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Economic Freedom

6 min read

Part of Markets and money.

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Every episode (8)

Who argued it

Carol Roth · Ilya Somin · Matt Warner · Benjamin Powell · Michael Strong · Joe Quirk · Fergus Hodgson · Yeonmi Park · Heidi Machen

Property Rights · Socialism · Eminent Domain · Federal Reserve · COVID-19 Lockdowns · Foot Voting · Federalism · Constitutional Law

Background

Definition and significance

Economic freedom is treated across these episodes as the set of institutional conditions — secure property rights, predictable courts, easy market exchange, and freedom from unjust restriction — under which individuals can pursue their own economic decisions. Bob Zadek calls it “the ultimate natural resource,” arguing that poverty is not caused by a lack of natural resources, bad weather or small population size, citing Singapore, Hong Kong and Japan as wealthy places with few resources, and contrasting Venezuela’s largest oil reserves in the world with resource-poor Singapore How to leverage resources within the liberty movement (2020). Matt Warner, describing the work of the Atlas Network, defines institutions as the rules of the game — the laws, norms and customs people face — which can either direct entrepreneurial talent toward providing value or toward gaming the political system How to leverage resources within the liberty movement (2020).

Economic freedom as the engine of recovery

Don Boudreaux argues that the New Deal did not end the Great Depression, noting that unemployment was still about 15% in 1940, and that the United States did not emerge from it until 1946, when the government rolled back its operation and deregulated in ways people had not expected. In his account, it was that greater freedom that inspired investors and business people to start new industries and firms, producing the postwar boom — not government spending and not World War II The Second American Revolution – NOW (2011).

Carol Roth frames the stakes in similar terms, warning that the laws, spending, proposals and programs being put out at a rapid rate are moving the country further away from economic freedom, and that economic freedom is the best path to prosperity. She argues that nobody gets wealthy other than politicians and their lobbyist friends on the government dole, and urges voting with dollars to support decentralized small businesses Carol Roth on the War on Small Business (2021).

Institutions, licensing and poverty

Warner describes a Burundi think tank that convinced the government to simplify business licensing and lower fees. In the year before the reforms there had been a 5% increase in business licenses; the year after, a 49% increase. He illustrates the effect with a man known locally as “Papa Coriander,” who had two employees, had been jailed many times and had his cash and inventory taken by police with no legal recourse because he was unlicensed; after licensing, Warner says, he grew to 100 employees in a year How to leverage resources within the liberty movement (2020). Warner argues that poverty is solved by individuals navigating their own paths, and that foreign aid undermines local democracy because recipient governments answer to donors rather than constituents.

The welfare-state objection

Will Wilkinson answers the slippery-slope worry — that once wealth transfer begins it cannot be modulated — by pointing to international evidence. He notes that the Fraser Institute and Heritage economic freedom indices include measures of property-rights integrity, and that countries with high tax rates and big welfare states score well on those dimensions, with good judicial procedures and little eminent domain. Canada, he says, has a single-payer healthcare system and takes a hit on the economic freedom index for that expenditure, yet still comes out higher than the United States in terms of economic freedom. He adds that many places with large welfare states rank at the top of Cato’s personal freedom index, concluding that big government is not something to be afraid of and is shown by the data to be consistent with a very high level of freedom Will Wilkinson: G.O.P. Should Embrace the Welfare State (2017).

Measurement and politics

Jason Sorens explains that his index weights variables according to how much Americans actually value the different freedoms, and that it is designed for everyone who cares about freedom, not only libertarians or anarchists. He reports that states voting Democratic in state elections tend to have less economic freedom — higher taxes and economic regulations — and that changes in voting behavior cause changes in economic freedom, citing West Virginia’s shift from strongly Democratic to strongly Republican and its subsequent rise on the index, which he says he had predicted. He also identifies a residual of cronyism: states where tax dollars are more likely to be wasted or given to private companies in subsidies tend to have more economic regulations on starting a business or entering a profession, higher lobbyist-to-legislator ratios, more corruption convictions, and ratings by state journalists as more corrupt Ranking Freedom in the 50 States (2022).

Across episodes

The topic recurs across all five episodes, but the episodes show no single developing argument: Boudreaux (2011) and Roth (2021) treat economic freedom as the direct cause of prosperity and its erosion as the central threat, Warner (2020) supplies the institutional mechanism and a concrete licensing case, Sorens (2022) supplies measurement and political correlates, and Wilkinson (2017) presses the contrary case that large welfare states can coexist with high measured freedom.

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