Tuesday, August 16, 2022

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Where Does Prosperity Come From?

The tour bus wound its way along the narrow road through the thicket of jungle trees. Our faces pressed against the glass; we tried to take in as many sights as we could. But the rainforest was dense and close. There wasn’t much to see but the forest wall as we zoomed past.

Every so often, the forest would give way to a clearing and we’d catch a glimpse of human activity: a house or a hut—often just a tent or a tarp strung between a few trees. “Activity” isn’t quite the right word. Usually, we saw human inactivity. People sat. They stared. They clearly had nowhere to be and nothing to do.

When we reached Chichen Itza, once one of the largest cities in the Mayan world, my wife and I were struck by the contrast. Along the long walk from the bus to the ruins, human activity abounded: eager entrepreneurs sold touristy T-shirts; justifiably proud artisans displayed beautiful handicrafts. These people had somewhere to be and something to do. But despite their spirit, it was clear that life was not easy for many. Soiled clothes betrayed the grinding poverty in which they lived. How strange to see such want in the midst of the ruins of a once-great civilization.

Why do some live in the lap of luxury while others barely scratch out a living? We can begin to answer this question by observing what economists call a natural experiment that takes place every day along the U.S.-Mexican border. In the pages that follow, I discuss this experiment. I show how it reveals the degree to which we all depend on invisible assets that either enhance or hinder our productivity. One of the most important of these invisible assets is human freedom. Those who have it prosper. Those who don’t stagnate.

Those are the opening paragraphs of an essay I recently wrote for the State Policy Network. My goal was to try to make the economic freedom literature accessible to non-economists without sacrificing too much substance. The essay was, of course, inspired by a trip my wife and I took to Mexico in 2007. But it was also inspired by an excellent WSJ OpEd by Ronald Bailey from several years back.