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March 17, 2011

Per Capita GDP prediction method with 97% accuracy using economic freedom, average IQ, trading block membership and oil usage

Economic Freedom and average citizenry IQ -- plus slight tweaks from trading block membership and oil predicted GDP per capita for every country with a high .97 correlation (r) with actual GDP per capita. This is not scientific but uses a few factors that can be adjusted to correlate to per capita GDP both historically and possibly into the future.

Summarized Methodology



Applying the formulas a gargantuan economic expansion could follow from worldwide reforms in former economically repressive countries.

China average EF (Economic Freedom rank from Fraser Institute) index for 15 years is a 5.34, while its actual per capita GDP came in at $6,200. However, its current (2003) EF index is already up to a 6.0. Even if we just assumed that no more reforms occurred for the next 15 years, we'd still get just the next 15 years of 6.0 EF in China's economy. That projects to a Chinese per capita GDP of around $15,900 (those are real numbers, not nominal). But that's for 1.35 billion people. The added economic growth from this minimum expectation alone will be $13 trillion/year in GDP.

If we assume that China continues with deregulation and economic reforms, inching up in the high 7's on the EF Index (at the level of, say, the United Arab Emirates) such that its weighted EF average for the next 15 years is around a 7.0. China would then shoot up to a projected $22,362 per capita GDP, with an economic explosion of over $29 trillion total GDP per year -- well above that of the United States.

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