Economic Freedom and Government: A Conceptual Framework

Abstract

The aim of this paper is to contribute to the development of a theory of economic freedom. In this endeavor, we build our framework on the Hayekian notion of freedom (Hayek, 1960) because it explicitly embodies the obvious link between freedom and the state: freedom is an absence of state coercion except for that which enforces abstract, general rules known beforehand. We derive two propositions from this Hayekian thesis and elaborate on them, leading to a categorization of government actions from the viewpoint of economic freedom in which the criterion against which coercive governmental actions must be evaluated is the rule of law, meaning a government’s reliance on general, abstract rules. As an implication, our framework allows us to argue for the imperative differentiation between “efficiency” and “economic freedom” as two separate criteria against which government actions can and must be evaluated. We also show that our framework may help explain the process through which economic freedom enhances growth.