The importance of economic freedom

by Bob Weeks on February 24, 2011

Why is economic freedom important? Here’s what Milton Friedman had to say in the opening chapter of his monumental work Capitalism and Freedom some 50 years ago:

The Relation between Economic Freedom and Political Freedom

It is widely believed that politics and economics are separate and largely unconnected; that individual freedom is a political problem and material welfare an economic problem; and that any kind of political arrangements can be combined with any kind of economic arrangements. The chief contemporary manifestation of this idea is the advocacy of “democratic socialism” by many who condemn out of hand the restrictions on individual freedom imposed by “totalitarian socialism” in Russia, and who are persuaded that it is possible for a country to adopt the essential features of Russian economic arrangements and yet to ensure individual freedom through political arrangements. The thesis of this chapter is that such a view is a delusion, that there is an intimate connection between economics and politics, that only certain arrangements are possible and that, in particular, a society which is socialist cannot also be democratic, in the sense of guaranteeing individual freedom.

Economic arrangements play a dual role in the promotion of a free society. On the one hand, freedom in economic arrangements is itself a component of freedom broadly understood, so economic freedom is an end in itself. In the second place, economic freedom is also an indispensable means toward the achievement of political freedom.

For more about Friedman and his thoughts on economic freedom, see Milton Friedman, the Father of Economic Freedom.

Economic freedom is the most important factor in determining the well-being of people across the world. Where economic freedom exists, countries become wealthy. In introducing the Economic Freedom of the World report, its authors write: “Economic freedom has been shown in numerous peer-reviewed studies to promote prosperity and other positive outcomes. It is a necessary condition for democratic development. It liberates people from dependence on government in a planned economy, and allows them to make their own economic and political choices.”

One of the authors of the Economic Freedom of the World report, Robert Lawson, expands on the importance of economic freedom: “The big question is: Do countries that exhibit greater degrees of economic freedom perform better than those that do not? Much scholarly research has been and continues to be done to see if the index [of economic freedom] correlates with various measures of the good society: higher incomes, economic growth, income equality, gender equality, life expectancy, and so on. While there is scholarly debate about the exact nature of these relationships, the results are uniform: measures of economic freedom relate positively with these factors.

Economic freedom is important to the states, too. In the 2009 report Freedom in the 50 States: An Index of Personal and Economic Freedom, researchers found that “… states enjoying more economic and personal freedom tend to attract substantially higher rates of internal net migration.” In measures of economic and personal freedom, Kansas ranks relatively well among the states, but lags behind some neighboring states. Actions by the Kansas legislature in 2010 might drive its ranking down, were the index to be recomputed.

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