How Much Economic Freedom Do We Need to Be Happy? A Comparative Analysis of the U.S., Japan and Germany

Abstract

Economic freedom affects wellbeing as numerous studies have shown. But there are differences among countries: while in some countries a low level of economic freedom already leads to high wellbeing, the same level of economic freedom in other countries may not be sufficient to achieve even satisfactory wellbeing. In the present study, we examine three industrialized countries whose economic prosperity is comparable - namely the United States, Germany and Japan – and analyse the perceived economic freedom on a microeconomic level using the capability approach. We later make a comparison with the freedom indices measured by the Heritage Foundation. As a result, in the USA, for example, freedom to invest plays an important role, and a high degree of freedom promotes wellbeing because of lower standards in social security systems. In Germany and Japan, on the other hand, the requirements for economic freedom in this area are lower, without this necessarily being accompanied by welfare losses. Though Germany scores comparatively lower in the Labour Freedom Index, German participants were more satisfied with their job situation than in the other two countries. The country comparisons show that, depending on cultural differences and habits, there are different demands on economic freedom to achieve wellbeing.

Keywords: economic freedom, well-being, happiness, capability approach, U.S., Japan, Germany

JEL Classification: I31, O12, P52