Economics has always been interested in what creates wealth ever since Adam Smith wrote An Inquiry into the Nature and Causes of the Wealth of Nations. Many of my columns for Augusta Business Daily have examined the nature and causes of the wealth of the Augusta Metropolitan Statistical Area (MSA). Recent research on economic freedom across all MSAs in the US sheds some light on which MSAs are growing the fastest and creating the most wealth.
Dean Stansel of the Birdwell Institute, has been compiling an index of economic freedom for all 383 MSAs in the US since 2013. The latest version uses 2017 data, the most recent available. The index contains three broad areas associated with economic freedom. Government spending measures the public sector’s share of the local economy. Taxation assesses the burdens local authorities impose on the private sector in terms of income, payroll, sales, and property taxes. Labor market freedom addresses interference with the operation of the labor market, such as the presence of unions and minimum wages.
In 2017, the highest MSA in Georgia was Atlanta and it ranked 43rd nationally. The lowest-ranked MSA was Albany, ranking 174 nationally but still in the top half of MSAs in the US. Augusta is the fourth-best-ranked MSA in Georgia and 74th nationally.
| MSA | Freedom Rank 2017 |
| Atlanta | 43 |
| Gainesville | 61 |
| Macon | 64 |
| Augusta | 74 |
| Warner Robins | 77 |
| Columbus | 98 |
| Athens | 100 |
| Hinesville | 102 |
| Savannah | 107 |
| Rome | 121 |
| Dalton | 128 |
| Brunswick | 160 |
| Valdosta | 169 |
| Albany | 174 |
Stansel and other authors, have written several academic articles relating economic freedom to economic outcomes such as employment, income, unemployment, and entrepreneurial activity. They generally find significant positive impacts of freedom on economic outcomes.
Here, I take the economic index rank for each MSA in Georgia and see how it is correlated with changes in the Labor Market Index (LMI) from 2018 through September 2024. The LMI includes employment, unemployment, the labor force, average weekly hours, and average weekly earnings. The graph below shows a positive relationship between economic freedom and labor market growth. An MSA that increased its rank by ten places would see an LMI improvement of 0.2. One way Augusta could ensure future wealth is to consider ways to improve economic freedom.
