Economic freedom is a vital component of a prosperous society. Defined as the ability to make economic decisions without undue government influence, people in free societies can work, transact, and contract with others, as well as own and use productive property. The United States has traditionally been one of the most economically free countries; however, measures of economic freedom from Freedom House, The Heritage Foundation, and the Fraser Institute in Canada, demonstrate a troubling pattern: over the last 30 years, economic freedom in the United States has declined precipitously.
As useful (and disturbing) as this knowledge is, these measures provide us with data but do not help us understand why economic freedom is waning. To understand the root cause of the decline, and reverse it, we need to get to the heart of what Americans know, and don’t know about economics. Without an understanding of how the economy functions, and how freedom is the foundation of our economic prosperity, the slide will continue.
So how do we begin to turn the ship around? First, we must recognize that current gauges of economic “knowledge” may be false signals of an informed citizenry. While the Advanced Placement exam in economics for high school students and the Test of Understanding College Economics tell us if students have learned key concepts, they do not reveal whether students have learned to think clearly about economic issues. To accomplish this, a more foundational change is required: We need to change the way economics is taught.
We know that scoring high marks on exams, learning how economic models work to predict certain outcomes, and becoming fluent in data analysis produces economists with employable skills — but that misses the point. Our society needs thinkers who see beyond examinations, understand the limitations of abstract models, and the flaws in data analysis. To put it more succinctly, we need people who question the baseline assumptions, recognize fallacious errors, and see the unseen forces that lead to unintended consequences. What does that mean for economic educators? ECON 101 should return to its roots by accentuating the history of economic thought, buttressed by the work of Adam Smith, Frédéric Bastiat, F.A. Hayek, Milton Friedman and others, like economic historian, Joel Mokyr, who was a recipient of the 2025 Nobel Prize in Economic Sciences, who think holistically about complex problems.
Without the ability to think critically about issues, we end up with “educated” people making poor economic choices. Consider two political leaders: Representative Alexandria Ocasio-Cortez (NY-14) and President Donald Trump, who both graduated with degrees in economics. Despite their education, each has decided, in their own way, to ignore clear-eyed economic thinking in favor of political policies that have detrimental economic consequences. They passed the exams, but what did they learn?
And that’s the crux of the issue on economic freedom. When economic education doesn’t connect freedom to prosperity, we all end up poorer. This is one on the main points of Frédéric Bastiat, a 19th century French economist known for penning a scathing series of satirical papers deriding protectionists in the French government. In the mid-1840s, Bastiat endeavored to explain how trade barriers and monopolies made small segments of the population rich at the expense of every consumer. Limiting the ability to trade with other nations was severely limiting the freedom of consumers. The higher prices resulting from trade limits curbed purchasing power and reduced standards of living. While the arguments that domestic jobs will be saved was tempting, failure to look beyond the very short-term benefits, equated to a sacrifice of freedom. After 180 years it seems that we are no better off.
Today, misconceptions about markets, money, and trade are everywhere — from social media, to classrooms, to Congress, to the White House. They shape policies that sound compassionate but often do more harm than good. We are buffeted by the sophisms of special interests, the well-intentioned, and the ignorant. With the advent of AI, these misconceptions will only be reinforced.
Dispelling misconceptions isn’t about defending “capitalism” in the abstract. It’s about clarity. When citizens misunderstand basic economics, policymakers have an easier time selling costly illusions such as price controls that create shortages, tariffs that raise consumer prices, or deficit spending that mortgage future growth.
By jettisoning the critical analysis of policy, and allowing the misconceptions of Bastiat’s day to persist, America is on the verge of the inexorable loss of its economic freedom. But it is not too late! To restore economic freedom, economic education needs to return to its roots. A public conversation grounded in the reality that intentions don’t guarantee outcomes, and every policy has trade-offs, would serve society. From voters to lawmakers to the next generation of entrepreneurs, economic literacy is the first step toward that goal — and one our democracy can’t afford to skip. Only then will we raise up a generation capable of reversing the precipitous decline in economic freedom.
