Free Economies are Clean Economies

Policy Paper

December 8, 2022

Free Economies are Clean Economies

A study of the correlation between economic freedom, limited government, open markets, private property rights, and environmental performance around the world.


Foreword by Edwin J. Feulner, PhD.

Business school students learn that “what gets measured gets improved.” That insight is often attributed to management guru Peter Drucker, but it makes so much sense that many business leaders have applied it across the decades. 

The concepts of “measuring” and “improving” were on our minds at The Heritage Foundation decades ago when we developed the Index of Economic Freedom. We knew that economic freedom was vital, but nobody had ever tried to categorize it or compare the level of freedom in one country to the level of freedom in another. By measuring levels of economic freedom across regions and cultures and over time, we could point to trends.

The least surprising trend we documented was the most important trend: countries with higher levels of economic freedom provide higher standards of living for their people. 

The trip toward economic freedom is like walking up a Stairmaster: as you climb, you enjoy more benefits. However, you never reach the top. Economic conditions are perfectible, but never perfect. By publishing the Index, we created a “race to the top,” with economies competing to improve their annual scores. They found ways to reduce regulation, encourage entrepreneurship, and spiral upward. Everyone was incentivized to improve year over year.

Today something similar is underway in another important realm: the environment. 

Everyone everywhere wants a clean environment. We all breathe the same air and drink the same water. Pollution anywhere eventually becomes pollution everywhere. The question is how to deliver a cleaner environment. As you will read in the following pages, the answer is an environmental “race to the top” using an “all of the above” energy strategy patterned on our decades-old race toward economic freedom. 

As former Treasury Secretary Larry Summers once put it, “nobody ever washed a rented car.” People take care of things they own, and don’t care as much about things that don’t belong to them. That is also described as the tragedy of the commons. 

Free economies are clean economies, for this same reason. Economic freedom encourages people to “own” their environment, and they do a better job of taking care of it. People who own their environment will replace oil with batteries when it makes sense to do so. They will substitute solar for coal when they can. They will do this automatically, because doing so delivers economic and environmental benefits. 

Progress will be the key that unlocks a better economic and environmental future.

As the following report puts it, “If greener industrialization is more cost-effective, developing countries will have the economic incentive to pursue those technologies as opposed to their higher-emitting counterparts.” Another way to put it is that as economic freedom increases, economic growth leads to environmental improvement.

Read on to learn about the “why” and the “how.” The following report delves into property rights and shows how capitalism is delivering the technological progress that will provide a greener future for everyone. Progress will be the key that unlocks a better economic and environmental future.

Dr. Edwin J. Feulner is the Founder and Former President of The Heritage Foundation.

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