It is easy to overlook how much the quiet fundamentals matter in driving long term prosperity. The Fraser Institute’s EFNA index is not telling an exciting new story. It is confirming a decades long pattern that stability in the rules of the game fosters growth. When states resist the temptation to expand government faster than the underlying economy they protect the space for private sector productivity. When they keep tax systems straightforward and rates reasonable they reduce the incentive for people and businesses to focus on avoidance rather than creation. And when labor markets remain flexible they allow for quicker adaptation to changing conditions which is essential in a dynamic economy.
It is easy to overlook how much the quiet fundamentals matter in driving long term prosperity. The Fraser Institute’s EFNA index is not telling an exciting new story. It is confirming a decades long pattern that stability in the rules of the game fosters growth. When states resist the temptation to expand government faster than the underlying economy they protect the space for private sector productivity. When they keep tax systems straightforward and rates reasonable they reduce the incentive for people and businesses to focus on avoidance rather than creation. And when labor markets remain flexible they allow for quicker adaptation to changing conditions which is essential in a dynamic economy.