Exploring economic freedom.
During the recent celebration of America's 237th birthday, I was reminded of lessons learned in Miss Muzzey’s second grade class. It was through the daily drilling of math flash cards in her class that I adopted the view that all problems must have just one answer. Three plus seven equals ten — and only ten. Two times four equals eight. You get the picture.
It seems I’m not alone in clinging to the illusive certainty of problems with singular answers. Throughout life I’ve encountered countless metaphors for the pursuit of such certainty in addressing problems. Take the proverbial “silver bullet,” for example, or the promise from Curly in the movie, City Slickers, that life is about “one thing.” But just when I had resigned myself to relegating this notion of finding singular answers to life’s complex questions to movies or memories of the second grade, my cynicism had to give way to a discovery that, at least in the case of economic development, the problem of creating prosperity can be reduced to one singular answer.
The answer to creating prosperity is economic freedom. According to the Fraser Institute, which publishes an annual Economic Freedom of the World Index, “the cornerstones of economic freedom are personal choice, voluntary exchange, freedom to compete, and security of privately owned property.” Prosperity may be used synonymously with well-being. Well-being is a function of wealth creation (GDP and income per capita), life expectancy and security to enjoy political and civil liberties. Research has demonstrated that nations that are economically free are more prosperous than non-free nations in indicators of well-being.
Dr. Kim Holmes, of the Heritage Foundation, shares among the simplest definitions of economic freedom as “the ability to profit from our own ideas and labor as we choose.” Borrowing further from the Fraser 2012 report, the key ingredients of economic freedom are:
• personal choice • voluntary exchange coordinated by markets; • freedom to enter and compete in markets; and • protection of persons and their property from aggression by others.
“These four cornerstones imply that economic freedom is present when individuals are permitted to choose for themselves and engage in voluntary transactions as long as they do not harm the person or property of others. While individuals have a right to their own time, talents, and resources, they do not have a right to those of others. Thus, individuals do not have a right to take things from others or demand that others provide things for them. Use of violence, theft, fraud, and physical invasions are not permissible but, otherwise, individuals are free to choose, trade, and cooperate with others, and compete as they see fit. In an economically free society, the primary role of government is to protect individuals and their property from aggression by others.”
Beyond the data analysis shared by the Fraser Institute and its catalog of empirical research articles, there is evidence we can all observe from our TV screens in the late 1980s and early 1990s as we witnessed the collapse of communism and the continuing struggle among economies of the remaining socialist nation states. I’ll be the first to acknowledge, the United States hasn’t been doing so well, but the notion that America is the bastion of economic freedom is increasingly becoming a memory. In the Fraser Institute’s 2012 Index and the Heritage Foundation’s independent measure of economic freedom, the United States now ranks 13th and 10th, respectively. We are less economically free than Canada, Chile and Australia among others. Florida isn’t fairing so well either. According to the Fraser Institute, Florida slipped from 3rd place in 2005’s report to to 26th this year among the sub-national North America rankings. Ouch!
How does economic freedom work? It engages the dynamics of mutual cooperation. Free to voluntarily exchange in the context of the rule of law, we are more productive by trading what value we can individually create with each other to our mutual benefit. In an economically free nation or state, the government is the referee rather than the major player. Government protects against harm from mischievous behavior, but it does not extend itself so far that it presumes to make decisions for us. Thomas Jefferson prescribed the balance to be found in aligning government’s role in creating prosperity: “What more is necessary to make us a happy and a prosperous people? A wise and frugal Government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned.”