Economic Freedom Key to the “Wealth of Cities”

By Matt Kelly

Economic freedom is the unrestricted ability of people in a country to associate and transact with one another. Measuring economic freedom has become a growing area of academic research. Probably the best known measure is the index constructed for the “Economic Freedom of the World”  annual report on 159 countries published by the Fraser Institute and authored by Florida State University’s James Gwartney, Southern Methodist University’s Robert Lawson, and West Virginia University’s Joshua C. Hall. Other indices compare US states, like Cato’s Freedom in the Fifty States ranking. More recently, Dean Stansel of Southern Methodist University created a measure of economic freedom for US metropolitan statistical areas (MSAs). Stansel’s index ranks many Florida cities among the nation’s freest.

Cities are “our species’ greatest invention,” writes Harvard economist Edward Gleaser in Triumph of the Cities, echoing the claims made by iconic urbanists such as Jane Jacobs. Advances in technology and culture often spring from urban areas, where proximity with others spurs collaboration, increased productivity, and creativity. People increasingly migrate to these cauldrons of commerce in search of opportunity. Nearly 80 percent of Americans, and 54 percent of the world’s population, live in cities.

Gleaser notes that governance is a perennial challenge for cities. Many American localities have enacted policies that diminish economic freedom, as measured by economic freedom indices. Local tax burdens, for example, have risen from around 4 percent in 1950 to nearly 7 percent today. Per capita local government spending rose from 6 percent of GDP in 1950 to over 10 percent in 2010. Growth management laws and more restrictive zoning ordinances have also weakened private property rights, restricted markets, and reduced housing affordability. Other municipal-level policies like taxi licensing, plastic bag bans, rent controls, and minimum wage laws diminish economic opportunity and reduce efficiency.

Stansel’s index of MSA economic freedom uses a ten-point scale and consists of three components: public spending as a share of local personal income, indirect tax revenue and receipts from levies on income and sales, and restrictiveness of labor market regulation. The scores reveal large variations among the 384 American cities in the sample. Naples, Florida, ranks most free with a score of 8.52. El Centro, California, ranks lowest with a score of 3.32. Among the 30 largest MSAs, the five freest metropolitan areas are in Florida and Texas. Tampa tops this list, followed by Houston, Dallas, Miami, and Orlando.

Across a range of outcomes, cities with greater economic freedom performed better than those with less (see Figure 1). Unemployment rates were lower in MSAs with higher scores. Of the 100 largest MSAs, the 20 freest saw employment increase by 17 percent on average between 2001 and 2014, compared with just 4 percent for the bottom 20. Average hourly wages were almost $16 in the top 20 cities, but only $12.40 in the bottom 20. Economic growth in the most free cities outpaced growth in the rest, yet the cost of living was highest in the 20 least free cities. Even income inequality, as measured by wage dispersion among median wages, was lower in cities with more economic freedom. Migration data suggests people are choosing to live in freer cities. Between 1992 and 2011, the 20 least free cities, including New York, Los Angeles, and Detroit, saw cumulative net out-migration of 7.1 million people, while top 20 cities like Atlanta, Dallas, Tampa, and Orlando saw net in-migration of 9 million.

Adam Smith’s The Wealth of Nations offered a simple but insightful explanation of economic prosperity: a political economy of limited government, private property rights, free trade, and markets that allowed for the division of labor. As Stansel’s index demonstrates, the wealth of cities is no different.

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Economic Freedom Key to Cities’ Success

By Matt Kelly

Economic freedom is the unrestricted ability of people in a country to associate and transact with one another. Measuring economic freedom has become a growing area of academic research. Probably the best known measure is the index constructed for the “Economic Freedom of the World”  annual report on 159 countries published by the Fraser Institute and authored by Florida State University’s James Gwartney, Southern Methodist University’s Robert Lawson, and West Virginia University’s Joshua C. Hall. Other indices compare US states, like Cato’s Freedom in the Fifty States ranking. More recently, Dean Stansel of Southern Methodist University created a measure of economic freedom for US metropolitan statistical areas (MSAs). Stansel’s index ranks many Florida cities among the nation’s freest.

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Beyond Recidivism: Addressing Behavioral Change within American Prisons

By Stephany Bittar

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Photo courtesy of the Prison Entrepreneurship Program’s official website. http://www.pep.org/

Two-thirds of the 2.3 million Americans that are currently housed in the U.S. state and federal prison systems are expected to reoffend within three years of their release. Recidivism, or the tendency of a criminal to reoffend, is one of the most prevalent social problems facing current and former prisoners.

High recidivism rates found in the United States have a number of potential causes, but research has yet to find a specific cause, or provide definitive support for any one theory. Nevertheless, empirical evidence provides little support for incarceration as a general way to reduce recidivism. An essay written by criminologists Francis Cullen, Cheryl Johnson, and Daniel Nagin in The Prison Journal reviewed five studies and included data and statistics from over 50 others. Combined, the results showed that custodial sentencing – that is, a sentence where the offender is required to be held in custody – increased recidivism rates by seven to eleven percent. Continue reading

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Tallahassee’s Local Permitting Process Reviewed

By Benjamin Peterson, Colin Cook, and Scott Williams

One of the core issues of the DeVoe Moore Center (DMC) is regulatory streamlining and reform. Previous reports on local permitting have considered particular development types, including shopping centers and telecommunications towers. The DMC’s Data Analytics Group continues to examine the permitting process and most recently began examining retail and commercial building permits. DMC researchers obtained all publicly available permitting records for these projects from 1996 to 2014 from the Tallahassee Growth Management Department (TGMD). This information was used to determine the average wait time for permits, a key measure of regulatory performance and a cost to entrepreneurs trying to open businesses in the Capital City.

Permitting processes vary from project to project, but usually follow certain prescribed steps. (The permitting process for telecommunications towers in Tallahassee was detailed in a 2016 policy report by the DeVoe Moore Center).

  1. An applicant acquires a Land Use Compliance Certificate, which ensures that the proposed use conforms with land development standards in Tallahassee’s zoning code.
  2. An Applicant then completes a concurrency application, which specifies how the project will impact public utilities and the flow of traffic.
  3. A Natural Features Inventory is conducted at the expense of the property owner to identify all existing environmental features on the site, such as trees, wetlands, or animal habitat.
  4. An applicant must also create a site plan – an initial set of blueprints for the facility and a detailed construction plan. Land developers often need to revise and resubmit hard copies of the site plan to ensure conformance to the code.
  5. The Natural Features Inventory and the site plan must then be approved by Tallahassee’s Development Review Committee at regularly held public meetings.
  6. Once an applicant’s plans are approved, they may apply for a building permit. Construction can begin after acquiring the building permit. An applicant must also obtain electrical, plumbing, fire, roofing, and mechanical permits.
  7. Once all these permits are obtained and the structure is built, the applicant must obtain a certificate of completion or a certificate of occupancy.

Not all of these steps are followed in actual practice. Applicants can seek exemptions from certain parts of the process, and the Development Review Committee may grant deviations or “variances” from local zoning and building codes as its members see fit.

FIGURE 1:

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Study Explores Local Government Response to Recessions

Recessions can be trying times for city and county governments. They typically experience a fall in revenue from two primary sources:  1) a shrinking property tax base because of falling property values and 2) lower intergovernmental transfers—grants and other payments received from the state and federal governments—because of cutbacks made at these higher levels of government. To stabilize their budgets, local jurisdictions can increase revenue, lower spending, or do both.

To determine which strategies were most likely to be used, the DeVoe Moore Center’s Keith Ihlanfeldt and Erich Cromwell examined the budget decisions made by local officials in Florida cities and counties following the 2007 recession, and published in the National Tax Journal. Continue reading

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Citizens Property Insurance Corporation Still Vulnerable to Underfunding

By Chad Thomas

Florida’s Citizens Property Insurance Corporation (Citizens) is a state-run insurer of last resort for commercial and residential property owners unable to afford a policy in the private market. Citizens tends to insure wealthy homeowners along the coast, where property values and the risk of damage are highest. In 2002, the Florida Windstorm Underwriting Association and the Florida Residential Property and Casualty Joint Underwriting Association were merged to create Citizens.

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Defunding Florida’s Film Industry Incentives was Example of Evidence-Based Policy

By Marisa Lupica and Matt Kelly

States have been competing fiercely for movie productions with tax incentives since the early 2000s. Such incentives include cash grants, income tax credits, sales tax rebates, or payroll tax credits. Today, 37 states offer tax incentives for film productions. However, recent economic research shows that film tax incentives fail to substantially increase employment or the number of business establishments. Florida defunded its film incentive program in 2016 after running out of appropriated funds in 2014, but continues to enjoy a healthy film industry.

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