The Concept of Economic Freedom - Essay Example

Economic Freedom Economic freedom is a concept widely used in the present day economical world. It refers to a situation whereby there are free markets and free trade that is conducted by everyone all over the place. Anyone has a right to own property since it is under free enterprise. The participants are free from any want whatsoever, and they are free to participate in collective bargaining. This is because the concept of free markets focuses on the need of people being free to consume, buy or sell and producing any goods and services that are available. Studies have shown that human beings operate more efficiently when not under pressure. Freedom allows individuals to practice and fully exploit their creativity. Sociologists have linked human freedom to human creativity and have found it to be working hand in hand. The Sociologists argue that it allows for greater risks taking that would generate better ways of doing business. Economic freedom has three classical viewpoints, institutions, political and indices of economic freedom. This paper presents a discussion on economic freedom. For there to be a smooth flow of trade between parties, there are institutions of economic freedom set to achieve it. The first is the observance of the rule of law. In the application of the law, all parties are equal, and none is superior. The rule of law has obligations that ensure equality of individual in spite of any form of difference between them. Observance of the law protects traders from unfair completion. In law, two kinds of parties exist, the one with power and the other one who is governed. Both parties should act in a manner that is required of them and feel protected by the law. In as much as there is the observance of equality, it is not logical for every party to earn the same income. Equality comes in the sense of treatment of one another and not in the distribution of private resources. It is illogical for the government to redistribute earned resources from citizens in the name of equality (Asafu-Adjaye 78). The next institution is a clear outline for the rights to own private property. A free market allows for the right for people to control their property and benefit from them. In addition to this, the individuals have a right to transfer their property at their own will. Therefore, an individual cannot be prevented from doing whatever he or she likes with the property. With this kind of system, traders are motivated to pursue their goals and continue adding value to their property. The traders are confident that they are capable of transferring their income anytime without the fear of having to leave anything behind when they opt to leave. Studies show that areas with well-defined property rules have a faster economic growth as compared to the areas without. Most research argues that this property rule is the main reason for poverty in third world countries since they do not have well spelt out systems. The third is the freedom of contract, which refers to the right of choosing whom to trade with, or not. The individual parties choose the form of contracts to get into and establish an agreement. However, once establishing the contract they both have to fulfill the terms and conditions and see it through whether one realizes that he will incur losses. In as much as most of the contracts are fair, some are not especially when the parties are unequal. An example is in the case of workers and employers when negotiating a number of working hours. The employer would be looking at maximizing the hours while the worker will be looking at minimizing it. However, since the employer has an upper hand, he tends to win the negotiation (Noyes 43). Economical freedom has come hand in hand with political freedom. Since the market is free, it has prevented politics to dominate trade. This has reduced the threat of suffering because of a political affiliation. It is a point worth noting that economical freedom has grown with the coming of political freedom. In both cases, power dominates around the individual people. Just as, the traders are free to practice free trade, they are also the ones who elect the politicians. This generates a mutual relationship between political freedom and economic freedom. None can exist without the other. It is for this reason that the two different concepts became popular at around the same time. Economic freedom has put an end to centralization in business. However, there are instances that the government has to interfere with that freedom especially when negotiating international contracts. The judiciary too has a right to interfere during some scenarios (Peacock 56). Another major concept in economic freedom is its indices. Through this, state of economic freedom in different nations is determined. As stated earlier, economic freedom dictates the amount of economic growth of a nation. In this study, the two kinds of indices used are (EFW) Economic Freedom of the World and (IEF) also know as Index of Economic Freedom. In the areas of conducting the studies, economic freedom tended to go hand in hand with certain factors. These factors include income growth rate, water access, literacy levels, infant mortality, and life expectancy (Ahiakpor 19). This index tries to identify and indicate the economic freedom. From these studies, the main influences of economic freedom are the ability to compete freely, an individual’s personal security in terms of property, personal choice and the freedom to exchange voluntarily. In order to achieve the right results, certain major measurements are taken. These are; the freedom to trade internationally, rules concerning credit and labor, ability to access money, legal structures and the government expenditures. In order to come up with reliable results, the interested parties collect information from trusted sources such as the World Bank and the International Monetary Fund among others (Ahiakpor 87). However, there are constant critics in the determination of correlation between economic freedom and the above-mentioned variables. It is not easy to get an agreeable method to determine this theory in their relationships (Ahiakpor 45). Economic freedom has played a role in the transformation of international trade. It has built trust between parties through the regulations set to improve the trading environment. Because of freedom, parties participated in production of produce that has boosted fair competition leading to the production of quality goods. In addition, it has opened the world to participate in trade as one market with different producers and consumers. In another aspect, it has provided a solution in the global problem of unemployment. Very many people are meeting their needs due to the new way of doing business. This is because it has welcomed all kinds of ideas that are within the regulations. Economic freedom is a messiah to modern trade (Asafu-Adjaye 34). Works Cited Ahiakpor, J. Economic Freedom: Toward a Theory of Measurement : Proceedings of an International Symposium. chicago: The Fraser Institute, 1991. Print. Asafu-Adjaye, J. Economic freedom, foreign direct investment, and economic growth. Miami: Institute of Economic Affairs, 2005. Print. Noyes, C. Economic Freedom: A Democratic Program. Virginia: Harper & brothers, 1943. Print. Peacock, A. The Political Economy of Economic Freedom. New York: Edward Elgar Publishing, 1997. Print. Read More