Economic freedom is negative liberty

Published on real-world economics review, issue no. 47, by Joshua C. Hall, Robert A. Lawson and Will Luther

(Beloit College, Auburn University and George Mason University, USA), fall 2008.

Two recent articles in this journal by Jim Stanford and the late Margaret Legum strongly condemn the measurements of economic freedom published by the Fraser Institute and the Heritage Foundation. As researchers associated with the Frasier Institute’s Economic Freedom of the World (EFW) index we feel that it is necessary to address some issues raised by their commentaries as they relate to the EFW index. …

… Legum and Stanford also argue that advocates of economic freedom believe this freedom is the only thing that matters. They point out correctly that there are other things that people find important besides economic freedom. We agree, in part, on this point. There is much to life besides economic freedom. Countries with higher degrees of economic freedom are given higher scores, but it does not follow directly that these countries are somehow better. Whether one should prefer more or less economic freedom is indeed a normative judgment. However, for those who make their normative judgments on consequentialist grounds, the existence of this measurement makes it possible to test long-standing claims, and counterclaims, that economic freedom enhances prosperity and other social goals.

Many, many studies have used the EFW index to examine the role institutions play in economic development. All have found a significant, positive correlation between EFW scores and growth. Nor does growth seem to be the only thing affected by economic freedom. Other measures of social progress, including the UN Human Development Index, are positively related to the EFW index. Lawson (2008) finds that income distribution is no better or worse on average in freer countries, but states “there is clear evidence that low-income people in freer countries are better off than their counterparts in less-free countries.” At least one study even shows a positive correlation between economic freedom and the environment.

Critics of the measurement of economic freedom such as Stanford and Legum need to reply to this growing body of empirical evidence that economic freedom is associated with a wide ranging array of desirable social outcomes. Baseless commentaries on the “pro-business” nature of the index and attacks on the motives of the authors including name calling (e.g., “right-wing think tanks”) do very little to advance our understanding of the relationship between differennt conceptions of freedom and human flourishing. (full text).

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