Driving Growth Through Economic Freedom and the Rule of Law
Economic freedom contributes to economic growth by fostering competition among actors, leading to increased innovations, efficiency, and ultimately, productivity. Economic freedom also allows investments to be more efficient, leading to growth. The rule of law, as understood as the protection of private property and contractual rights, can protect economic freedom and contribute to growth as well.
Still, the question remains of how to describe economic institutions that make the exercise of economic freedom possible. This article sets out to describe the different component of economic freedom and explain how they relate to both economic growth and the rule of law. Then, it addresses what is necessary for good economic institutions to foster growth on the basis of economic freedom.
Article at a glance
- Economic freedom drives economic growth through innovation.
- While both economic freedom and the rule of law create incentives for accelerated economic growth, economic freedom has a greater effect because it intensifies market competition that leads to improved efficiency and productivity.
- In order to continue fostering growth, economic institutions must be flexible enough to adapt to technological innovations that develop as a result of economic freedom.
Dr. Boris Begović is President of Center for LiberalDemocratic Studies and a professor at the School of Law, University of Belgrade. His field of expertise includes institutional economics, economic analysis of law, industrial organization and theory of economic growth. His book Institutional Aspects of Economic Growth has just been published.
The views expressed by the author are his own and do not necessarily represent the views of the Center for International Private Enterprise (CIPE). CIPE grants permission to reprint, translate, and/or publish original articles from its Economic Reform Feature Service provided that (1) proper attribution is given to the original author and to CIPE and (2) CIPE is notified where the article is placed and a copy is provided to CIPE’s Washington office.
