Correlation of economic and personal freedom(6 min read)

There is a strong positive correlation (r = 0.70) between the economic freedom and personal (social) freedom of countries. Both are also moderately positively correlated with happiness (economic r = 0.55, personal r = 0.67).

Countries on the bubble chart, showing the economic and personal axes, with happiness indicated by green high through to red (colour-free version below), and the size of bubbles based on population. Some key countries are indicated.

Both economic and social freedom are important, and related, so a good strategy would be to try and increase both.

Economic vs personal freedom vs happiness

Correlation and causation

Many political surveys use a two-axis framework, with one for economic freedom (free markets, smaller government), and the other for personal or social freedom (civil liberties, religious freedom). Similar rankings are available for countries from several published indexes.

The data shows there is strong correlation between economic and personal (social) freedom, but that does not necessarily mean causation. Does economic freedom lead to social freedom, or does greater social freedom mean people are happy with less government, or is there some third factor, such as geographical, historical, or cultural factors play the major part?

The correlation of both with happiness is also expected, as some of the major factors (components) found in the World Happiness Report are GDP per capita and freedom to make life choices.

An interesting aspect, related to causation, is how the results compare to political outlook which, in Australia at least, are strangely opposite (see more below).

Primary sources:


The Cato Human Freedom Index has been used for the economic and personal freedom ratings, as the report covers both aspects across a consistent set of countries, methodology, and years.

As well as correlation between the Cato economic and social indexes (r = 0.70), there is also positive correlation between the independent economic and social indexes, ranging from r = 0.53 (Hertitage Economic Index and Freedom House Score) to r = 0.77 (Cato/Fraser Economic Index and Social Progress Index).

The World Happiness Report is also moderately positively correlated with the Cato overall freedom index (r = 0.68) and moderately to strongly positively correlated with all the other indexes, both economic and social freedom.

Correlation between the personal/social indexes and happiness was slightly higher, with the Social Progress Index the strongest with r = 0.78.

Australia is 10th place in the World Happiness Report, and 5th in Cato's overall freedom index.

RankCato Freedom IndexWorld Happiness
1New ZealandFinland
3Hong KongDenmark
Overall freedom and world happiness (r = 0.68)

Economic freedom

As expected, there is strong correlation (r = 0.88) between the Heritage index and the Cato index; the Fraser index is the same as the economic part of the Cato index. Australia ranks very well, at 9th place in Cato/Fraser, and 4th place in Heritage.

Note that modern Nordic countries actually have a lot of economic freedom, being spread across to top quartile (Cato has Denmark 13th through to Sweden 35th), and the United States is no longer as free as it used to be (Heritage ranks them 17th, and although they are still high on Cato's economic freedom they do worse on personal freedom).

RankCato / FraserHeritage
1Hong KongSingapore
2SingaporeHong Kong
3New ZealandNew Zealand
5United StatesSwitzerland
7United KingdomUnited Kingdom
Economic freedom top ten ranking


Personal (social) freedom

Other well known indexes include the Freedom House Score, and then Social Progress Index. As expected, correlation with the Cato index is strong (Freedom House r = 0.86, Social Progress r = 0.77).

Australia ranks well, 12th in the Cato Personal Freedom Index, equal 8th in the Freedom House Score, and 12th in Social Progress Index.

RankCatoFreedom HouseSocial Progress
3New ZealandNorwaySwitzerland
7GermanyUruguayNew Zealand
8AustriaNew ZealandGermany
Social freedom top ten ranking


Relationship to political outlook

Previous analysis of the political outlook, of both parties and voting electorates within Australia, shows the opposite result -- a negative correlation between economic freedom and social freedom.

That is, there are some parties on the left (in popular media terms) that promote greater personal freedom but reduced economic freedom, and some parties on the right that promote greater economic freedom but reduced social freedom.

I have never quite understood why these two ideas had a negative relationship, and in fact the world-wide country analysis shows that on a greater scale they have a positive relationship.

I don't know the results for other countries, but one possible explanation for Australia is that we are already one of the most free countries in the world (top 10 or 20) and so it is not a key issue for many people.

There is low support for freedom-based parties in Australia not because people don't care about freedom, but because they have already achieved most of the goals (being in the top ten countries in the world) and it is simply no longer a big concern.

However, it still doesn't make sense though why, even if you concentrated on, say, improving social freedom why that has to be combined with reducing economic freedom (or vice versa).

It is often argued, from both sides, that you can't have one without the other, but this is clearly not the case from the worldwide data; the data actually shows they go hand in hand!

Alternative graph

The same chart as in the introduction, but happiness is shown as light to dark instead of green to red.

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