Economic freedom is oneof the core values of development. Its foundations are personal choice,voluntary exchange and open markets. It brings individuals a right to choosefor themselves rather than being forced by others.
The EFW (Economic Freedom ofthe World) index is designed to measure the degree of the economic freedom inthe world’s nations by comparing five areas: 1 Size of Government, 2 LegalSystem and Property Rights, 3 Sound money, 4 Freedom to TradeInternationally, and 5 Regulation of credit, labor, and business. Size ofGovernment indicates the extent to which economic freedom is affected by governmentpolicies regarding its expenditure and tax rates. Legal System and PropertyRights focus on protection of persons and their rightfully acquired property.Sound Money focuses on the significance of stable inflation rates and avoidanceof regulations that limit the ability to use alternative currencies. Freedom toTrade Internationally measures the extent to which residents in differentnations can trade with foreigners. Regulation focuses on how regulations restrictingentry into markets and freedom to engage in voluntary exchange affect economicfreedom. We believe economic freedom has a significant impact on human progressregarding economic growth, poverty rate, political rights and civil liberties,gender inequality and happiness.
As indicated by the report, countries with greater economic freedom achievehigher levels of per-capita income and tend to grow more rapidly. Over the pastfew decades, numerous scholars have also investigated the relationship betweeneconomic freedom and growth. Cebula, Clark and Mixon (2013) found that thehigher the degree of economic freedom, the higher the level of economicactivities and, hence, the higher the per-capita real GDP level. Economicactivities have a direct impact on per-capita real GDP. Economic freedomfosters economic activities by affecting incentives, productive effort and theeffectiveness of resource use (Fuat, 2005).Besides, according to thereport, extreme and moderate poverty are lower in countries with greatereconomic freedom. Economic freedom plays a key role in reducing poverty.
Developingeconomies such as China and India have seen millions of people lifted out ofpoverty by improving the economic freedom within their countries. The report also pointsout that countries’ political rights and civil liberties are also associatedwith the level of economic freedom. Political rights and civil liberties are asincomplete without economic freedom as it is without a right to vote.Economically free individuals should be able to decide for themselves but nothave options imposed by political process or the use of fraud and violence byothers.According to the report,gender inequality also narrows in countries with greater economic freedom. Themore economic freedom the country is, the better able its people are to makedecisions for themselves and the less able gender-biased institutions are toimpose their misogynistic wills on others who will hold them accountable(Davies, 2012).
Moreover, people tend tobe happier about their lives and have a longer life expectancy in countrieswith greater economic freedom. Gropper, Lawson and Throne (2011) concluded thataround the world freer people live wealthier, live longer, and are happier. Thereis a positive relationship between national levels of happiness and economicfreedom. GDP per capita also exerts a strong positive influence on happiness.
To sum up, living in a nationwith higher level of economic freedom could provide individuals with higherchances to earn higher income, live happier and longer, and equally treatedregarding to genders. Countries should implement policies that enhance theeconomic freedom within its nations, which could lead to improvement inwellbeing and development.ReferencesCebula, R., Clark, J., & Mixon F. (2013). The Impact of EconomicFreedom on Per Capita Real GDP: A Study of OECD Nations. The Journal of Regional Analysis & Policy, 43(1), 34-41.
Davies, A. (2012). Women need more economic freedom, not moregovernment. Retrieved fromhttp://dailycaller.
com/2012/03/09/women-need-more-economic-freedom-not-more-government/?print=1Erdal, Fuat. (2005). EconomicFreedom and Economic Growth: A Time Series Evidence from The Italian Economy.
Department of Economics, Adnan Menderes University, Aydin, Turkey andInternational Centre for Economic Research, Torino, Italy. Gropper, D.M.
, Lawson, R.A. & Thorne Jr, J.T., (2011). EconomicFreedom and Happiness.
Cato Journal, 31(2), pp.237-256.