Nighttime light intensity exposes failure of autocratic regimes

When people have more economic freedom, they are allowed to make more of their own economic decisions, free of constraints imposed by others. During the 1960s and 1970s, despite the relative economic success of most western democracies, most of the rest of the world rejected strong pro-market policies, with the notable exception of Hong Kong. Milton Friedman said Hong Kong offered “an almost laboratory experiment in what happens when government is limited to its proper functions and leaves people free to pursue their own objectives.” Hong Kong’s success served as the primary example of the uplifting potential of economic freedom.

However, without a quantifiable measure of economic freedom, it was difficult to generalize these claims. This led to the conception and production of the Economic Freedom of the World (EFW) index by the Fraser Institute. Armed with a measure of economic freedom, researchers could test the claim that economic freedom leads to prosperity.

Since its inception, the multiple editions of the dataset routinely confirmed that economically freer countries have higher income levels, enjoy faster economic growth, are more resilient to shocks, and produce great reductions in poverty and income gains all along the income ladder.

But in fact, in a recent article published by the European Journal of Political Economy and co-authored with Macy Scheck and Sean Patrick Alvarez, I offer evidence that the EFW report often underestimates the potency of economic freedom.

Why? Because the economic statistics produced in countries ruled by autocrats are not believable.

In autocratic regimes, rulers must bolster their legitimacy to prevent coups or uprisings, so they produce statistics that exaggerate their country’s performance. And since neither the opposition nor independent authorities are allowed to challenge these claims, autocrats can get away with lying about the size of their economies.

Autocrats also repress economic freedom (along with other freedoms), so any estimation of the effects of economic freedom on economic development will likely be exaggerated due to the lies of dictators.

How can we correct these lies? It’s not as if the autocrats would let us check their books. But fortunately, we don’t have to. We simply need a measure of economic activity that correlates with economic development and cannot be manipulated. Namely, nighttime light intensity, as measured by satellites orbiting the Earth.

Satellites provide accurate and unbiased information, which dictators cannot manipulate. Nighttime light is artificial (manmade) and its level should depict (all else being equal) levels of development. It’s why one can often see images of North and South Korea at night where the former is in utter darkness and the latter sparkles like a Christmas tree.

By examining the relationship between light intensity and economic development as measured by GDP in democracies—where data is generally reliable—one can estimate the extent of inaccuracies in the economic data reported by dictatorships and then create corrected data.

In our article, based on satellite data, we found that in more than 110 countries (including dictatorships), the association between economic freedom and income levels was between 10 per cent and 62 per cent greater than previously estimated. We also found that when using the corrected data, one extra point of economic freedom (on a 10-point scale) generated between 5 per cent and 24 per cent more economic growth from 1992 to 2012.

These results are a powerful answer to those who doubt the value of economic freedom. And they offer a way to see past the lies of dictators.

Author:

Vincent Geloso

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Ottawa’s emissions cap will impose massive costs with virtually no benefit

Published on September 18, 2024

Todayville

From the Fraser Institute

By Julio Mejía and Elmira Aliakbari

The resulting reduction in global GHG emissions would amount to a mere four-tenths of one per cent (i.e. 0.004 per cent) with virtually no impact on the climate or any detectable environmental, health or safety benefits.

Last year, when the Trudeau government said it would cap greenhouse gas emissions (GHG) from the oil and gas sector at 35 to 38 per cent below 2019 levels by 2030, it claimed the cap will not affect oil and gas production.

But a report by Deloitte, a leading audit and consulting firm, found that the cap (which would go into effect in 2026) will in fact curtail production, destroy jobs and cost the Canadian economy billions of dollars. Under Trudeau’s cap, Canada must curtail oil production by 626,000 barrels per day by 2030 or by approximately 10.0 per cent of the expected production—and curtail gas production by approximately 12.0 per cent.

According to the report’s estimates, Alberta will be hit hardest, with 3.6 per cent less investment, almost 70,000 fewer jobs, and a 4.5 per cent decrease in the province’s economic output (i.e. GDP) by 2040. Ontario will lose more than 15,000 jobs and $2.3 billion from its economy by 2040. And Quebec will lose more than 3,000 jobs and $0.4 billion from its economy during the same period.

Overall, the whole country will experience an economic loss equivalent to 1.0 per cent of GDP, translating into lower wages, the loss of nearly 113,000 jobs and a 1.3 per cent reduction in government tax revenues. Canada’s real GDP growth in 2023 was a paltry 1.1 per cent, so a 1 per cent reduction would be a significant economic loss.

Deloitte’s findings echo previous studies on the effects of Ottawa’s cap. According to a recent economic analysis by the Conference Board of Canada, the cap could reduce Canada’s GDP by up to $1 trillion between 2030 and 2040, eliminate up to 151,000 jobs by 2030, reduce federal government revenue by up to $151 billion between 2030 and 2040, and reduce Alberta government revenue by up to $127 billion over the same period.

Similarly, another recent study published by the Fraser Institute found that an emissions cap on the oil and gas sector would inevitably reduce production and exports, leading to at least $45 billion in lost economic activity in 2030 alone, accompanied by a substantial drop in government revenue.

Crucially, the huge economic cost to Canadians will come without any discernable environmental benefits. Even if Canada were to entirely shut down its oil and gas sector by 2030, thus eliminating all GHG emissions from the sector, the resulting reduction in global GHG emissions would amount to a mere four-tenths of one per cent (i.e. 0.004 per cent) with virtually no impact on the climate or any detectable environmental, health or safety benefits.

Given the sustained demand for fossil fuels, constraining oil and gas production and exports in Canada would merely shift production to other regions, potentially to countries with lower environmental and human rights standards such as Iran, Russia and Venezuela.

The Trudeau government’s proposed GHG cap will severely damage Canada’s economy for virtually no environmental benefit. The government should scrap the cap and prioritize the economic wellbeing of Canadians over policies that only bring pain with no gain.

Authors:

Julio Mejía

Policy Analyst

Elmira Aliakbari

Director, Natural Resource Studies, Fraser Institute

Economy

Scrap the second carbon tax: Taxpayers Federation

Published on September 17, 2024

Todayville

Author: Franco Terrazzano

The Canadian Taxpayers Federation is calling on the federal government to scrap its second carbon tax following the release of government documents showing it will cost the Canadian economy $9 billion by 2030.

“This is another government report that shows carbon taxes are a big drag on the economy that Canadians can’t afford,” said Franco Terrazzano, CTF Federal Director. “The second carbon tax alone will cost average families hundreds and even thousands of dollars.”

The second carbon tax is embedded within federal fuel regulations, which took effect July 1, 2023.

The regulations require producers to reduce the carbon content of their fuels. If they can’t meet the requirements, they must purchase credits, increasing costs that are passed onto Canadians purchasing gasoline or diesel.

According to government documents, in 2030, the second carbon tax “will result in an overall GDP decrease of up to $9 billion.”

The documents were tabled by Environment and Climate Change Canada in the House of Commons in response to an order paper question filed by Conservative MP John Barlow (Foothills).

Previous analysis from Environment and Climate Change Canada shows the first carbon tax (including industrial) will cost the Canadian economy $30 billion by 2030.

The Parliamentary Budget Officer estimated the second carbon tax will cost the average household between $384 and $1,157 in 2030 depending on the province.

“Canada’s own emissions are not large enough to materially impact climate change,” according to the PBO report.

The PBO also estimated the second carbon tax will increase the price of gasoline by up to 17 cents per litre and the price of diesel up to 16 cents per litre by 2030.

“Prime Minister Justin Trudeau can make life more affordable and help our economy by scrapping his carbon taxes,” Terrazzano said.