Economic Freedom and Environmental Regulation

The Pacific Research Institute recently released its “U.S. Economic Freedom Index: 2008 Report” and the results are pretty interesting.

PRI defines economic freedom as “the right of individuals to pursue their interests through voluntary exchange of private property under rule of law.”  Thus, the more easily two individuals can freely exchange goods, property, services, etc., the more economic freedom he or she has.  Thus, a state with greater economic freedom is simply a state in which its citizens enjoy greater economic freedom.

There is a lot of very interesting information in the report, but I want to focus specifically on the correlation between a state’s economic freedom score and that state’s environmental regulations.  Consider the five least economically free states on PRI’s report:

46.  Pennsylvania

47.  California

48.  New Jersey

49.  Rhode Island

50.  New York

If one were listing the five states with the most restrictive environmental regulations, the list would include at least a couple of these states.  It is probably not coincidental that states with more environmental regulations tend to come in lower on the economic freedom index.  There are at least two reasons for this.

First, there tends to be a more pro-big government mentality in many of these states.  State governments already have significant control over the state and it is difficult, if not impossible, for government to scale back its own size.  Not that it can’t happen, but it doesn’t tend to happen.

Second, these states harbor some of the largest and most powerful environmentalist groups in the country.  While most of the larger organizations are nationwide, these organizations have a particularly strong hold over states at the bottom of the economic freedom index.  As long as environmentalist groups make up a very powerful lobby, it will be difficult for some of these states to reform their economically crippling environmental regulations.

Note that I am only pointing out a strong correlation between more environmental regulation and less economic freedom.  I am not claiming that an increase in environmental regulation causes significant losses of economic freedom, although the potential is there.  It is simply worth nothing that, whether coincidentally or not, people should be aware that environmental legislation and regulation can be very economically harmful.

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