Saturday, May 10, 2008

Is inner freedom related to economic freedom?

In earlier posts about inner freedom - the feeling of choice or control over the way life turns out - I have discussed some implications of the observation that humans have a passion for control of their lives (here) and the correlation at a country level between inner freedom and life satisfaction (here).

In this post I want to consider the extent to which inner freedom varies with economic freedom i.e. the extent to which people are free to undertake economic activities without excessive government regulation or taxation.

What reasons do we have to expect that inner freedom and economic freedom might be correlated? First, it is possible that people might feel that they have greater control over their lives when they have greater freedom to engage in economic activities without government interference. Second, economic freedom provides incentives for wealth creation; and greater wealth may give people a feeling of greater control over their lives. Third, it is possible that causation may run in the other direction. When people feel in control of their lives they may feel less threatened by competition and hence less supportive of restrictions on economic freedom.

Economic freedom data used in compiling the chart below has been derived from the Fraser Institute’s Economic Freedom of the World project (here). After matching with inner freedom data (sourced from “Human Beliefs and Values” by Ronald Inglehart et al) data were available for 66 countries for the year 2000. After ranking by level of economic freedom, averages were calculated for each quintile of the percentage of people in the countries concerned who feel in control of their lives and who feel satisfied with their lives.

The chart shows that, on average, the percentages who feel in control of their lives are substantially higher in countries with high levels of economic freedom than in countries with lower levels of economic freedom. The chart suggests, however, that life satisfaction tends to rise more steeply with higher economic freedom.

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