Justinian Lane

The secret to succeeding in the new economy might be a "poor legal climate."

Today, I came across an interesting study about how well states are positioned to succeed in the new economy:

The 2007 State New Economy Index, released by the Ewing Marion Kauffman Foundation and the Information Technology and Innovation Foundation (ITIF), is a state-by-state analysis of how state economies are transforming from an old industrial economic model based on "smokestack chasing" in which economic development success is measured by the number of big company relocations rather than in the creation and retention of high value-added, high-wage jobs.

2007 State New Economy Index

The New Economy Index was developed by the Kauffman Foundation, which is one of the larger charitable foundations in America; it's not a "front group."

Just for fun, I thought I'd compare this study with the "study" put out by the U.S. Chamber of Commerce earlier this year.  That study purports to rank the legal climate of every state.  According to the Chamber, a healthy legal climate is essential to a healthy business climate.  If that statement is true, the Chamber must have a flawed definition of what a healthy legal climate is.

Here are the top five states in the New Economy study compared to the Chamber's ranking:


And now, here are the Chamber's top five states compared to the New Economy ranking:

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Posted at 3:15 PM, Nov 26, 2007 in Debunking Tort "Reform" | Hypocrites of Tort "Reform" | Reports | reports and research
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The two columns have a very high correlation. The legal climate rating of the Chamber of Commerce predicts New Economy ranking very well. Your tables rebut your point.

Posted by: Supremacy Claus | November 27, 2007 12:04 AM

While there is some correlation I would not describe is as strong. Strong positive correlation would be more like 1-1,2-2,3-3,4-4 and so on. Strong negative correlation would be 1-50, 2-49, 3-48 and so on. In the New Economy / Chamber example there is at least a weak positive correlation. Actually the lack of a strong correlation would seem to bode poorly for the contention that "a healthy legal climate is essential to a healthy business climate." Note that the word "essential" strongly implies that the correlation would need to be strongly positive for the statement "a healthy legal climate is essential to a healthy business climate" to be true. Of course one might conclude that all the states, or perhaps no states, have either a healthy legal climate or a healthy business climate and still come up with some sort of ranking of the degree of health of the legal and business climates. In the end the rankings seem rather stupid although the statement "a healthy legal climate is essential to a healthy business climate" is quite intelligent.

Posted by: Steve Wagner | November 29, 2007 8:43 PM

If one uses the ranks as dummy variables (standins proportional to some real outside quantity), then r = 0.8, very high in a social science. The standard error would be 0.6, also very high. The standard error reflects the variance in the dependent variable accounted for by the independent variable. That number shows great power over the new economy ranking. Right now, new economy startups could do better in South America or Africa. They welcome there.

The land pirate wants to defund the US economy, because the lawyer is a Hate America internal traitor. Intelligent, entrepreneurial people will go elsewhere, where new economy is welcome. The risk is too high in the US, of government expropriation by litigation, in a dozen legal subjects, simultaneous, all the time, at the point of a gun.

Anyone starting a business in this country is a fool. The lawyer has given the US the business climate of Venezuela. As soon as a profit is turned, the land pirate comes around to plunder from all sides. The resulting poverty will be well deserved by the American people, unless they stop the land pirates. These are internal traitors.

Posted by: Supremacy Claus | December 2, 2007 12:14 PM