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What’s So Great about Economic Freedom?

Economic freedom is about the freedom to buy and sell things, says Professor Antony Davies, but it’s also about the freedom to interact with people, to converse with others, to travel, and to say what we want to say. Evidence shows that economic freedom is associated with many positive things in society. This holds true among states in the United States and across the countries of the world.
Countries that have more economic freedom also tend to have higher GDP per capita. They tend to take better care of the environment. They also tend to have less child labor and more gender equality. Prof. Davies examines the data on these factors and several of the arguments people have raised about the data to show the many benefits of economic freedom. Economic freedom is about being free to make your own choices. It allows us to:
- Do what we love
- Create wealth
- Protect the environment
- Improve equality
- End child poverty

Freedom in the 50 States [study]: An index of personal and economic freedom across the 50 states, compiled by the Mercatus Center at George Mason University


2013 Index of Economic Freedom [study]: The Heritage Foundation, in partnership with The Wall Street Journal, tracks the march of economic freedom around the world


Free to Choose Video Series (video): Renowned economist Milton Friedman's "Free to Choose" video series on the benefits of economic freedom and the dangers of government intervention


The Economic Freedom Index isn’t… [article]: A critique of the usefulness of the economic freedom index from the Libertarian left


Free, Free at Last [article]: A critique of the usefulness of the economic freedom index from the progressive left


What Economic Freedom Indexes Leave Out [article]: The Foundation for Economic Education adds another critique of economic freedom indexes


Economic Freedom and Economic Growth [article]: A piece from the Independent Institute on the two theories of economic growth and on the connection between economic freedom and prosperity


The Case for Economic Freedom [article]: Benjamin Rogge of the Foundation for Economics Education discusses the moral case for economic freedom and how all freedoms are ultimately connected




To see Professor Davies' data sources, please click the following links:


For data on comparative economic freedom by state, see: Economic Freedom of North America, 2011 Annual Report, Fraser Institute


For data on unemployment by state, see: Bureau of Labor Statistics Unemployment Rates for States


For data on comparative economic freedom by country, see: Economic Freedom of the World, 2011 Annual Report, Fraser Institute


For global comparative GDP data, see: The World Bank GDP Data


For data on comparative climate and pollution indicators, see: Climate Analysis Indicators, World Resources Institute, CO2 Emissions by Country, Mortality from Air Pollution by Country, World Health Organization, and Exposure to Air Pollution by Country, World Health Organization


For more on income inequality by country, see: List of Countries by Income Groups of GNI per Capita and Income Gini Coefficient by Country and Distribution of Family Income, Gini Index


For data on poverty by country, see: Poverty Headcount Ratio at $2/day (PPP)


For gender inequality data, see: Gender Inequality Index, Human Development Reports, UN Development Programme


For data on child labor rates, see: Child Labor Rates by Country


For data on tropical deforestation, see: Data on Tropical Deforestation


What's So Great about Economic Freedom?

Economic freedom is about, yes, the freedom to buy and sell stuff, but it’s also about the freedom to interact with people, to converse with people, to travel where we want, to say the things we want to say. These things [that] involve interaction with others are truly at the core of economic freedom.

There’s a tremendous body of evidence that suggests that economic freedom is associated with many of the things we think of when we think of a healthy society. We can look at the Economic Freedom of North America Index. States with more economic freedom have higher growth rates of the economy, they have lower unemployment rates, they have less debt per GDP than states that are less free.

All of these things we associate with economic health are also associated with economic freedom, but we see the same phenomenon when we compare countries of the world. The most economically free countries have GDPs per capita that are about 10 times the size of less economically free countries.

One might argue that what we’re seeing is the big country effect. That is, big countries will tend to be economically free, and they’ll also tend to have high GDP per capita. But if we restrict our vision to just the poorest 20 percent of countries, the poor countries that have the most economic freedom have GDP per capita that are 50 percent greater than the poor countries that have less economic freedom.

One counterargument is that GDP per capita only measures average income. It’s possible that you could have a country with a small number of elite, rich people and a large number of destitute people. But if we examine inequality measures, what we find is that the countries that are more economically free also have more equitable income distributions. That is, economic freedom is not only associated with higher income levels on average, but it’s also associated with a more equitable income distribution.

Skeptics might argue that economic freedom achieves greater income because of exploitation, exploitation of people and exploitation of the environment. Let’s look at the data and see if this is the case. On average, women in economically free countries have more gender equality than women in economically less-free countries. Also, child-labor rates tend to be lower in economically free countries and higher in economically unfree countries.

One might argue that child-labor rates are lower in economically free countries because economically free countries are richer and therefore can import products from poor countries that do not have child-labor laws. In effect, the rich countries encourage the poor countries to exploit their children so the rich countries don’t have to exploit theirs.

But if we look at the poorest countries, we see the same phenomenon. Even amongst the poorest countries, those with more economic freedom have lower child-labor rates than those with less economic freedom.

Economic freedom also accompanies reduced exploitation of the environment. For example, deforestation is worst amongst the least economically free countries. Meanwhile the most economically free countries actually experience reforestation: Their forests are growing.

Economic freedom is about the freedom to act. The more freedom we have to act, the more able we are to do the things we want to do: to create wealth, to protect the environment, to help people be equal across genders, to help children no longer have to work in factories. It’s about being free to make your own choices and to live with the consequences of those choices, provided that you do not violate anyone else’s freedom. The more economic freedom we have, the more able we are to make the world a better place.

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