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Hub AI
Economic freedom AI simulator
(@Economic freedom_simulator)
Hub AI
Economic freedom AI simulator
(@Economic freedom_simulator)
Economic freedom
Economic freedom, or economic liberty, is the agency of people to make economic decisions. This is a term used in economic and policy debates as well as in the philosophy of economics. One approach to economic freedom comes from the liberal tradition emphasizing free markets, free trade, and private property. Another approach to economic freedom extends the welfare economics study of individual choice, with greater economic freedom coming from a larger set of possible choices. Other conceptions of economic freedom include freedom from want and the freedom to engage in collective bargaining.
The liberal free-market viewpoint defines economic liberty as the freedom to produce, trade and consume any goods and services acquired without the use of force, fraud, theft or government regulation. This is embodied in the rule of law, property rights and freedom of contract, and characterized by external and internal openness of the markets, the protection of property rights and freedom of economic initiative. There are several indices of economic freedom that attempt to measure free market economic freedom. Based on these rankings, correlative studies have found higher economic growth to be correlated with higher scores on the country rankings. Critics of this approach, such as Fredrik Carlsson and Susanna Lundström, have argued that the economic freedom indices conflate unrelated policies and policy outcomes in order to conceal negative correlations between economic growth and free-market policies, such as counting lower corruption as an indicator of economic freedom.
According to the liberal free-market view, a secure system of private property rights is a necessary part of economic freedom. Such systems include two main rights, namely the right to control and benefit from property and the right to transfer property by voluntary means. David A. Harper argues that a system of private property is required for entrepreneurship, because "entrepreneurs would not be able to formulate or carry out their plans unless they were reasonably sure that the people with whom they trade have exclusive control over the relevant resources." Bernard H. Siegan holds that a secure system of property rights also reduces uncertainty and encourages investments, creating favorable conditions for an economy to be successful. According to Hernando de Soto, much of the poverty in Third World countries is caused by a lack of Western systems of laws and well-defined and universally recognized property rights. De Soto argues that because of legal barriers and because it is often unclear who owns what property, poor people in those countries cannot utilize their assets to produce more wealth. David L. Weimer, surveying a series of empirical studies about economic growth, reports that "a number of economic historians have noted the importance of credible property rights, especially in terms of freedom from arbitrary seizures of property by governments, for understanding relative rates of growth in different time periods and regions," and concludes that countries with strong property rights systems have economic growth rates almost twice as high as those of countries with weak property rights systems. At the same time, he notes that the risk of unexpected seizure, and not state ownership in and of itself, is responsible for this outcome, saying: "the degree of state ownership of property does not have a statistically significant effect on growth rates after controlling for the risk of seizure."
Freedom of contract is the right to choose one's contracting parties and to trade with them on any terms and conditions one sees fit. Contracts permit individuals to create their own enforceable legal rules, adapted to their unique situations. Disputes arising from contracts are typically resolved by the judiciary branch of government, but not all contracts need to be enforced by the state. For example, in the United States there is a large number of third-party arbitration tribunals which resolve disputes under private commercial law. Negatively understood, freedom of contract is freedom from government interference and from imposed value judgments of fairness. The notion of "freedom of contract" was given one of its most famous legal expressions in 1875 by Sir George Jessel MR:
[I]f there is one thing more than another public policy requires it is that men of full age and competent understanding shall have the utmost liberty of contracting, and that their contracts when entered into freely and voluntarily shall be held sacred and shall be enforced by courts of justice. Therefore, you have this paramount public policy to consider – that you are not lightly to interfere with this freedom of contract.
In the United States, courts have at times stated that the U.S. Constitution protects the freedom of contract. For example, in the case of Lochner v. New York the U.S. Supreme Court struck down legal restrictions on the working hours of bakers because under the facts of the case the court found the hours "not dangerous in any degree to morals or in any real and substantial degree to the health of the employees." Instead, the court stated that "other motives" underlay the law, by which it seemed to mean protectionism against small bakeries and their non-unionized employees.
Critics of the classical view of freedom of contract argue that this freedom is illusory when the bargaining power of the parties is highly unequal, most notably in the case of contracts between employers and workers. The argument is that workers as a group may benefit from legal protections that prevent individuals agreeing to contracts that require long working hours. In its West Coast Hotel Co. v. Parrish decision in 1937, the Supreme Court retrenched on some of its previous caselaw protecting the freedom of contract.
Since then, the U.S. Supreme Court has been extremely hesitant to protect economic freedom under the due process clauses of the U.S. Constitution, as it did in Lochner. It has, however, sometimes protected economic freedom in other ways, including through the dormant Commerce Clause doctrine and the First Amendment through protection of commercial speech. And lower courts, including state courts, have protected economic freedom at times through due process clauses and similar constitutional provisions. For example, in 2023 the Georgia Supreme Court found that a law requiring lactation consultants to have a state-mandated license violated the state constitution.
Economic freedom
Economic freedom, or economic liberty, is the agency of people to make economic decisions. This is a term used in economic and policy debates as well as in the philosophy of economics. One approach to economic freedom comes from the liberal tradition emphasizing free markets, free trade, and private property. Another approach to economic freedom extends the welfare economics study of individual choice, with greater economic freedom coming from a larger set of possible choices. Other conceptions of economic freedom include freedom from want and the freedom to engage in collective bargaining.
The liberal free-market viewpoint defines economic liberty as the freedom to produce, trade and consume any goods and services acquired without the use of force, fraud, theft or government regulation. This is embodied in the rule of law, property rights and freedom of contract, and characterized by external and internal openness of the markets, the protection of property rights and freedom of economic initiative. There are several indices of economic freedom that attempt to measure free market economic freedom. Based on these rankings, correlative studies have found higher economic growth to be correlated with higher scores on the country rankings. Critics of this approach, such as Fredrik Carlsson and Susanna Lundström, have argued that the economic freedom indices conflate unrelated policies and policy outcomes in order to conceal negative correlations between economic growth and free-market policies, such as counting lower corruption as an indicator of economic freedom.
According to the liberal free-market view, a secure system of private property rights is a necessary part of economic freedom. Such systems include two main rights, namely the right to control and benefit from property and the right to transfer property by voluntary means. David A. Harper argues that a system of private property is required for entrepreneurship, because "entrepreneurs would not be able to formulate or carry out their plans unless they were reasonably sure that the people with whom they trade have exclusive control over the relevant resources." Bernard H. Siegan holds that a secure system of property rights also reduces uncertainty and encourages investments, creating favorable conditions for an economy to be successful. According to Hernando de Soto, much of the poverty in Third World countries is caused by a lack of Western systems of laws and well-defined and universally recognized property rights. De Soto argues that because of legal barriers and because it is often unclear who owns what property, poor people in those countries cannot utilize their assets to produce more wealth. David L. Weimer, surveying a series of empirical studies about economic growth, reports that "a number of economic historians have noted the importance of credible property rights, especially in terms of freedom from arbitrary seizures of property by governments, for understanding relative rates of growth in different time periods and regions," and concludes that countries with strong property rights systems have economic growth rates almost twice as high as those of countries with weak property rights systems. At the same time, he notes that the risk of unexpected seizure, and not state ownership in and of itself, is responsible for this outcome, saying: "the degree of state ownership of property does not have a statistically significant effect on growth rates after controlling for the risk of seizure."
Freedom of contract is the right to choose one's contracting parties and to trade with them on any terms and conditions one sees fit. Contracts permit individuals to create their own enforceable legal rules, adapted to their unique situations. Disputes arising from contracts are typically resolved by the judiciary branch of government, but not all contracts need to be enforced by the state. For example, in the United States there is a large number of third-party arbitration tribunals which resolve disputes under private commercial law. Negatively understood, freedom of contract is freedom from government interference and from imposed value judgments of fairness. The notion of "freedom of contract" was given one of its most famous legal expressions in 1875 by Sir George Jessel MR:
[I]f there is one thing more than another public policy requires it is that men of full age and competent understanding shall have the utmost liberty of contracting, and that their contracts when entered into freely and voluntarily shall be held sacred and shall be enforced by courts of justice. Therefore, you have this paramount public policy to consider – that you are not lightly to interfere with this freedom of contract.
In the United States, courts have at times stated that the U.S. Constitution protects the freedom of contract. For example, in the case of Lochner v. New York the U.S. Supreme Court struck down legal restrictions on the working hours of bakers because under the facts of the case the court found the hours "not dangerous in any degree to morals or in any real and substantial degree to the health of the employees." Instead, the court stated that "other motives" underlay the law, by which it seemed to mean protectionism against small bakeries and their non-unionized employees.
Critics of the classical view of freedom of contract argue that this freedom is illusory when the bargaining power of the parties is highly unequal, most notably in the case of contracts between employers and workers. The argument is that workers as a group may benefit from legal protections that prevent individuals agreeing to contracts that require long working hours. In its West Coast Hotel Co. v. Parrish decision in 1937, the Supreme Court retrenched on some of its previous caselaw protecting the freedom of contract.
Since then, the U.S. Supreme Court has been extremely hesitant to protect economic freedom under the due process clauses of the U.S. Constitution, as it did in Lochner. It has, however, sometimes protected economic freedom in other ways, including through the dormant Commerce Clause doctrine and the First Amendment through protection of commercial speech. And lower courts, including state courts, have protected economic freedom at times through due process clauses and similar constitutional provisions. For example, in 2023 the Georgia Supreme Court found that a law requiring lactation consultants to have a state-mandated license violated the state constitution.