The global spread of think tanks and economic freedom.

AuthorPowell, Benjamin
  1. Introduction

    The period from 1980 through 2005 witnessed a significant liberalization of the world economy. Economic freedom in the 101 countries for which there are data over this period increased by an average of 29 percent (Gwartney, Lawson, and Hall 2014). Andrei Shleifer (2009) dubbed this period of increased freedom and the accompanying increases in living standards "The Age of Milton Friedman." During this same period, market-oriented think tanks spread rapidly around the globe. This paper investigates the relationship between the spread of free market think tanks and the global increase in economic freedom.

    Think tanks with an explicit mission of studying free markets and agitating for social change that would lead to freer markets have a long history in the United States and Great Britain. The Foundation for Economic Education (FEE), founded in 1946, was the first free market think tank in the United States. (1) Sir Antony Fisher started the United Kingdom's first free market think tank when he founded the Institute for Economic Affairs (IEA) in 1955. There were nineteen free market think tanks in the world by 1970, but only six of them existed outside of the United States. The number had grown to forty in thirteen countries by the end of the 1970s. Since then, the number of think tanks has exploded. Today, there are at least 468 free market think tanks operating in ninety-eight countries around the globe (see figure 1). (2)

    The spread of these think tanks was not accidental. Fisher believed that the foundation laid by IEA played a role in ushering in the Thatcherite revolution in Great Britain. In 1981, while living in the United States, he founded the Atlas Economic Research Foundation to "institutionalize this process of helping start up new think tanks," and "friends like Milton Friedman, Friedrich Hayek, and Margaret Thatcher applauded the idea of replicating the IEA model far and wide." (3) Hayek provided a letter of endorsement that Fisher used to help secure early funding for Atlas. The letter, in part, read (Frost 2002, p. 155, emphasis original),

    I entirely agree with you that the time has come when it has become desirable and almost a duty to extend the network of institutes of the kind of the London Institute of Economic Affairs. The future of civilization may really depend on whether we can catch the ear of a large enough part of the upcoming generation of intellectuals all over the world fast enough. And I am more convinced than ever that the method practiced by the IEA is the only one that promises real results. According to Fisher's biographer, Gerald Frost, Fisher set up Atlas to give detailed advice to new think tanks about "legal structures, fund raising, budgets, staffing, publications, findings and commissioning authors, editing manuscripts, marketing, media relations, and how to keep politicians at arms' length" based on IEA's model (Frost 2002, p. 155). The vision at Atlas today is that "to win the long-term policy battles that will shape history, we need freedom champions to create credible institutes--well-managed and independent of vested interests--that use sound business practices to advance sound public policy ideas." (4) Atlas has helped many intellectual entrepreneurs found these think tanks in their home countries. In other cases, Atlas has found existing think tanks and helped to bring them into the global network of think tanks with similar missions.

    A quick perusal of any of these think tanks' mission statements reveals that they are interested in increasing economic freedom in their home countries. For example, the Center for Liberal Democratic Studies (Serbia) wants to "influence public policy in Serbia basing policies on the principles of a free society." (5) For many think tanks, their name reveals their goal: the Freedom Institute (Jakarta), Freedom Factory (South Korea), and Foundation for Economic Freedom (Philippines), to name a few randomly chosen examples.

    According to Frost's biography of Fisher, "The cumulative impact of the Atlas institutes is impossible to assess, and difficult to keep up with. However, the practical consequences of their programmes can be seen not only in successful reforms undertaken in Britain, Canada, and the US, but also in Italy, Spain, Central and Eastern Europe (where the influence of IEA-institutes is admittedly difficult to separate from other influences), India, Argentina, Brazil, Chile, Mexico, Australia, New Zealand, and parts of Africa" (Frost 2002, p. 171).

    There is little broad-based scholarly empirical research that examines the effectiveness of free market think tanks in changing public policy. We attempt to measure whether, on average, these think tanks have played a role in the global increase in economic freedom. Our study has the benefits and drawbacks of any cross-country empirical study. We make no claim about the effectiveness of any one think tank in any particular country, as any one of those stories could be unique.

    Leeson et. al. (2012) is the most closely related study. It examines the role that state-based free market think tanks played in changing policy in US states. The authors found little evidence that state-based free market think tanks impacted economic policy in a more "pro-market" direction. However, they did find that state-based free market think tanks are associated with more pro-market citizen attitudes. As they note, one reason they might not have found an effect on policy is that their panel data spanned only thirteen years. If think tank influence on policy only manifests itself through the long-run battle of ideas by influencing citizen views, which only later influence economic policy, their study would not be able to find the link between think tank years and public policy.

    Another reason that Leeson et. al. might not have detected an influence of think tanks on US state policy is that differences in policy across states are much narrower than differences in policy across countries. This study is the first to examine how differences in think tank years are associated with differences in economic freedom across nations, and our data span forty years, allowing us to examine the long run as well as the short run impact of think tanks.

    We use the well-known Economic Freedom of the World Annual Report (EFW) (Gwartney, Lawson, and Hall 2014) to examine how think tank years are associated with changes in economic freedom. This index has been used...

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