Chapter 5.

Why Economic Freedom Matters: Digging into the Principles

Policy Paper

Free Economies are Clean Economies 2022

Chapter 5.

Why Economic Freedom Matters: Digging into the Principles


To better comprehend why a positive relationship between economic freedom and environmental performance exists, it is important to dig deeper into what aspects of policy make a country economically free. We know why a country scores highly on the Index of Economic Freedom. As measured by the Heritage Index, a country would have a strong rule of law, fiscal health, regulatory efficiency, and open markets. Similarly, the Fraser Institute measures economic freedom by analyzing a country’s size of government, legal system and security of property rights, sound money, freedom to trade internationally, and regulation.

The underlying factors that make a country economically free create a culture of entrepreneurship and innovation that empowers people to meet consumers’ needs, raise levels of human welfare, and improve the environment.

Understanding how these indicators contribute to human prosperity and better environmental outcomes should encourage policymakers around the world to pursue the necessary changes to spur bottom-up solutions to our greatest economic and environmental challenges.

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