Volatility Versus Growth

I had a theory that countries that experience more volatile or erratic economic growth probably do so because the government doesn't intervene or try to regulate the ebbs and flows of the economy. Smoothing out what would otherwise be the US rollercoaster ride so that weak-stomached European socialists can be sure their bottle of milk is there everyday...sure it may cost 40 Euros, but the bottle of milk is there. Meanwhile their riskier US counterparts are willing to risk it that their milk may not be there tomorrow or the day after in the gamble and hope that the farmers may have restructured their operations to deliver that same bottle of milk for only $2.

So what I did was run a correlation between the OECD member countries' average economic growth and the standard deviation in that growth to see if more volatile economic growth coincided with high average economic growth;

And what do you know, I'm right once again.

It seems that if the government steps aside, lets people make decisions (good or bad) for themselves, the people will inevitably make the right choices. It also suggests that if markets are allowed to be volatile, yes, there may be a rollercoaster, but those markets are allowed to adjust quicker. That capital and resources are allocated more efficiently, and thus losses caused by mistakes are cut short and profitable ventures and industries are allowed to be chased and exploited with the utmost of efficiency...meanwhile the French still pay 50 Euro's for a bottle of milk.

Of course, thus far all I've proved is that economies that are more volatile have on average higher economic growth rates. This says nothing about how much the government intervenes in those countries. Thusly I ran another correlation, this time with government expenditures as a percent of GDP versus the volatility of that country's economic growth.

Again confirming what I have suspected.

Alas it seems that if you want to get the big economic thrills you have to stomach the big roller coaster rides. Too bad our European counterparts are stuck on the little kiddie rides.