Monetary Policy
A new study links economic freedom—not income levels—to local happiness rates.
What to Know:
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According to a significant peer-reviewed study, economic freedom—rather than income alone—is a major factor in determining happiness in American cities.
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Cities with lower taxes, limited government spending, and flexible labor markets report significantly higher levels of life satisfaction.
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The study controlled for variables like income, education, and employment—and still found economic freedom to be a strong independent predictor of happiness.
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Excessive regulation and high taxation can reduce feelings of autonomy, even in high-income areas, leading to lower reported well-being.
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The findings present a powerful opportunity for 2025 campaigns to reframe economic issues around personal freedom, agency, and quality of life—not just GDP or job numbers.
What makes people happy? Politicians chase the answer with policies, economists with data. Most assume the answer is simple—more money. But a newly published peer-reviewed study reveals a deeper truth: it’s not just how much you make—it’s how much control you have over what you earn, spend, and build.
In “Economic Freedom and Happiness in U.S. Metropolitan Areas,” authors Jeremy Jackson, Mona Amadiani, and Dean Stansel show that happiness is tightly linked to economic freedom, defined by low government spending, lower taxes, and flexible labor markets. In short: people are happier when they feel economically unshackled.
Measuring Freedom and Joy
Analysis of 381 U.S. metro areas goes beyond simply suggesting a correlation. It rewrites the playbook for urban policy and electoral strategy. In a moment when Americans are questioning government overreach and economic pessimism runs high, the data suggests what many intuitively feel: happiness comes from being free to chart your own financial path.
Image generated by DALL-E
Published in the Journal of Regional Analysis & Policy, the study draws on Gallup’s U.S. Daily Poll for subjective well-being scores and the Economic Freedom of North America index, which scores cities based on:
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Government Spending (lower is freer)
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Taxation (lower is freer)
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Labor Market Regulations (less restrictive is freer)
The researchers controlled for other happiness factors—income, employment, education, even weather. Yet economic freedom stood out as a significant, independent predictor of happiness. In fact, a one standard deviation increase in economic freedom predicted a measurable rise in life satisfaction.
A Tale of Two Cities, One Truth
Look at cities through the lens of economic freedom, and a clear pattern emerges. Austin, Texas, thrives on low taxes, light-touch regulation, and a pro-growth climate. With no state income tax and minimal bureaucratic friction, it’s become a magnet for startups, creatives, and self-starters. Despite rising housing costs, residents report high life satisfaction, strong civic pride, and a sense of upward mobility.
Gov. Abbott signs pro-growth business bills. Source: Office of the Texas Governor
San Francisco, California, by contrast, is marked by heavy regulation, high taxes, and expansive public programs. But even with massive public spending and immense wealth, resident satisfaction has dropped. Layers of red tape, unaffordable housing, and a feeling of lost control have pushed many to leave.
Image source: California City & County Sales & Use Tax Rates
The paradox is clear: bigger government doesn’t automatically mean better lives. When people feel empowered to shape their own future, they’re happier. When bureaucracy replaces autonomy, even in wealthy cities, fulfillment declines. Austin and San Francisco represent two distinct models of governance and two different approaches to economic freedom and quality of life.
The Power of Autonomy
One of the study’s most important contributions is its reframing of the income-happiness debate. While it’s long been accepted that higher income correlates with greater life satisfaction, the authors show that this relationship breaks down when income is paired with a loss of personal control. In other words, earning more doesn’t necessarily make people happier if they feel constrained by how they can use it.
The study suggests that people want agency, or the freedom to make decisions about their work, money, and investments without excessive interference.
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The freedom to change jobs, launch a business, or redirect financial priorities on one’s own terms plays a powerful role in shaping well-being. This aligns with decades of psychological and behavioral research showing that autonomy is a core driver of human happiness. The more people feel in control of their environment and decisions, the more likely they are to report fulfillment.
Policy Implications
Here’s where the study punches through the political noise. It doesn’t say government is bad. It says too much government might be making people feel helpless rather than helped. For policymakers, this is a call to reconsider bloated public programs, overregulation, and taxation that disincentivizes independence. Instead of focusing purely on redistribution or social spending, cities should consider:
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Streamlining licensing and permitting processes
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Lowering local tax burdens
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Cutting red tape for small businesses and workers
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Limiting overreach in housing and labor markets
In this sense, the study suggests reconsidering how government functions rather than criticizing it directly. When policy prioritizes empowerment over control, the result isn’t less support, but more meaningful support. Cities that focus on enabling choice, streamlining access, and removing unnecessary barriers may be better positioned to foster lasting well-being.
Campaign Impacts Are a Messaging Opportunity
For candidates in 2025, this study is political gold. It offers a new way to frame economic debates—not just around growth or GDP, but around personal happiness. Republican and independent-leaning candidates can point to the study as evidence that smaller government boosts not only prosperity but peace of mind. “Vote for freedom” becomes more than a slogan—it’s a quality-of-life argument.
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Progressives, on the other hand, will need to reframe how their policies restore agency rather than control. For instance, how can programs empower rather than entangle? In either case, this research is a call for more nuanced, liberty-first governance.
Wrap Up
In a period of heightened national anxiety and rising inflation, new research suggests that economic freedom, not simply financial aid, has a stronger correlation with individual well-being. The study defines economic freedom as the ability to make personal choices related to work, spending, and investment without excessive government interference. Respondents indicated higher satisfaction when they had more control over their financial decisions, even in areas with lower average incomes.
The findings suggest that autonomy in daily economic life—such as the ability to opt in or out of certain services, start a business, or change employment—may contribute more to reported happiness than direct support programs. As cities and policymakers reconsider strategies for growth and public engagement, the data points to freedom of choice as a key variable in improving life satisfaction across diverse communities.