Texas Tech University

Hood: Economic freedom is a shock absorber

John Hood

December 6, 2022

WATAUGA DEMOCRAT - In a normal market, creditors demand higher interest from borrowers to whom they lend money for longer periods of time. That’s because these creditors are assuming more risk that they won’t be paid, and because a dollar of interest received tomorrow is usually more valuable than a dollar of interest received years from now.

...Economic freedom can be, in other words, a kind of “shock absorber” during recessions. That's what Texas Tech economists Justin Callais and Jamie Bologna Pavlik found in a study just published in the journal Economics of Governance. Using data from the years 2002 to 2012, they found that metropolitan areas with higher economic-freedom scores tended to experience lower unemployment, higher job creation, and higher income growth than less-free places did...

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