Overview

Ever since Adam Smith asserted in 1776 that freedom from government intervention is essential for economic growth and thus the wealth of nations, economists have attempted to gauge the relative importance of various factors that generate growth. These variables include economic factors, such as private and government spending, flexibility of tax regimes, and investment in the form of domestic or foreign capital. Broader societal parameters are also essential: fundamental social, legal and political institutions, the rule of law, property rights, and enforcement of contracts.

Roger Bate is a visiting fellow at AEI. David Montgomery is vice president of Charles River Associates.