Economic Freedom and Happiness

August 5, 2011

That liberty is necessary for greater happiness and a better life is a notion deeply rooted in the American sensibility.  But is there a link between greater freedom and greater happiness across countries?

Daniel M. Gropper, the David and Meredith Luck Professor in the College of Business at Auburn University, Robert A. Lawson, the Jerome M. Fullinwider Chair in Economic Freedom in the Cox School of Business at Southern Methodist University, and Jere T. Thorne Jr., of the Home Depot and a graduate of Auburn University, answer this question by examining the empirical relationship between liberty, as measured by economic freedom and happiness across more than 100 countries.

Early research tended to find that economic freedom was positively associated with happiness.  More recent work, however, has been mixed.  Researchers argue that the association between measures of institutional quality (like freedom) and happiness are different between rich and poor countries.  Others contend that the relationship between government size (a component of economic freedom) and happiness is contingent on the quality of the governance.  Still, others say that "freedom of choice" is a strong factor in determining happiness.

  • Using the best available data for a sample of well over 100 countries, the authors find a positive relationship between national levels of happiness and economic freedom.
  • Gross domestic product (GDP) per capita also exerts a strong positive influence on happiness.
  • The statistical impact of both economic freedom and GDP per capita appears to diminish as the other increases, but the combined effect of simultaneously increasing both economic freedom and GDP per capita, particularly for poorer and less free nations, is positive.

Around the world, freer people generally are wealthier, live longer and are happier.

Source: Daniel M. Gropper, Robert A. Lawson, and Jere T. Thorne Jr., "Economic Freedom and Happiness," Cato Journal, July 6, 2011.

For text:

http://www.cato.org/pubs/journal/cj31n2/cj31n2-4.pdf

 

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