Culture and Freedom

Economists have long posited that institutions matter for economic success, but how they matter is a question much more difficult to answer. With countless studies showing a positive link between the formal institutions of economic freedom and growth and recent studies illustrating the link between informal cultural attributes and economic growth, it is clear that institutions are important (see De Haan et al., 2006 for a survey on the importance of economic freedom and economic outcomes). This chapter contributes to the literature exploring the relationship between economic freedom, culture, and economic growth and development. The results of Williamson and Mathers (2011) and Mathers and Williamson (2011) are reviewed and expanded, providing further evidence of the complicated and important relationship between formal and informal institutions and their consequences for economic outcomes. Prior to understanding how culture and economic freedom affect economic decisions, it is necessary to understand what institutions are and what the difference is between the institutions of economic freedom and culture.

Find the chapter online at The Annual Proceedings of the Wealth and Well-Being of Nations.