Over the past few years, academic economists and think tanks have published studies on freedom that offer valuable insights for Hoosier policymakers.

The Cato Institute, for example, ranks states on policies that drive population, income and job growth (see https://www.freedominthe50states.org/). Indiana ranks 8th in regulatory freedom, 21st in fiscal freedom (tax and spending) and 23rd in personal freedom.

These rankings measure whether policies expand or limit choices for families and businesses. Regulatory freedom is the strongest indicator of growth, followed by personal freedom, with tax and spending issues coming in a distant third or lower. In studies that measure quality of life, the importance of tax and spending falls even further (see https://link.springer.com/content/pdf/10.1007/s12122-014-9175-7.pdf).

Places with fewer restrictions on housing construction and occupational licensing attract more residents. For example, in the miscellaneous regulation category that covers topics including hospital regulation and price gouging laws (see https://www.freedominthe50states.org/misc-regulatory), conservative Arizona ranks first in regulatory freedom while conservative South Carolina ranks last, showing this isn't a partisan issue.

The second-most important predictor of growth and prosperity is personal freedom, which is far less politically aligned than fiscal policy. Liberal states like California and conservative states like Montana outrank Indiana.

Freedom generates good economic outcomes, no matter who supports it.

The components of personal freedom are incarceration rates, freedom to gamble, smoke, marry who you wish, buy alcohol whenever you wish, use cannabis, donate to political candidates of your choice and be free of a whole slew of miscellaneous rules, such as bans on buying unpasteurized milk or allowing mixed martial arts fights.

For the record, drinking unpasteurized milk is generally stupid. It’d be best to let natural selection, rather than legislation, keep it under wraps.

Tax and spending tend to have a more modest effect on migration, income, employment or any other measure of outcomes. I’ve made this point in a previous column (see https://www.indystar.com/story/opinion/columnists/2024/07/01/indiana-high-property-tax-counties-are-growing/74249802007/). As a raw empirical fact, counties and cities with higher tax rates grow faster and enjoy higher standards of living than places with lower tax rates.

Households and businesses aren’t the idiots that the anti-tax crowd supposes them to be. Families and business owners are very good at judging the quality of local schools, the safety of local communities, the quality of local roads and the availability of well-educated workers.

Businesses and families would like to pay lower taxes, but they also desire better services. We all understand trade-offs, so the variable that matters most for the tax-and-spending measurement is how good a state, city or county is at delivering those public services.

Research confirms this: Regulatory freedom strongly predicts growth, personal freedom has moderate impact and fiscal policy shows no significant effect. Fiscal freedom matters only insofar as governments deliver services efficiently and effectively. Families and business owners are good judges of government efficiency (see https://michaeljhicks.substack.com/p/judging-the-value-and-quality-of).

Economic freedom particularly attracts college-educated families, who have more mobility options (see https://ageconsearch.umn.edu/record/243949/?v=pdf). The lesson for Indiana is clear: Our future growth depends more on reducing regulatory barriers and expanding personal freedoms than on cutting taxes. We've maintained our regulatory edge for 25 years, but we've slipped badly on personal freedom.

Fixing that slide—not chasing fiscal rankings—is how Indiana can compete for the families and businesses that drive prosperity.