An almost laboratory experiment: John Cowperthwaite and Hong Kong’s economic prosperity

Abstract Milton Friedman, in the 1960s, was convinced that John Cowperthwaite, the British official overseeing Hong Kong’s economic policy, was conducting the most radical experiment in economic history. A staunch classical liberal within the British civil service, Cowperthwaite aggressively resisted government intervention, believing that free markets fueled growth. His influence was amplified by British domestic politics and the nature of colonial rule, making him a uniquely powerful figure. In this paper, we use the Synthetic Control Method (SCM) and Synthetic Difference-in-Differences (SDID) to assess whether Cowperthwaite truly constrained government expansion and whether his policies drove economic growth. In other words, we test whether Friedman overstated Cowperthwaite’s impact. We find strong evidence that Cowperthwaite limited government growth but had no visible effect on economic growth. We link these results to Hong Kong’s land policies, their impact on government size metrics, and more even-handed assessments of Cowperthwaite’s policy decisions.