The headline of Tyler Cowen’s recent article in the NYT is: “Economic
Freedom Does Not Necessarily Lead to Greater Tolerance”. Tyler has acknowledged
on his blog that the headline “doesn’t exactly capture” the message his article
that economic freedom does tend to lead to greater tolerance. The headline
seems to me to be almost as bizarre as suggesting that sunshine doesn’t necessarily
cause plants to grow.
Tyler Cowen’s article provides a good summary of research
findings by Niclas Berggren and Therese Nilsson, particularly their paper “Does Economic Freedom Foster Tolerance?” I urge people to read Tyler’s article, so I
will just provide the briefest possible summary of his summary.
The main points are:
- Societies characterized by economic freedom tend to exhibit greater tolerance toward gay people. There is a similar but weaker relationship between economic freedom and racial tolerance.
- This greater tolerance is strongly associated with certain features of economic freedom i.e. secure property rights and low inflation.
- Economic freedom has a closer association with tolerance in societies which exhibit high levels of social trust.
Niclas Berggren and Therese Nilsson suggest that economic
freedom promotes tolerance through two main mechanisms: market institutions protecting
private property offer a framework in which it becomes less risky to engage in
transactions with unknown members of other groups; and market processes
involving interaction between members of different groups lead to greater
understanding and recognition that intolerance comes at a cost (e.g. loss of
profit from failure to employ the best person for the job).
The authors suggest that these positive impacts are
reinforced by social trust. Social trust can be expected to have a direct
positive impact on tolerance – if you trust people you don’t know, you are more
likely to be open and generous in your attitudes to people who are different. Social
trust can also be expected to enhance the impact of economic freedom on
tolerance – for example, because trust reinforces the expectation that the
legal system will treat people equally and in accordance with the rule of law.
So, what do the authors say about the influence of economic
development on tolerance? Per capita GDP is included as a control variable in
their regression analysis, but the results seem to imply that economic
development has no impact on tolerance.
At first sight those findings appear to conflict with other empirical
analyses, which I have supported, which suggest that the widespread economic
opportunity that tends to accompany economic growth also tends to foster
emancipative values, including greater tolerance.
I think economic freedom shows up as being more important
than per capita income levels because tolerance is more likely to be sustained
if economic opportunities are growing - and because economic freedom fosters economic
growth. It is reasonable to expect tolerance levels to be lower in high income
countries where economic opportunities are contracting (e.g. where there is
high unemployment) than in high income countries where economic opportunities
are expanding. That was one of the points that Benjamin Friedman made in his
book, The Moral Consequences of Economic
Growth, which I discussed on this blog a few years ago.
The point I am coming to is that it still seems reasonable to
expect that one of the mechanisms by which economic freedom promotes tolerance
is by promoting widespread economic opportunities. When opportunities are
expanding, people are more likely to perceive the potential for mutually beneficial economic interactions with
others and are more likely to be open and generous in
their attitudes toward people who are different.