Economic Freedom, Individual Perceptions of Life Control, and Life Satisfaction

Happiness economics has shown that the degree to which people feel they are in control of their lives positively correlates with personal life satisfaction. In a parallel manner, economic freedom has been found to exert an independent impact on life satisfaction over and above the impact on per-capita income levels and other indicators of material well-being. In this chapter, the authors put both of these strands together and establish that economic freedom exerts a strong and persistent impact on both individual life control and life satisfaction. Employing data from the World Values Survey and the European Values Study, their findings show that living in a country with high overall economic freedom is a major determinant of perceived personal control over one’s life. Thus, the authors show that economic freedom has a direct positive influence on life satisfaction and also influences individual happiness by providing people with more control over their own lives.