Introduction: Choosing to Lose: Hong Kong’s Tradition of Positive Non-interventionism and Its Constraints on Innovation

In Free to Choose (1980), Milton and Rose Friedman hailed Hong Kong’s explosive growth in the immediate post-war decades as proof of the wisdom of laissez-faire. They wrote:

In today’s world big government seems pervasive. We may well ask whether there exist any contemporaneous examples of societies that rely primarily on voluntary exchange through the market to organize their economic activity and in which government is limited to our four duties (Note: the four duties are protection from coercion, justice, provision of public goods, and protection of those who are not responsible adults).
Perhaps the best example is Hong Kong — a speck of land next to Mainland China containing less than 400 square miles with a population of roughly 4.5 million people…. The density of populations is almost unbelievable — 14 times as many people per square mile as in Japan, 185 times as many as in the United States. Yet they enjoy one of the highest standards of living in all of Asia — second only to Japan and perhaps Singapore.

Yet almost three decades after the Friedmans praised the obvious positive effects of Hong Kong’s laissez-faire policies (referred to in Hong Kong as the policy of positive non-intervention), the lackluster performance of Hong Kong’s knowledge economy over the intervening period calls these very same policies into question.