meaning clogs. Sabotage. You know, and something Deirdre mentioned earlier on is that those jobs didn't actually get shipped offshore. They, of course, moved south, right? Yeah, that's right.
Certainly the cotton textiles moved south massively. Exactly. For instance, same thing. Down here in the Carolinas, we stole those jobs from up north. And then it moved offshore, which, again, I think when I try to talk about trade to people who are willing to listen, one of the things you bring up is that trade across state borders is no different than trade across national borders. These are the same types of things, again, that have been going on before those borders, any borders actually existed.
Well, of course, we in the United States, more or less by accident, have this big free trade area because in the original 1789 constitution, tariffs between states, which had been happening under the so-called confederation during the war and after 1783, were abolished. There are still tariffs in India among states. You still have to stop at a border and pay a tariff. As a result, the United States had this enormous free trade area and could take advantage of economies of scale and specialization. And hey, are you going to grow cotton in Massachusetts? Don't be absurd. And that made us, how can I say, disdainful of...
How can I say it? Not worry about the bad side of protectionism. If you're a little tiny country, Holland or something, or Luxembourg, it would be insane to try to obstruct trade because that's how you live. Whereas if you're the United States for a long time, we could get along with doing crazy deals in Congress to protect rails, for example. Steel rails were protected in the late 19th century.
So, Scott, related to that, Deidre raises a point, which is the capacity for self-delusion among Americans when it comes to matters of trade. Everyone could be could be especially pronounced here because we do have a lot of a lot of productive capacity and ability to produce so much stuff. And we don't necessarily immediately think, well, we've just got we've got to get these Chilean grapes. Yeah, that's right. 100 percent. And it is one of the many myths about the United States today is that we are.
really steeped in free trade and globalization, when in reality, the trade as a share of the United States economy, a share of GDP, is actually really low compared to almost every other country in the world. I mean, because we're such a big, diverse economy and have such a big geography. And so if you don't work in trade, if you don't need trade and globalization, then again, yeah, you don't think about it much. And of course, if you're not thinking about it, well, then it becomes much easier for a steel company in Pennsylvania or a Pennsylvania politician to impose a barrier because we've not paying attention. The only people paying attention are the ones that benefit financially, right, or get votes. And so you end up with these policies like steel tariffs that don't make any economic sense, that are rife with cronyism and the rest, but that the rest of us kind of go, eh, whatever, you know, it doesn't affect me directly and I can't see it and I'm not thinking deeply about it. And so you end up with steel tariffs. Almost the first thing that the Trump administration did.
was to impose a steel tariff because the Secretary of Commerce was a longtime flack for, guess what, the steel industry. Yeah, we had a USTR who was a lawyer for the steel industry, the Secretary of Commerce that, I think, owned a steel company at one point. I mean, it's hilarious, right? And there's President Trump at a news conference surrounded by all these steel CEOs and executives and steel workers. You couldn't caricature it any better if you tried. And yet, again, it just all, nobody really cares here because we have better things to do.
And I'd say the other thing, though, is that, you know, we in the United States, we get away with a lot. because there are so many great things about the U.S. economy, right? So, you know, a few billion here or there isn't going to sink the U.S. economy. And so that's, I think, another huge issue. And one of the things, just to plug the project a little more, one of the other reasons, aside from the pessimism that we started this project, is there's just so much misinformation and misunderstanding out there about not just the nature of trade and globalization and migration and the rest, but also just the basic nuts and bolts, right? And so part of the project is simply to try to educate, right? Try to get, okay, let's have a common understanding of the facts.
Well, for example, you would think that the main cause of unemployment in the United States is offshoring, as we now call it, that is free trade with the rest of the world. The numbers, the crude numbers just don't support that. If in Youngstown, Ohio, there's unemployment temporarily, it's because of competition with, for instance, other parts of the United States, or it's a result of technological improvement, which temporarily makes some... autoworker or steelworker unemployed, but greatly benefits all Americans in the end. So it's not the bloody foreigners. And especially, you know, I've often speculated, as you mentioned, Scott, in the 80s, we were terrified by the Japanese and now we're terrified by the Chinese. I wonder if there's a little element of racism in that, because if it had been the Dutch or the Norwegians or something who were investing in Rockefeller Plaza, no one would have noticed it.
Yeah, for sure. It is a very difficult thing sometimes to try to pierce this kind of veil of ignorance about a lot of this, right? And even with the history we have, again, the Japan-China parallels are pretty darn stark, even though they, of course, have fundamental differences as well. And so, yeah, the goal is to try to break through all of that. Yeah, yeah, it's hard. As you said, most people don't.
think about these things. And that's, of course, something that Cato has organized to try to change, to make them think about it. But I think it might be more effective to appeal to people's heart and to somehow get them... understanding that we're all citizens of the world and that we ought to be nice to each other and buy and sell each other's products. Yeah. Yeah. Then that's definitely, you know, one of the parts of this project is we're going to be looking at some of the actual faces of globalization, so real people. And, you know, I always say one of the most influential videos I've seen on this is, you know, the guys over at NPR's Planet Money did a whole series on how you make a t-shirt. And one of the episodes was a woman, a Bangladeshi garment worker, you know, working in what we consider sweatshops and terrible conditions. And she, well, yeah, because of course, compared to the alternative subsistence.
farming or worse, it was amazing. And that is, I totally agree with you, Deidre. You know, since those Seattle protests in 1999, more than a billion people have escaped extreme poverty as defined by the World Bank. A billion people living better lives, right? And globalization being a big part of that, like as in Bangladesh. One out of eight people on the planet, that's right. And one of the things that you note in your essay as part of this project, Deidre, is declining global inequality, which is not the U.S. losing any of the...
productivity. It's the rest of the world catching up. Exactly. And that's, of course, if you love the rest of humanity, you want the Chinese, the Indians, the Africans to succeed. You want them to be as rich as we are. And it's not a zero-sum game. It's a positive-sum game. There was a wonderful exhibit when I was a kid called The Family of Man with a very nice book of photographs that came from it. And it's that kind of appeal. Don't you, if you're a Christian, Jew, Hindu, I don't care what you are, don't you want other people to...
be well off. And that comes from making the world a neighborhood. Yeah. Yeah. And I think you can even be a little selfish about it. All right. I want people abroad to be very rich so they can maybe discover the next cure for some terrible disease. Right. That's right. And, you know, I thought one of the things that was excellent in your essay, and I think I should say, you know, I don't want to downplay the benefits of globalization for Americans either. Right. Because the fact is that the exchange of not just goods and services, but of ideas is so.
Yeah, right. Essential to, as you call it, the great enrichment and human flourishing. So even if you want to be a selfish person and not really care about that nice woman in Bangladesh, there are great, great reasons to support this dynamism and this exchange. It's going to make you better off. Yeah. And indeed, among the larger sources of enrichment is these ideas, lots of them coming from other countries. The only two places in the world that invented place value for numbers, which makes calculation easy, are India and Guatemala.
those two places. And if we had said a thousand years ago, no, we're not going to do that place value. We're going to go on with Roman numerals. We wouldn't be able to calculate our bank balance. You know, Scott, you and I talked about the global race to create vaccines, manufacture vaccines, source materials to make vaccines, store vaccines, ship vaccines, and make them available to people all over the world. And, you know, as when then-President Trump was standing before in the Rose Garden talking about...
how all of this was going to roll out. He never looked more presidential than when he stepped aside and explained that these here are the captains of industry who will be making sure that all of this happens as efficiently as possible. And on a much broader scale, that's sort of how government ought to behave in the face of free, relatively free people. wanting to deal with one another to enrich each other. Yeah, and that's, I mean, you know, it's amazing that we had this incredible real-time example of global collaboration across almost every, you know, element you can think of, right? Whether it's knowledge or goods or services or whatever. And all of the story I always tell is that, you know, the government contracts to buy these vaccines effectively said, just make them.
Right. We don't care how it's we don't care where it's made, how it's made. Just make them. Right. And that that I think is really, really telling that when there's true urgency, when there are human lives on the line and let's be cynical for a second, reelection on the line, the government all of a sudden says, you know, we're going to get out of your way. We're going to let you guys do this. And if only they would do that with everything else. Right.
Well, that's how the United States won the Second World War. Not by central planning of how to make tanks issued from Washington, but by allowing American enterprise to shift from making automobiles to making tanks. And if you provide the right incentives, they'll do it. But you can't... put hooks and chairs in their way, they say, oh, well, it all has to happen in California, and I'm not going to vote for it. If you don't have a cosmopolitan economic ethic, which is what we're talking about here, there are a whole bunch of innovations and investments that are just not going to happen.
All right, we're going to leave it there. The Project on Defending Globalization is available at our website. Thank you, Scott Lincecum, Vice President for General Economics at the Cato Institute, and Deidre McCloskey, Distinguished Scholar, and Isaiah Berlin Chair in Little Thought. Of course, I urge you all to read the essays in the project, share them. We have videos, in fact, one not like a TED Talk chat from our own Scott Lincecum, extolling the virtues of free trade and exchange and travel. And that's all available at our website, cato.org.
How free is your state? In the seventh edition of Freedom in the 50 States, authors Jason Sorens and William Ruger answer that question with the most comprehensive measure of governmental respect for economic and personal freedom at the state level. They spoke at the Cato Institute in November. The Freedom Index, again, the seventh edition, is we think, and I think it bears out given the extent of it, is the most comprehensive index of freedom out there. And we don't look at just economic freedom or look at personal freedom. We look at the whole range of different types of freedom. So we look at regulatory policy, fiscal policy, and personal freedom or freedom from paternalism. And the way we do that is we try to be very careful, right? We define what we're talking about pretty carefully. Freedom is the ability to use your life, liberty, and property as you see fit, consistent with the equal rights of others. So that's kind of like...
general American sense of what it means to be free. And then we look at those state and local policies that either infringe on that freedom or support that freedom. And we have about 230 top-line policy variables. And then we call balls and strikes. We look at which states are doing well and which states are doing poorly. And again, we can get into a lot more about how we construct the index. So the first thing, I'll turn it over to Jason to kind of talk about some of the construction. But again, we look at, here's fiscal policy, right? State taxation, government consumption, local taxation, government employment, government debt, cash and security assets. Then we look at regulatory policy. Here's the whole range of them.
And then we look at personal freedom. So you can see that it covers a lot of different ground. But you may notice that we say incarceration and arrest, 6.7%. Where do we get that from, right? Did this just spring out of our head and we said, hey, we think that that's worth roughly 6% of our freedom. No, of course we didn't do that. So I'm going to turn it over to my partner here, Jason Sorens, to tell us how we actually came up with those numbers. Well, to keep it very short and simple, one thing that's unique about this index is that we weight every policy variable, every input into the index, according to the value of that freedom.
that we find in the literature. So we look at the published literature, mostly in economics. What is the value of the freedom to those people whose freedom is at stake? So we don't look at any potential side effects that might be positive for taking away freedom. We're just looking at the value of the freedom to the people whose freedom is at stake. And so we use that actually then to weight these variables. We also have a constitutional weight. If there's a policy that touches on something that's more of a fundamental right that's recognized in federal or state constitutions, then we give it a boost. So we've got personal freedom up here. One of the things that was a little bit surprising to us
First of all, the gambling freedom is so high, because we don't personally do a lot of gambling, but Americans do. Americans gamble a whole heck of a lot. They spend a ton of money on gambling, and so some states don't allow gambling at all, and there are a handful that don't allow any form of legal gambling, and then many allow lots of legal gambling. So there's really a wide range there, and so it ends up mattering a lot in our Freedom Index. Campaign finance, by contrast, matters very little, even though it touches on First Amendment freedoms, because Americans do not.
Like giving money to politicians, it turns out. Spend more on almonds than on elections. So it's not a very valuable freedom to most Americans. And so we just kind of let the data speak in that sense. Yeah. And this is a way we can shield ourselves from just trying to measure freedom according to what Ruger and Soren's like. We're trying to have an objective way of measuring a normative concept. And this is in the tradition of a lot of social science. People study to what extent do we have democracy in various countries. People can study equality or equity. We're studying freedom. And we're excited to have a conversation about where freedom is doing better or worse. But even if you disagreed with the idea that freedom matters or that it matters as much as we think it is.
We think this could be helpful because it is a data-driven project. Excellent, excellent. By the way, I don't gamble either. I lost all my candy in a poker game in the fourth grade. I haven't gambled since. Yeah, it's not a big thing for us. But there's a lot of things in the study that aren't big for us. I don't drink raw milk, but we also code that. It's a very small percentage. But even things like prostitution legalization, gambling. Fireworks laws. Yeah. So again, it's not what we think is right for people to do. We think it's what fits with our definition of freedom, what they ought to be able to do freely, even if in some cases they might be better off not choosing to exercise that freedom. But we want to kind of go through a little bit of different issue areas, because people care not just about the overall freedom, but also the different areas.
We see fiscal policy where our number one state for fiscal policy is Florida, followed by New Hampshire, South Dakota, Tennessee, and Pennsylvania. And Hawaii is the worst. And you can see over time what's going on here, right? You can see that fiscal policy for many, many years improved across the 50 states with a recent dive over the last few years. So here's regulatory policy, where you can see that, unfortunately, regulatory freedom has fallen quite a bit. But Kansas has a real advantage here as the most free state when it comes to regulatory policy, followed by a whole bunch of other states that are in the middle of the country. And unfortunately for New Jersey, which used to have more of an economic freedom advantage, which is why it drew a lot of people from New York, New Jersey comes in 50th.
And here's our economic freedom scores combined as the combined measure of fiscal and regulatory policy, where you see New Hampshire, Florida, South Dakota, Tennessee, and Georgia are the tops. And of course, New York is the worst. And not that I'm going to surprise anybody, but New York is also the worst overall state. But maybe Jason wants to talk about personal freedom here. Yeah, I don't think there's a big surprise with Nevada at number one on personal freedom. What happens in Nevada stays in Nevada, apparently. And Texas, for all its faunted talk of freedom, is number 50 on personal freedom. And what's interesting with personal freedom is that we see a very strong long-run trend in favor of growing personal freedom. And this actually even excludes those policies where the Supreme Court has overturned state laws. So this is only policies that states control. So it doesn't even include things like sodomy laws and marriage laws and things like that. So personal freedom has been rising at the state level for over a decade.
And so again, we don't do the drum roll and roll through them one by one like we used to, but here's your overall reveal, if you will. A few editions ago, Florida actually came in number one, but New Hampshire has maintained its crown from the last edition. And in fact, it's not only the number one free state in the country, but it actually has the highest score absolutely that we've seen in the index since we started, which shows that even though New Hampshire has been doing well for some time, the New Hampshire advantage to live free or die state, but it's actually improved even relative to where it was. And I think that has a lot to do with things like a policy ideology that's friendly to freedom, but also maybe on the margins, the Free State Project, which Jason founded, I think has had an impact there. Florida obviously has been improving for many, many years, as has Arizona. And so you see with these top five, whereas the bottom five, New York is worst by far. It is not even close, although Hawaii has been gaining on it in a negative sense, followed by California, New Jersey, and Oregon.
Jesse, you want to take this one? Sure. You can see here that we took the top five and bottom five to see how they've changed over time. And you can see that New Hampshire was briefly number one in 2000 and then wasn't for a long time. And Nevada and South Dakota have taken turns at the top in Florida as well, I believe, one year. But New Hampshire has regained the crown the last few years. And in all these states, these top five states have gained a lot. In fact, Arizona and Florida have really gained tremendously, especially starting in about 2010, 2011. The bottom five states, most of them have kind of flatlined. They're not...
falling any further, except for Oregon, you can see that they've dipped quite a bit just recently. And this is state average overall freedom over time. Again, a pretty significant increase in the last 10 years. Some people on Twitter get triggered by this, but this is just what the data have shown us is that deep blue states tend to have less economic freedom. It's not necessarily that becoming more and more Republican makes you have more economic freedom because we see that purple states actually do quite well here. But it does seem that some of these states that are very, very strongly Democratic tend to have lower economic freedom, with a couple of exceptions like Massachusetts and Connecticut.
And then personal freedom. We see here a slight positive relationship between democratic partisanship and higher personal freedom, but it's really very noisy in here. It's because democratic states tend to have more left-coded personal freedoms like on marijuana, criminal justice policies. Republican states tend to have more personal freedoms on the more right-coded policies like education freedoms and gun rights. And so it kind of comes out in the wash.
And Will, do you want to talk about the consequences of freedom? Yeah, exactly. I mean, we care about freedom as an intrinsic good, but we also care about it for its consequences for our flourishing and for our political economy here in the United States. And what this shows you is that there's a real important relationship, even when you control for lots of types of variables that cause people to move, right? Natural amenities, oceans, mountains, cost of living, the climate. These are things that people move for, but they also move on the margins for freedom. And this shows that. And we have seen states that are less free, people are leaving them in droves like New York. New York has had population declines, what, since 1957 in terms of migration?
And especially I think over the last several years has lost about 3.4% of its population. That's a lot of people. And they're not just fleeing to Connecticut or New Jersey, especially because New Jersey has lost some of its advantage in terms of its comparison to New York, but they're fleeing to places like Florida. Jason and I were just doing a podcast and we were talking about how it's not just older Americans moving to Florida. older New Yorkers. It's also the Gen Z demographic that's moving. And they're moving in many ways to economic opportunity, which gets to the next issue, which is that, not that we should be surprised here at the Cato Institute, but Adam Smith's notion about how peace, easy taxes, and a tolerable administration of justice can turn a community from barbarism to opulence. And we see here that economic freedom in particular is correlated with higher personal income growth. So not only are people voting with their feet for freedom, but places that are more economically free in particular are growing. And that helps them also attract new residents. But it's also better for their well-being, for their flourishing, because
Economic freedom is such an important aspect, and economic growth is such an important aspect of a flourishing life more generally. And so, again, we view freedom as a whole, like Milton Friedman did. It's a totality. And that means both of these together are vitally important. Again, we could talk a lot about some of the details here, but we wanted to give you a general sense of what our study finds. And just to sum up, right, so I think the most comprehensive study of freedom that's out there, looking at fiscal, regulatory, and personal freedom, and what we find through a very objective social science approach to weighting and measurement is we find that the states vary quite widely on freedom and that there are these significant results in terms of either attracting citizens or pushing them away and also increasing their economic growth in those states that are more free. And so we think that this is an important tool that legislators can use.
staff. We've had a lot of people through the years that have wanted to have a look at this and see how they could do better. Businesses and individuals who want to move and reveal their preference for freedom, or at least to take advantage of a better economic climate. And also social scientists who have used this to try to measure all types of different things and using freedom as a variable. And so, again, this is good for the everyman, which is something at the American Institute for Economic Research that we care a lot about is bringing ideas and data to people that can use it in their own lives, but also important for scholars. Will Ruger and Jason Sorens are authors of Cato's Freedom in the 50 States.
The arrival of generative artificial intelligence has captured the imagination of the public and policymakers. While often hailed as the newest thing in many sectors, AI has been a core financial technology for years. From market makers to consumer-facing fintechs, our financial markets both deploy and innovate cutting-edge AI. Regulators' proposals seem, at best, incredibly vague and liable to create unintended consequences. At the Cato Institute, Amy Kayaza, partner and practice leader at fintech and financial services at Wilson, Sonsini, Goodrich, and Rosati, and Daniel Gorfine, founder and CEO of Gattaca Horizons, discussed how financial firms use AI.
and how regulators seem not to understand it. The proposal does not seem to be, as I said before, kind of consistent with how we think about, in this case, investment advisor and broker dealer obligations. It really changes fundamentally some of the ways that investment advisors and broker dealers. would interact with their clients and customers based on the way that the rule is written. It covers arguably such a broad amount of technologies that it's well beyond AI. It's obviously targeted in part of AI, but it could cover the Excel spreadsheet I do my budget on for the most part. So it does seem to be not as well thought through and not as well versed in a technology as we would really like. For me, some of the really...
big unintended consequences are we're going to wrap all kinds of transactions that have occurred in the market into a new rule and change fundamentally the way that they're used in a way that kind of squashes innovation within especially the investment advisor and broker-dealer industries. I think that could be really, really problematic. I also do think it is the kind of rule that could be obsolete pretty quickly because the way it's drawn is meant to bring in a very, very broad range of technologies, but very quickly the technology is going to change in ways that we can't predict. I also think a really fundamental issue with it is that The way the predictive data rule is written, it requires advisors and broker dealers to not only identify conflicts of interest that may arise from the use of what are called covered technologies, predictive data.
analytics, the way that it covers every single conflict of interest and it requires that the advisor or the broker dealer not just identify and disclose those conflicts, but that the advisor eliminate or neutralize the conflicts. That's probably well nigh impossible in most situations. It's both going to be impossible to identify every conflict and impossible to neutralize or mitigate it. To the extent that it is possible, it's going to really favor big actors with compliance departments that have hundreds, if not thousands of compliance people and lawyers and everyone else. Whereas your small kind of innovative advisors and broker dealers are going to have no chance at actually being able to comply with this law, which is likely to push them out of the market or alternatively facilitate non-compliance in a way that if you can't actually comply, what do you do? You either get out of the market or you just ignore what you need to do to comply. Neither of those is particularly helpful to customers or clients or broker dealers or advisors. And it just potentially really stifles the market and innovation in the market.
Yeah, I just have to kind of reinforce some additional points there. I completely agree. I mean, I think this is an example of a rulemaking that is hasty and premature, and it violates the principle of being tech neutral. I mean, it casts the use of technology in such a negative light. And I would point at two kind of underlying assumptions in the rule that I think need to be challenged. And the first is that technology and mobile and internet platforms are necessarily more likely to cause harm to investors. And then there's a second assumption in there that they're less likely to be detected.
And that's kind of the rationale that the agency is using to promote the rule. And I challenge both of those. I mean, if you think about where we've evolved from, and again, comparing to the status quo, you know, old boiler rooms where you were using kind of a telephone to call potential investors to sell a product were a lot more opaque. And I would argue had a much higher risk of harm than something that is necessarily scalable to many users where you can identify it much, much more readily. If there's a problem with a platform.
you would see it. You would see it pretty quickly and you could neutralize that pretty quickly as well from an enforcement perspective if there's an actual problem. So I think that to necessarily assume that it's more likely to cause harm, I think it's completely the opposite. I think if you look at the use of tech and platforms, say they've brought costs down for retail investors, they're giving them more information, more access to opportunity. They're far more efficient. Now, again, that's not to say there can't be challenges with the platforms and certain business models, but those would be readily identifiable through any kind of mobile or internet-based platform. So I don't...
agree with the underlying assumptions that kind of establish why we would even need this rule in the first place. So this to me does strike as something that's looking to jump out prematurely when I'm not clear what harm we're actually trying to solve for. In an era marked by contentiousness, rancor and bitter divide, what role does civility play in our society? In her new book, The Soul of Civility, Timeless Principles to Heal Society and Ourselves, Alexandra Hudson addresses these insights with a refreshing exploration that digs deeply into the history of civility, its relevance for today and the impact it can have on ourselves, our relationships and our society.
So I came by my interest in this topic of civility and social norms, honestly. My mother is called Judy the Manners Lady. So she's this internationally renowned expert on manners and etiquette. And I realized that while writing this book, there are actually four internationally renowned experts on manners and etiquette named Judy. The most prominent might be Judith Martin, the longtime Washington Post columnist who goes by Miss Manners. But there are three others, and my mother is one of them. And my mother is both an unbelievably gracious, hospitable, other-oriented.
person who embodies the spirit of true civility as I explore it and define it throughout my book. But she also taught my brothers the ways and means of politeness. And I am, this won't surprise you, Alan, I'm constitutionally allergic to authority. I hate rules. I hate being told what to do. And so I remember my mother asking us to set the table just so and cut our food, you know, just so. I hungered for a reason why, you know, why do we do things the way that we do them? Is it just because some self-appointed authority somewhere sometime decided that we should?
If that's the case, is that the best way? And I never sufficiently got those answers to why we do things the way we do them so. But I, you know, my mother promised that following these rules of politeness would lead to success in school and work and life. And she was right. until I got to federal government. I served 2017 to 2018, and it was a very divided time in our nation's country, our nation and our capital specifically. And I experienced that division at a microcosm while I was in government. I saw these two extremes. On one hand, I saw people who were, they had sharp elbows, and they were hostile and abrasive and aggressive. They were willing to step on anyone to get ahead. And on the other hand, I saw people who were, at first I thought they were my people. They were polished and poised and polite, but these were people who...
I realized it would smile and flatter me and others one moment and then stab us in the back the next. And that really perplexed me, this second contingent, because one thing my mother had said to me growing up was that manners mattered because they were an outward expression of our inward character. And yet here I was surrounded by people who were well-mannered enough and yet ruthless and cruel. So this experience of government, these two extremes, taught me several things. One is that at first I thought that these two extremes were polar opposites, the extreme hostility and extreme politeness. But I actually realized they're quite similar. They're actually two sides of the same coin because each sees other human beings as a means to their own selfish ends as opposed to beings who are worthy of respect and in and of themselves just by virtue of our shared moral status as members of the human community.
And the aggressive and hostile contingent sees others as pawns to be bowled over and stepped on, whereas the polite contingent sees others as pawns to be manipulated. And neither have a sufficiently high view of the gift of being human, which is what my book argues for. And second, this experience taught me that there's an essential distinction between civility and politeness. So I argue in the book that we often conflate these words today. We hear there are kind of two extremes. On one hand, there are people that say we just need more civility and politeness in order to...
overcome our differences, and they harken back often to a golden age of comity and harmony in Congress and American public life. And then there's another contingent that says, no, civilian politeness, they're part of the problem. They are tools of the patriarchy. They're tools of people in positions of power. to silence and oppress the powerless. We need less civility and politeness in public life. And both these contingents miss this essential distinction between civility and politeness that I argue for throughout my book. I say, politeness is etiquette. It's manners. It's technique. It's behavior. It's external. Whereas civility is internal. It's a disposition of the heart. It's a way of seeing others as our moral equals and worthy of a bare minimum of respect, again, just by virtue of being human. And that crucially, sometimes actually respecting others, actually loving someone, requires being impolite. It requires telling hard truths, engaging in robust debate, having uncomfortable conversations. That's a way to act.
actually respect someone. So throughout the book, I make the case that, you know, where politeness at its best can, you know, mitigate social discomfort at its worst, it can be harmful for the joint project of living well, it can manipulate and instrumentalize others. Whereas civility, the disposition of respecting others is always good. And that we need more civility and less of the tone policing and faux respect of politeness in order to help us thrive and flourish today. Alexandra Hudson is author of The Soul of Civility.
The Human Freedom Index examines the relative levels of human freedom across virtually all of the globe's population. The story in recent decades is not a happy one. Cato's Ian Vasquez is a co-author on the report published by the Cato Institute and Canada's Fraser Institute. We look at this data, and Ian, I have come to expect that you don't have a very good story for me whenever we sit down to talk about the Human Freedom Index. Just by way of recapitulating, what goes into judging or evaluating a country's level of overall human freedom? Well, what we've done with the Human Freedom Index is compile a set of data that measures economic, personal, and civil freedoms around the world for 165 countries looking at 86 distinct variables. And we do that for...
a period of time that begins in the year 2000 and ends, in this case, in the year 2021. That's the most recent year for which we have data. That's just the way that data is lagged on international surveys. And what that gives us is a sense of freedom globally and a sense of freedom within countries. And by freedom, what we mean is the absence of coercive constraint, that idea that you can lead your life as you wish.
as long as you respect the equal rights of others. And we look at distinct categories of freedom, like freedom of assembly or freedom to trade or whether a country has sound money or freedom of expression. We look at rule of law and security issues. Obviously, if the murder rate is high or if there's a likelihood that your government is going to disappear you, your human freedom is not very high. So we really do look at many, many variables. And then we weigh them out to produce the Human Freedom Index. And remind me, at least globally, what was the peak? The peak in this?
two decade or so span for which we have data was the year 2007. And so what we saw for the global data was the steady increase in human freedom up until the year 2007, which coincides with the financial crisis that began that year. And then from then on, we see this steady decline going on up until the year 2019. And it is in this period that we see the rise of different forms of populism around the world. And then, of course, the coronavirus hit in the year 2020. And as we documented last year.
This was something that made the level of human freedom around the world just fall off a cliff. And this year includes what you could call the second year of the pandemic, 2021. And what we find is that the level of freedom didn't change much from the year before, so that you can still say that the pandemic was a disaster for freedom. And what we can say, given this data from 2019 to 2021, some 90% of the world's population saw a fall in there. levels of freedom. And this includes rich countries and poor countries, democracies and non-democracies, and it includes the vast majority of categories of freedom. So it was a real blow and it wasn't just a one-year event. And it's not like a lot of these countries bounced back or whatever impositions they delivered in 2020 were necessarily lifted. So we see some countries move up a little bit and some countries move down a little bit.
I expect that at the beginning of next year, we're going to start seeing the bounce back towards more freedom in a lot of countries, not all of them. We'll see what the data says. But overall, 2021 was an equally bad year for freedom as 2020 was. You have, I note, two countries displayed in front of you. And notably, they are the United States and Argentina. Now, none of the data that you have on Argentina will include the just elected president, Javier Malay. But in a couple of years...
It might. And depending on how things shake out with his new administration, this self-described anarcho-capitalist president of a large Latin country, we may see some changes. How has the United States performed? You said 2007 was the peak, and I think that was true for the U.S. in particular. The U.S. was hit very hard by the financial crisis. But how has the U.S. performed in just the last few years? Well, there's been a deterioration for the United States. And if you look at the economic freedom data for the United States, that's been a long-term deterioration.
Near the end of the Obama administration, you saw that economic freedom started to go up a little bit, which makes sense because it was recuperating from the financial crisis. And so a lot of those government programs were coming, were winding down. But then in terms of overall human freedom, there was a deterioration and that started to go down again in the last few years, especially with the pandemic. Just like the majority of countries, there was a big drop in overall freedom. As far as the United States goes, it ranks 17th in our human freedom index.
Compared to the year 2000, it was ranked seven, so that's a drop of 10 places. This is not the place where I think most Americans want to be or perceive themselves to be, or for that matter, the world perceives the United States as traditionally being one of the freest places in the world, a bulwark of liberty. I don't think we can really say that right now in the United States, and that's something that's very worrisome. But again, the majority of countries saw a decline in freedom. over the past two years that have been significant. Right. So the rankings might not have changed that much, but the overall level of freedom can still go down. The ratings went down significantly, but since so many countries went down, some of the rankings didn't change all that much. To give you an idea of how big that change was in terms of ratings, it sets the globe back in terms of freedoms more than two decades. So the level of freedom in the world today is much farther below what it was in the year 2000. Now, the other country you have displayed before you, Argentina, 77th.
in this report for human freedom. And you and I were discussing before we started recording the fact that Americans who talk about Argentina are looking through the American lens and have a difficulty even really fathoming a lot of the difficulties that everyday Argentinians have to deal with. Can you give us a sense of, in some ways, this is sort of predictive of a radical departure for Argentina to escape inflation, crime, among other things. When you look at the graph of human freedom of Argentina over the course of the past two decades. What you see is the steady decline in overall freedom. This is not, you can't say that that many countries during that period show this kind of graph. A lot of the populist countries do, and Argentina fits that bill, because over the past 20 years, it has been the Peronists who have been ruling almost entirely during that time, with the exception of a four-year rule of a center right party that didn't accomplish much. And you can see it in the data. You see this blip during that time period where the level of freedom goes up somewhat, not.
to the level that it was before. And then when the parents are reelected, it goes down. 77 on the human freedom index is not good. But if you look at the sub indexes, that's what really tells the story. Argentina is one of these unusual countries where its level of economic freedom is very low and its level of personal freedom is, by comparison, much, much higher. Usually what you see around the world is a stronger relationship between economic freedom and personal freedom. Typically, those two go together. Argentina has somehow managed, however, to have extremely low economic freedom.
not accompanied by extremely low personal freedom. And that's why it gets a higher rating than what you might expect. However, it ranks 158th out of 165 countries in economic freedom. And that's been low for a long time. And that really does explain the situation, including the political situation in Argentina. Argentina now has more than 40% poverty rate, an inflation rate of above 140%. It's really, the economy is.
shrinking debt levels are through the ceiling and they're in a real crisis. That's the context in which Javier Millet was elected. But of course, he was elected on a libertarian platform. And the crisis is so severe that people are ready for what amounts to a paradigm shift, which is what he has been advocating. So we hope that he'll be successful in that regard. But it's going to get, in economic terms, much worse before it gets better. You mentioned that Argentina is special in a way that it has...
fair degree of personal freedom, but economic freedom is rock bottom. What generally is the relationship between those two things? And I know you've looked at this pretty carefully. So does one come first or do they move in sync? Well, it's hard to tell which comes first. What you can say is that both kinds of freedoms complement each other. I think that it is true that...
The control of the economy by governments, by regimes, by states is, as somebody once said, the control of life itself. So that if you can control economic decisions, and those are centralized in the hands of the state, then a lot of your personal decisions are also controlled by the state. Where you work, where you go to school, whether the printing press can get the paper it needs or the resources it needs, which are economic decisions. So freedom of expression comes under fire. There is a lot more control that is exerted by regimes that have low economic freedom. And that's one of the reasons why I say that
If you want to live in a country that has relatively high levels of personal freedom, you're almost always better off picking a country that has relatively high levels of economic freedom. And I think that if Argentina kept going down the path that has been going on in economic freedom, it wouldn't be too long before these personal freedoms started going down in a notable way. That is, of course, what happened in Venezuela. And for various reasons, thankfully, that has not happened in Argentina. Ian Vasquez is a co-author on the Cato Institute and Fraser Institute's Human Freedom Index.
When you've worn out your Cato Audio for the month, please take time to browse on over to the Cato Institute's YouTube channel, featuring interviews and video productions on a wide variety of policy issues. Also take a moment to browse Cato's large volume of podcasts, available wherever better podcasts are sold. That includes, of course, the Cato Daily Podcast, hosted by yours truly. That will do it for this edition of Cato Audio. I'm Caleb Brown. Once again, Happy New Year, and I'll talk to you again next month.