If New Orleans were a country it would have the second highest homicide rate in the world.
As I avoided the potholes, ignored the sounds of guns, and walked past beggars throughout the streets of New Orleans, I could not help but be reminded of my travels in Phnom Penh, Cambodia. With their mass poverty and crumbling infrastructure, the two cities differ in one key area: Phnom Penh is in a developing country and New Orleans is in a developed country.
Throughout the United States, I frequently come across what I call “third world cities in first world countries” – whether it is Detroit, Baltimore, or even my beloved New Orleans. These third world cities all have one thing in common: an absence of free and open markets.
There is a wide consensus amongst economists that economic freedom largely determines the wealth of nations and metropolitan areas are no exception to this rule. As Economist Dean Stansel, in his paper, “An Economic Freedom Index for U.S. Metropolitan Areas,” states, “higher levels of local economic freedom are found to be correlated with positive economic outcomes.”
One of the most profound insights from Stansel’s paper is that moving from the 5th (least free) to the 4th quintile causes a drop in unemployment by 0.9%. Stansel’s index ranks Detroit number 345, Baltimore number 102, and New Orleans number 262 out of the 384 metropolitan areas examined.
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