With Republicans now in control of the White House and Congress, we’re probably going to see tax cuts, deregulation and weakening of rules protecting labor unions. What should we expect from these policies? One way to answer this question is to look at states where free-market approaches have been tried.
A great thing about the U.S. is that the states can act as policy laboratories. States have many similarities -- they fall under the same federal laws and have similar legal institutions. That makes comparisons between states a lot easier than comparisons between, say, Japan and South Korea. But because of the U.S.’s federal structure, states have a lot of control over their economic policies. They can set their own tax rates, manage public spending and impose lots of regulations, including rules governing organized labor. They can also set urban land-use policy, use industrial policy to promote or lure certain businesses, and much more.