A capitalistic, or economically free, society is one in which institutions are characterized by personal choice, voluntary exchange, freedom to compete, and protection of person and property. It requires public policies that promote open markets, limited government, stable monetary growth, free trade and a strong rule of law, says Michael D. Stroup, a professor of economics and interim dean of the Nelson Rusche College of Business at Stephen F. Austin State University.
The Fraser Institute's Economic Freedom Index (EFI) evaluates these public institutions and policies for more than 120 countries from 1975 to the present, based on objective, measurable data, says Stroup.
In countries with relatively low levels of both economic and political freedom, adopting greater economic freedom is more likely to enhance society's well-being than increasing political rights through expanded democracy, says Stroup. Consider:
A one-unit increase in a country's EFI score is associated with a 1.3 year rise in life expectancy at birth and reduces child mortality by 16 deaths per 1,000.
However, a one-unit increase in a country's PRI score reduces life expectancy at birth by three months and reduces child mortality rates by only one-fourth as much (four deaths per 1,000) as a similar increase in the EFI score.
Furthermore, a one-unit increase in the EFI score is associated with a 10.3 percent increase of two-year-olds with adequate vaccinations (diphtheria, pertussis and tetanus), whereas a one-point increase in PRI produces less than a 0.1 percent increase in vaccinations.
Among countries with relatively high levels of both types of freedom, enhanced political rights improve the well-being of society less than economic freedom, says Stroup. Indeed:
A one-unit increase in EFI increases life expectancy by one-and-a-half years and reduces child mortality by 14.6 deaths per 1,000.
However, a one-unit increase in PRI decreases life expectancy by four months and reduces child mortality rates by only 1.6 deaths per 1,000.
Moreover, a one-unit increase in EFI is associated with a nine-point rise in the percentage of two-year-olds with adequate vaccinations, while a one-unit increase in PRI has no significant effect.
Source: Michael D. Stroup, Economic Freedom, Democracy and the Quality of Life, National Center for Policy Analysis, Brief Analysis No. 695, March 2, 2010.
For text: http://www.ncpa.org/pub/ba695
For Economic Freedom Index: http://www.freetheworld.com/2009/reports/world/EFW2009_BOOK.pdf
For more on Economic Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=17
First published by the National Center for Policy Analysis, Dallas and Washington, USA
FMF Policy Bulletin/ 09 March 2010