ECONOMIC freedom produces faster economic growth, higher living standards and even increased happiness as people gain control of their lives, according to a wide-ranging research review by the Centre for Market Education (CME) and Fraser Institute.
“An immense amount of research shows that increasing economic freedom in Malaysia would vastly improve the lives of the people of Malaysia,” said CME chief executive officer (CEO) Dr Carmelo Ferlito in a statement launching the research paper, Economic Freedom in Literature – What Is It Good (Bad) For?
“Such a research finding is particularly important because the policy evolution of the last three years in the country went in the direction of an increasing role of the Government interference with the market process, and, therefore, in the direction of diminishing people’s welfare,” he added.
Ferlito, an economist, said this was particularly evident in the labour legislation, the “selective” approach to foreign direct investments (FDIs) and the introduction of price ceilings.
As part of the research, 721 empirical papers published between 1996 and 2022 were examined using the Economic Freedom of the World index, which measures economic freedom or the ability of individuals to make their own economic decisions.
Research paper author Robert A Lawson then scrutinised the papers for policies and institutions of jurisdictions and assessing indicators such as regulation, size of Government, property rights, trade openness, Government spending and taxation.
He found that more than 50% of the papers under review reported good correlations between economic freedom and good outcomes such as faster economic growth, higher living standards and reduced conflict.
On the other hand, about 45% of the papers reported mixed, null or uncertain results, while only one out of 20 papers reported a bad outcome.
Correlation with positive outcomes
“In the academic world, there’s a growing consensus that increased economic freedom correlates with positive outcomes for people in countries around the world,” Lawson, a Southern Methodist University economics professor said.
“(Our) research not only shows that economic freedom boosts prosperity and economic growth but also leads to positive outcomes in a number of other areas,” Lawson noted.
Individuals and families, when free to do so, make the best decisions for themselves, he said, and not “crony elites” or an “over-powerful Government”.
The majority of studies in the following areas found economic freedom was related to reduced conflict, wars, civil unrest and terrorist attacks; increased entrepreneurship and innovation and; stronger economic growth.
There were also correlations between economic freedom and improved human rights and social development; boosted income and productivity and; improved labour market outcomes such as reduced unemployment and increased wages and participation.
“Personal choice, voluntary exchange and open markets remain the cornerstones of economic freedom, which is key to prosperity worldwide,” Lawson noted.
“In order to boost sound economic growth in a moment of global uncertainty and rising price tensions, Malaysia needs to rediscover its vocation to economic openness and business-friendly attitude, and to recognise the superiority of the market process outcomes over Government control and interference.”
The CME is a boutique think-tank based in Kuala Lumpur focused on promoting a pluralistic and multidisciplinary approach to economics, while the Fraser Institute is an independent Canadian public policy research centre that aims to improve the quality of life for Canadians. – Aug 25, 2022
