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Economic freedom and materialism: an empirical analysis


While economists have found a positive relationship between norms like generalized trust and economic growth, several scholars outside of economics have argued that there is a tradeoff between economic growth and morality. In particular, they argue that as markets develop, market values, e.g. a focus on money and material possessions, also increase. In this article we empirically test this claim using data from the Economic Freedom of the World project, the World Bank, and the World Values Surveys. Our findings suggest that countries with more economic freedom, i.e. those countries that embrace markets to a greater extent, are less materialistic. We also find that countries with a higher GDP per capita are correlated with less materialism.


There is a substantial body of empirical research that supports the idea that economic freedom increases general wellbeing. First, there is a strong positive relationship between economic freedom and economic growthFootnote 1 as well as between economic growth and better education outcomes, more diverse and higher quality products, and more job opportunities (Gwartney et al. 1999; Djankov et al. 2002; Arnold et al. 2011; Doucouliagos and Ulubasoglu 2006; Dasgupta 1990). Secondly, economic freedom is positively correlated with proxies of well-being like fewer human rights violations (Soysa and Vadlammanati 2013), higher life expectancies and literacy rates (Esposto and Zaleski 1999), more income equality in some cases (Ashby and Sobel 2008; Berggren 1999; Krieger and Meierrieks 2016), even higher levels of happiness and general life satisfaction (Gehring 2013; Bjørnskov et al. 2010; Knoll et al. 2013). Also, rule of law, a key component of economic freedom, appears to lead to improvements in human capabilities and welfare including infant mortality, life expectancy, malnutrition, environmental factors, and education (Boettke and Subrick 2003).Footnote 2

What the literature has not considered—and what we hope to help establish in this article—is the effect that markets and money have on moral wellbeing. In this article, we explore the empirical relationship between the extent that a country embraces markets (as proxied by economic freedom) and measures of greed or materialism. We also look at the empirical relationship between money (measured as GDP per capita) and measures of greed or materialism.Footnote 3 We find that countries with more economic freedom and higher GDP per capitas are associated with less greed or materialist values. These findings suggest that neither the spread of markets nor increased prosperity are necessarily associated with greed or materialism.

The article is, thus, structured as follows. In Sect. 1, we offer a brief overview of the recent relevant literature on the relationship between markets, money, and materialism. We also present and explain our hypotheses: (1) measures of materialism are lower where measures of economic freedom are higher and (2) measures of materialism are lower where measures of GDP per capita are higher. We do not focus on the extensive debate around the doux-commerce advanced by Montesquieu and others that commerce is a moralizing agent that gentles manners (Hirschman 1997). Instead, we focus on more recent discussions in the social sciences concerning the relationship between markets and money, and materialism. In Sect. 3, we introduce our data, layout our empirical strategy and convey our findings. Finally, Sect. 4, offers concluding remarks.

The effect of markets and money on materialism

Previous work

While the question as to whether markets have moral consequences is an ancient one, it is also very much an active field of inquiry. Often, scholars have focused on materialism as a necessary consequence of capitalism and market competition. For instance, results from group experiments suggest that market contexts lead to moral behavioral changes. In an experiment where individuals had to choose money or saving a mouse’s life, individuals placed within a market context were more likely to take the money (Falk and Szech 2013). Falk and Szech (2013, p. 708) suggest that “ provide strong framing and focus on materialistic aspects such as bargaining, negotiation, and competition, and [resultantly] may divert attention from possible adverse consequences and moral implications of trading.”

The converse position suggests that materialism is not a normal good. That is, when incomes improve as a result of economic growth, individuals do not demand more materialism. Freer markets, then, should weaken materialism in individuals rather than encourage it. Indeed, “...people in capitalist countries already possess the material, [therefore] they are less attached to their possessions than people in poor countries” (McCloskey 2010, p. 26). For McCloskey (2010), it appears that individuals with more opportunities to afford more things will be less likely to define themselves by their possessions. Likewise, Inglehart (1977, p. 991) hypothesizes “...individuals pursue various goals in hierarchical order...[where] pursuit of symbols of affluence could be regarded as derivative from the search for sustenance.”Footnote 4 Other studies implicitly suggest that materialism is costly for relatively richer individuals. Materialist individuals spend more time and resources focusing on the protection and acquisition of material objects, thus, they have to spend less time focusing on other life domains (Sirgy et al. 1998; Sirgy 1998; Ryan and Dziurawiec 2001). The presence of materialism, then, ceteris paribus generates lower levels of life satisfaction. This is confirmed on the macro level: relatively richer countries have higher levels of life satisfaction due to individuals in richer countries preferring to develop rich social relationships more than pursuing intrinsic goals of financial gain (Ahuvia 2002; Belk 1985; Kasser and Ryan 1993, 2001; Sirgy et al. 1998). For these authors, market growth and development make materialism too costly.

Despite the interest and debates, there are no studies within the economics literature as far as we know that empirically evaluate how economic freedom impacts materialism. The closest set of literature within economics is concerned with comparing cultural traits to economic freedom scores. Berggren and Jordahl (2006) as well as Leibrecht and Pitlik (2015), for instance, find that economic freedom increases trust or social capital because the rule of law (and other economic freedom subcomponents) substitutes for higher transactions cost ways of generating trust such as developing a good reputation. In another paper, Berggren and Nilsson (2016) provide evidence that greater economic freedom cultivates an environment of tolerance. Likewise, Williamson and Mathers (2011) as well as Mathers and Williamson (2011) use an overall cultural index that includes the level of trust, respect, self-determination, and obedience from the World Values Survey 1981–2014 Longitudinal Aggregate (2014) to determine how economic freedom impacts economic growth. In Williamson and Mathers (2011), economic freedom is more important than values for economic growth in areas where economic freedom is high. Conversely, values are more important for growth than economic freedom in areas where economic freedom is low. Adding to this, Mathers and Williamson (2011) find that “good culture” amplifies capitalist institutions, suggesting that “culture” is at least one mechanism that leads to improved economic outcomes.

More closely related to our topic are studies within psychology which explore why materialist sentiments change over time and how materialism impacts subjective well-being. Regarding the former, the founder of the World Values Surveys, Ronald Inglehart first examined the composition of materialism within the context of cultural and political conflict. He claimed that early life determinants—formative experiences—dictate whether an individual will become materialistic or postmaterialistic later in life. This, he conjectured, would lead to differences in materialist sentiments which then would cause intergenerational political conflict (Inglehart 1971). In his seminal paper, Inglehart (1971) measured materialism as the relative preference of policy concerning protection of acquisitions (emphasis on economic security and domestic order) over more expressive priorities (like free speech and political participation). His findings suggest that the post-materialist/materialist designation appears to predict patterns in political orientations, connecting his hypothesis concerning hierarchical value orientations and political preferences across generations. Further empirics testing Inglehart (1971) are mixed. Duch (1993), for instance, found that survey results from former communist regimes now identify with postmaterialism as opposed to the expected materialist sentiments. They show, instead, that economic conditions at the time of the survey are much more important explanations for variations in postmaterialist measures. Also, Ger and Belk (1996) find that social conditions that are driven by flexible markets invite materialism through “envy” and “prestige of consumption.” Both works suggest that Inglehart (1971) was incorrect in saying that formative experiences necessarily dictate materialist outcomes. A more recent paper by Ahuvia and Wong (2002), however, confirms Inglehart—economic deprivation in childhood does, in fact, lead to economic insecurity later in life.

The psychology literature also has extensively explored how materialism impacts well-being (Ahuvia 2002; Sirgy et al. 1998; Sirgy 1998; Ryan and Dziurawiec 2001; Belk 1984; Dawson and Bamossy 1991; Keng et al. 2000; La Barbera and Gürhan 1997). These studies show that materialism, incontrovertibly, leads to lower life satisfaction. A materialist mindset imposes unrealistically high standards of living that are never fully satiated (Sirgy 1998; Sirgy et al. 2013). Spending resources trying to attain these standards and never meeting them leads individuals to feel as if they are treated inequitably and unjustly. It also leads to feelings of envy and anger which, in turn, lead to further dissatisfaction (Dawson and Bamossy 1991; Sirgy et al. 1998; Belk 1985). The causes of the consistent negative relationship between materialistic inclinations and well-being in these studies are largely attributed to psychological reasons: either personality and factors such as self-esteem, optimism, or alienation (among others) (Belk 1985), or situational factors like satisfaction with family, job, neighborhood, etc. (Sirgy et al. 1998; Sirgy 1998), generate and reinforce the negative relationship observed (Sirgy et al. 2013).

One reason that there may be so few economic studies that explore the relationship between markets, money and materialism is that high level rules or laws do not always lead to predictable responses on the part of the individual. Standard neoclassical models do not readily accommodate this kind of complex decision making. The recent replication crisis has brought these issues to light, empirically questioning the validity of even Falk and Szech (2013)’s claim that markets erode morals.Footnote 5 Because individuals make moral choices based on a variety of reasons, it can be difficult to replicate similar results for the same social experiment. Models that attempt to isolate away the endless variables that make up human decision-making must face this problem. But a model embracing that complexity may offer a solution. Congleton (2018)’s “homo-constitutionalus” characterizes human behavior as decisions embedded within a hierarchy of rules. Within society, we have laws or rules that govern groups; at the individual level, we have rules that govern our action and survival. This bounded decision-making hints at an underlying connection between psychological and economic theory. Namely, that environmental factors—not pure rational calculi—cause us to favor certain rules over others.


In this article, we propose that institutional factors ultimately lead individuals to become more materialistic. In this way, we follow Berggren and Jordahl (2006) and Ahuvia and Wong (2002) which theorized that improved economic conditions leads to changes inducing individuals to become more trusting or more concerned with their own happiness.

Specifically, we hypothesize that:

  • Hypothesis 1 Measures of materialism are lower where measures of economic freedom are higher.

  • Hypothesis 2 Measures of materialism are lower where measures of GDP per capita are higher.

We believe there are at least two reasons why markets and money lead to less materialism:

The market makes us richer and being richer allows us to focus on alternative, non-material things

The neoclassical version of the law of diminishing marginal utility states the utility an individual receives from consuming one unit of a good will necessarily be higher than the utility received from consuming a second or a third (or subsequent) unit of that good all else held equal. To the extent that (more and less wealthy) individuals desire social, moral and spiritual goods in addition to material goods, even if they have a preference for material goods, we would expect them to shift their focus away from material goods and towards other types of goods the more material goods that they acquire and consume. As such, the portfolio of goods desired and consumed by individuals who are more wealthy are likely to be relatively more diversified than the portfolio of goods desired and consumed by less wealthy individuals, all else equal, because more wealthy individuals are more likely to be able to satisfy their material desires without exhausting their resources than less wealthy individuals. This explains why we might find a greater emphasis on (a desire for) material goods relative to other goods amongst less wealthy populations.

It is helpful, also, to consider the law of diminishing marginal utility ordinally. That is, individuals rank acquisitions based upon relative baselines not on the absolute amount of utility that an individual assigns to changes in acquisitions. As such, an individual assigns items in conjunction with their relative importance across various uses. The first bottle of water you purchase might be first assigned to quenching your thirst, the second bottle of water might be given to your pet, and the third you might use to make a cup of soup. If it is very hot outside, you might decide to reallocate the bottle of water originally meant for soup to quench your own (and your dog’s) thirst—a hotter afternoon means that you value the water’s uses differently than when it was cooler in the morning. Thinking about the law of diminishing marginal utility in this way means that individuals are principally concerned with making choices in particular situations while faced with specific constraints. They are not primarily concerned with attaining a particular level of utility.Footnote 6

This has at least two implications that are relevant here. First, individuals in less economically free and so less wealthy countries might come to view the importance of attaining more wealth differently than individuals in more economically free and so richer countries. The difference in the material quality of life, for instance, between the wealthiest and least wealthy individuals is arguably more pronounced the less economically free the country. Indeed, individuals in less economically free and so poorer countries may simply view becoming wealthier and the attainment of more material goods as being more important than do individuals in more economically free and so richer countries. To continue the example above, living in a less economically free and so poorer country may be akin to having three bottles of water on a very hot day (i.e. a focus on your own material wellbeing becomes more likely). Second, because countries with more economic freedom are also countries that do a better job securing property rights and limiting government predation, individuals in more economically free countries will be able to make better choices because they can allocate less time, resources and attention to acquiring things and securing the things they have. The emphasis moves away from acquiring and protecting things to instead wondering how to allocate and use things away from materialist concerns (as defined and measured here).

Economic freedom may lead to faith in the rules of the system and so there’s not a need to be as material-focused

The rules of a system shape an individual’s set of possible opportunities. We believe it also shapes an individual’s opportunity set of possible moral responses. Recall that countries with greater economic freedom have lower levels of government predation and stronger contract enforcement; they have institutions that decrease the costs associated with transacting. Courts in these countries tend to redress breaches. Because people are confident that their goods will not be confiscated or stolen, individuals are less worried about losing those things they have earned. As a result, individuals spend less time focusing upon protecting their things themselves and ensuring that they have the resources to protect their material possessions. Within less economically free systems, on the other hand, individuals are not only wary of others reneging on mutually agreed upon contracts, they must also be concerned with the possibility of violent theft. Moreover, individuals cannot place faith in legal systems to rectify damages or return stolen goods. Indeed, less economically free countries are prone to corruption by officials or simply have inept enforcement institutions. Additionally, individuals residing in less economically free countries are aware that public authorities can and sometimes do, confiscate assets or income without warning or compensation. Given these conditions, it does not seem unreasonable that individuals covet their things and desire more; they are afraid they will lose them. Consequently, their priorities towards possessions are more highly emphasized. Being materialistic is a rational response to the environment.

Data and empirics: markets, money, and materialism


In the regression specifications introduced in the next subsection, we compile variables on economic freedom, GDP per capita, political institutions, and materialism from four datasets.

As our dependent variables, we include measures of materialism which all come from the World Values Surveys six wave aggregated file 1981–2014 issued by the World Values Surveys Organization (World Values Survey 1981–2014 Longitudinal Aggregate 2014). This dataset contains the answers to hundreds of value-related and life-preference questions for over 256,000 interviews across 87 countries. In this article, we choose one survey question and two index variables pertinent to materialism or greed (as we have defined it in the introduction). These questions, shown in Tables 1 and 2, provide proxies for materialist or non-materialist sentiments and have been widely used throughout the literature. Tables 1 and 2 provide a detailed explanation of these variables and how to interpret the responses.

Table 1 Materialism-related question from the world values surveys: responses less than 0 were recoded as missing
Table 2 Post materialism indexes from the world values surveys: responses less than 0 were recoded as missing

Economic freedom is our main explanatory variable of interest. We primarily use the final summary measure of the Economic Freedom of the World Index (EFW), but for robustness, as well as to examine which areas of economic freedom may be most important when it comes to materialism, we also include results for three of the individual areas that comprise the summary index: Area 2: Legal Structure and Security of Property Rights, Area 4: Freedom to Trade Internationally, and Area 5: Regulation of Credit, Labor, and Business.Footnote 7 The time period for this data is 1980–2012 (Gwartney et al. 2014).

Several of the five major areas might impact our respective materialism variables in any number of ways. For example, Area 2: Legal Structure, and Security of Property rights should have a direct positive correlation with our materialism variables since secure property rights might allow individuals to develop faith in the economic system, allowing them to be less self-focused. So, individuals in countries with better property rights should answer away from the lower, materialist survey answers—Bad thing. Similarly, Area 4: Freedom to Trade Internationally and Area 5: Regulation of Credit, Labor and Business, should also have a positive correlation with our questions since the set of institutions captures by these areas tend to result in economic growth that enhances wealth—allowing individuals to diversify their desires over a variety of goods and services—some of which may not be material-oriented. We examine each of these individual area separately.

This said, it is also important to use a measure representative of the extent of the market- or the degree to which participating actors have the ability to create or attain products with little or no outside intervention and engage in other voluntary exchanges. Using the EFW summary measure here allows us to conservatively proxy the market environment. Indeed, empirical evidence suggests already that such summary measures that proxy the extent of the market are connected with the ability to provide certain quantities and qualities of goods: markets with fewer regulatory burdens provide greater quantities of better quality goods and services while markets with more interventions have fewer products of lesser quality (Djankov et al. 2002). We believe that this variation in the distribution of choice across goods and services reflects both ways the markets shape materialist tendencies: (1) an explicit impact that more choice has on an individual’s opportunity set and (2) an implicit impact that market environments offering more choice impart on individual action.

Additionally, we include GDP per capita as a proxy measure for the overall level of development of a country. This measure comes from the World Bank Development Indicators (World Bank 2017) for years consistent with our materialism measures—1980–2014. This measure is included in all of our regressions to ensure that the impact of economic freedom on materialism is not explained by the effect that a country’s level of wealth has on materialism. Since economic freedom and per capita income are highly correlated, and because the literature provides empirical support for the argument that economic freedom has a causal impact on a country’s level of wealth (Hall and Lawson 2014), we recognize that the impact of economic freedom on materialist attitudes may be understated in some cases so the estimates provided are conservative estimates.

We also recognize that political institutions, not just economic institutions, may exert a significant impact on the materialistic attitudes people possess. To account for this impact, we control for one key measure of institutional quality: democracy.Footnote 8 This measure is obtained from Bjørnskov and Rode (2019)’s update to the Cheibub et al. (2010) dataset.

Finally, included in our regressions are several measures from the World Values Survey that capture key individual characteristics of the survey participants who have answer materialism-related questions we use in our empirics. These are factors that we believe may impact materialistic attitudes in addition to economic freedom. These characteristics include: gender, age, education, social class, marital status, and employment status. We only use years that are exactly comparable, even though there is data for approximately 25 closely comparable years. For example, we may have available data from 1993 in the WVS, but data from 1990 or 1995 from the EFW index. Since we have no reason to justify rounding up or down to make these years comparable, we choose to compare only those years where this is data overlap: 1990, 1995, and 2000–2014. Finally, we converted questions with discrete, categorical answers—such as Y002Footnote 9 and Employ—into dummy variables for easier interpretation. Table 3 provides a verbal description of each of the explanatory variables as well as their source. Descriptive statistics for the variables used in this study are found in the appendix. The next section discusses the empirical strategy we employ in this analysis.

Table 3 Variable names, definitions, and data sources

Empirical strategy

We explore the relation between markets and materialist sentiments by developing and then testing the following two hypotheses:

  • Hypothesis 1 Measures of materialism are lower where measures of economic freedom are higher.

  • Hypothesis 2 Measures of materialism are lower where measures of GDP per capita are higher.

Two of our dependent variables derived from the World Values Survey, “E014” and “POST,” are dummy variables, so a logit model is used to estimate the relationship between economic freedom and these two dependent variables. Our third dependent variable, “Y001” is a categorical variable. The relationship between economic freedom and this dependent variable will be estimated using an ordered logit regression. Equation (1) depicts the regression model we estimate.

$$\begin{aligned} WVS\;Question_{it}=\beta _{0} + \beta _{1}EFW_{it} + \beta _{2}GDPpc_{it} +\beta _{3}Pol'_{it} +\beta _{4}X'_{it} + \epsilon _{i} \end{aligned}$$

where, Eq. (1) is a logistic regression where i denotes the country subscript and t denotes the year. On the right-hand side of the equation, \(EFW_{it}\) denotes the economic freedom measure used in that particular specification, \(GDPPC_{it}\) is the per capita GDP measure, \(Pol'_{it}\) is our political control variable–democracy, and \(X'_{it}\) is the vector of individual characteristics of survey respondents. Here, the dependent variable, the survey respondent’s true attitude toward materialism, is not observed. We do, however, observe the individual categories that survey respondents identify with. For the binary dependent variables, “E014” and “POST,” responses are coded such that a “1” indicates that the survey expressed postmaterialist attitudes. For the categorical dependent variable, responses are coded into five categories ranging from “0” (highly materialist attitudes) to “5” (postmaterialist attitudes).

In all but one case, higher values for our independent variables are associated with less materialistic attitudes. For example, positive marginal effects and higher odds ratios for the economic freedom variable suggest that greater economic freedom is associated with less materialism. With respect to the “social class,” however, higher values correspond to a lower social class so the interpretation of the results is reversed for this. Negative marginal effects and odds ratios below 1 indicate that a lower social class is associated with greater materialism.

For each regression model, two separate specifications are estimated:

  • Specification 1 Our baseline estimate which includes our dependent variable, our measure of economic freedom, and our per capita income measure to control for the overall level of development within a country.

  • Specification 2 Adds our political institutions proxy and a vector of variables controlling for a numbers of characteristics of the survey respondents.

For each specification, the regression output table reports the odds ratios, average marginal effects, and the pseudo-R-squared measure. The logit regression tables also report the percentage of observations that are accurately predicted by each specification to give us a sense of how well our models explain our measures of materialism. The predicted probabilities for the two main explanatory variables of interest, economic freedom and per capita income, are reported for the ordered logit regressions.

Several robustness checks were also conducted, the results of which are not included in this paper but can be made available upon request. Each specification was re-estimated to include both year and country dummy variables. Three alternative employment dummy variables were used in lieu of “Unemployed,” and “Income Scale” was used instead of “Social Class.” We also estimated the regressions constraining the sample to countries with relatively higher economic freedom scores (7.1 or higher), and separately constraining the sample to countries with relatively lower economic freedom scores (lower than 7.1). Finally, since theory does not provide much guidance as to which is preferable, the probit or the logit model, we chose to estimate logit models in this paper but probit models were also estimated. These robustness checks did not alter the pattern and the significance of the main explanatory variables of interest, economic freedom and per capita income, in any material way.

Empirical results exploring the relationships between materialism, markets, and money

To establish that a relationship exists between economic freedom and materialism, we estimate the coefficients for Eq. (1) first with using the summary measure of economic freedom, then separately examining the individual areas of economic freedom. Referring to the results in Tables 4 and 5, the results for economic freedom, both with and without added controls, are statistically significant at the 1% level and all of the signs are in the anticipated direction. That is, a positive response for “E014”—that it is a good thing to place less emphasis on money and possessions in the future—is more likely to be provided by respondents living in economically free countries than by those living in places that are not economically free.

Table 4 Logistic regression analysis of world values survey question e014 and economic freedom summary index and Area 2
Table 5 Logistic regression analysis of world values survey question e014 and economic freedom Areas 4 and 5

In all specifications, economic freedom is significant at the 1% level. The marginal effects show that the effect of a one-unit increase in a country’s summary economic freedom score (which is also roughly equivalent to one standard deviation) is associated with an increase in the likelihood that an individual will respond in a way that is consistent with postmaterialist sentiments by about 2–4%. The odds ratios indicate a one-unit increase in a country’s summary economic freedom score makes postmaterialist sentiments between 1.11 and 1.23 times more likely. The signs, significance, and magnitude of these results are comparable to the results when Areas 2 and 5 are used instead of the summary scores.Footnote 10

Similarly, when the dependent variable is “POST,” the binary version of Inglehart’s index, shown in Tables 6 and 7 all of our results for the summary economic freedom score, are statistically significant at the 1% level and have signs in the anticipated direction. That is, postmaterialist attitudes are more likely to be expressed by survey respondents living in economically free countries than by those living in places that are not economically free.

Table 6 Logistic regression analysis of world values survey question post and economic freedom summary index and Area 2
Table 7 Logistic regression analysis of world values survey question post and economic freedom Areas 4 and 5

Here, the odd-ratio for the EFW variable suggests that the odds are 1.21–1.39 times higher for individuals in places with higher summary economic freedom scores to answer in postmaterialist ways over materialist ways. The marginal effect of a one-unit increase in a country’s economic freedom score on the likelihood of postmaterialist attitudes is an increase of about 1.9–3.2%. When Areas 2, 4, and 5 are used the signs, significance, and magnitude of the results are very similar.

Finally, the results of the regressions using the six-category version of Inglehart’s index as the dependent variable provide a similar picture as in the other two cases (Tables 8, 9, 10, 11). A one-unit increase in a country’s overall economic freedom score is associated with odds that an individual will have materialistic sentiments that are 1.10–1.13 times greater than they would be otherwise. These results are significant at the 1% level both with and without the inclusion of other control variables. The odds ratios for specifications using Areas 2, 4, and 5 in lieu of the summary index range from 1.06–1.09 and are also significant at the 1% level.

Table 8 Ordered logistic regression analysis of world values survey question Y001 and economic freedom summary index
Table 9 Ordered logistic regression analysis of world values survey question Y001 and economic freedom Area 2
Table 10 Ordered logistic regression analysis of world values survey question Y001 and economic freedom area 4
Table 11 Ordered logistic regression analysis of world values survey question Y001 and economic freedom Area 5

The marginal effects for these regressions suggest that economic freedom reduces the likelihood that survey respondents will hold materialistic sentiments, as the coefficients for the two lowest category values are both negative. The coefficients for the categories corresponding with less materialistic attitudes are all positive, suggesting that economic freedom makes these responses more likely. The results for the specifications using Areas 2, 4, and 5 as explanatory variables provide an identical pattern of results.

Taken together, the results of all three sets of regressions exploring the relationship between economic freedom and materialistic sentiments are consistent with our hypotheses. There is no evidence that competitive market institutions lead to a greater focus on materialistic goals. In fact, the analysis we present suggests just the opposite. Institutions that protect property, establish rule of law, foster greater economic competition, and allow individuals the freedom to choose what types of voluntary exchanges they want to participate in, are associated with an increased likelihood that individuals will express post-materialistic attitudes. These results are robust to the choice of dependent variable and the inclusion of relevant control variables.

Our empirical strategy and findings are deliberately not causal: it is not the intention of this paper to illustrate a causal link, but instead to show that markets and money are not associated with high levels of greed or materialism. Our findings confirm at least this unequivocally.

That being said, in using this strategy we expose ourselves to alternative and often competing explanations. For example, our results could reflect, as we suggest, an increase in the price of materialist sentiments for more economically free countries due to more opportunities to expand one’s portfolio of goods and experiences and the decreased likelihood of having one’s acquisitions stolen. Conversely, our results also could be interpreted as materialistic individuals creating and/or maintaining governments that support more interventionist governments and less economically free institutions or reforms. Less economically free countries could, thus, be subject to a sort of materialism trap where more materialist individuals support governments that embed institutions (both formal and informal) that generate materialism. This implies at least two counter-intuitive conclusions, however.

First, if materialistic individuals desire poor institutions, this suggests that they prefer to have and encourage institutions that maintain lower levels of life satisfaction (Ahuvia 2002; Sirgy et al. 1998; Sirgy 1998; Ryan and Dziurawiec 2001; Belk 1984; Dawson and Bamossy 1991; Keng et al. 2000; La Barbera and Gürhan 1997) and also, they prefer to maintain institutions that may expropriate their assets or provide poor protections against predation.

Second, this scenario suggests an implicit and known connection between materialism and low levels of economic freedom. For example, individuals that are materialistic might move to places that have lower levels of economic freedom.Footnote 11 It is worth mentioning, however, that empirical studies overwhelmingly find that people choose to migrate to places that have higher levels of economic freedom than their current location (Bergh et al. 2015; Nejad and Young 2016; Ashby 2007).

These possibilities seem unlikely, however. Regarding the first, low levels of life satisfaction are typically undesirable and most individuals do not want their acquisitions taken from them. Second, the large proportion of individuals that migrate from one country to the next do so to improve their lives (Gehring 2013). So, if the relationship between life satisfaction and materialism holds, as the psychology literature has extensively shown,Footnote 12 our results would be much noisier: these studies would predict that new migrants are more likely to be materialistic. Since our findings are both economically and statistically strong, this suggests, instead, that our theories are likely true: as individuals become richer and develop faith in good institutions, materialism is no longer an attractive moral trait.

Implications and conclusion

The results from our empirical tests suggest that markets and money do not generate materialism or greed. We provide two reasons why this may be the case: (1) the market makes us richer and being richer allows us to focus on alternative, non-material things; and, (2) Economic Freedom may lead to faith in the rules of the system and so there’s not a need to be as material-focused.

Much empirical work has emphasized the importance of economic freedom for growth, fulfillment of physical necessities, and life satisfaction or happiness. Indeed, economic freedom and growth are consistently correlated (Gwartney et al. 1999; Vanssay and Spindler 1994; Scully 1991) and may actually cause economic development (Dawson 2003; Faria and Montesinos 2009; Vega-Gordillo and Alvarez-Arce 2003). Very little empirical work has focused on how economic freedom impacts moral well-being generally and, specifically, how it affects materialism. Our article fills this gap. More specifically, we attempt to capture the relationship between materialist or greed oriented values and markets and money using an order logistic regression model. We show that by utilizing measures of the extent of the market (proxied by economic freedom), money (measured by GDP per capita) and various materialism-related questions over a 24 year period, higher levels of both economic freedom and GDP per capita are associated with lower levels of greed or materialist values. Our results suggest that improvements in economic freedom are associated with improvements in values, not the degradation of them.

Our empirical strategy is not without limitations. We cannot, for instance, claim that economic freedom causes materialism nor can we claim that our survey data is consistent with true preferences.Footnote 13 Indeed, individuals may, in fact, be adopting new positions or individuals could be facilitating the development of poor institutions in order to maintain their materialist sentiments. Given that more materialism could be purchased with greater wealth, however, it seems irrational that materialist individuals would want institutions that stifle wealth generation. To falsify this, we include GDP per capita in our model. In so doing we answer the following question: Are individuals in countries with greater GDP per capita’s more materialist? Our finding—GDP per capita increases as materialist sentiments decrease—suggests this latter position unlikely.

Despite this, we think that our results justify further empirical and investigative work. For example, an interesting extension of this work would be to evaluate within country analyses to exploit variation across different types of individuals. Unfortunately for us, the two datasets were not always consistent in measuring across similar regional areas. The Economic Freedom of the World Index does not measure every country regionally and for the ones that it does, the geographic regions are not always consistent with the World Values Surveys. Likewise, GDP data for some countries and regions is sparse. To supplement these issues, an ethnographic study may help provide additional support and robustness regarding our survey responses. A final avenue for future research would be to further investigate what we referred to as the materialism trap. Much has been said concerning poverty traps and violence traps as of late, could there also be a materialism trap? While our evidence certainly is supportive of this position, more could be done to develop and test this theory more explicitly.

A final topic of some importance concerns possible mechanisms we believe our theory operates out of—that is, do we believe our evidence is indicative of economic freedom explicitly causing individuals to be less materialistic or does our evidence support economic freedom via its effect on growth? Our empirics cannot confirm or reject either unequivocally. However, our two reasons for our empirical results suggest the two mechanisms are not mutually exclusive.Footnote 14 Our first reason—there exists diminishing marginal utility to material things and countries with economic freedom provide opportunities to choose and receive lots of things—suggest that our mechanism could function through the impact of economic freedom on growth. In particular, economic freedom—strong, legitimate formal institutions that facilitate rule of law and protection of private property—lays the foundation upon which markets can grow and flourish. This growth of markets provides a greater variety of goods, both in quality and quantity, as well as more job opportunities. It also lays the foundation upon which individuals can make higher quality choices—allocating resources away from the search for protection from predation towards entrepreneurial ways to innovate and use products and services in new ways.

The second reason, on the other hand, suggests that economic freedom also directly impacts our moral or materialist inclinations: the economic environments we live in dictate our possible moral choice set. As Boettke (1995, p. 11) aptly acknowledges, “The rules which enhance social cooperation and as such allow the simultaneous achievement of liberty, prosperity, and peace are moral rules. Moral rules which promise justice, but deliver reduced liberty, lower levels of prosperity, and the breakdown of peaceful harmony do not deserve to be described by terms such as ‘just’ and ‘moral’.”

Since relatively poor governing and arbitrating institutions generally exist in environments with less economic freedom, individuals living in these countries are prone to greater predation by governments and by others. As such, these individuals are forced to be more material-focused to preserve their livelihoods. Materialism may exist as a survival-type behavior for these individuals. Conversely, residents of relatively more economically free countries need not be as concerned with protection of their goods; the formal institutions ensure this. Consequently, these individuals can allocate their time and resources doing other non-material things. In short, we identify both the inferences that can be drawn—and those that must be drawn—from our research.


  1. 1.

    Gwartney et al. (1999), for instance, show that economic freedom was a significant determinant of economic growth after controlling for confounding factors such as human capital, physical capital, and demographic characteristics. Doucouliagos and Ulubasoglu (2006) confirm the strength of this positive relationship by controlling for specification bias present throughout previous literature.

  2. 2.

    See Hall and Lawson (2014) for a detailed survey of the literature exploring the relationship between economic freedom and numerous development outcomes. The authors surveyed 402 studies, out of which 198 used the EFW index as an independent variable in an empirical analysis. More than two-thirds of these empirical studies found a significant relationship between greater economic freedom and a desirable development outcome, while only two found a significant relationship between greater economic freedom and an undesirable outcome.

  3. 3.

    The link between morality and materialism is a complex one that we do not attempt to solve in this article. Instead, we call upon common knowledge of moral systems in general and their commentary on such vices like greed or avarice which emphasize desires to acquire “things” above other things we might consider important. It is these moral characteristics we seek to proxy by using measures of materialism, which we likewise define as ‘desires to acquire material possessions for oneself above most other things,’ in our exploration of the connection between morals and markets.

  4. 4.

    This is very similar to Maslow (1943), who in the Theory of Human Motivation argued that there are several levels of human development and once one level is satiated, needs from other higher categories become desirable. To Inglehart (1977), materialism is a result of some lesser need—economic security, he hypothesizes—not met.

  5. 5.

    This paper has come under question recently, with several papers and books denoting faults of Falk and Szech (2013)’s experiment (Ariely et al. 2015; Breyer and Weimann 2014; Bartling et al. 2014). Bartling et al. (2014), for instance, attempt to run a similar experiment between China and Switzerland and finds that outcomes vary across countries and contexts. Another study by Ariely et al. (2015) contests the argument that markets, alone, are demoralizing. By testing the propensity to cheat between individuals with cultural closeness to either western or eastern parts of Germany, they suggest that closeness to socialism may have an even stronger demoralizing effect than markets. Others point to the validity of the experiment procedures or interpretation of their findings (Bowles 2016; Breyer and Weimann 2014) . Bowles (2016) suggests comparing the results from their paper to a test which allows subjects to buy back the mouse’s life after being stolen. This might elucidate whether it was the market or simply the experiment that induced demoralizing outcomes. Another paper by Breyer and Weimann (2014) explains that Falk and Szeck misinterpreted their results: most markets do not involve bargaining and consumers, after all, are often price takers and so they should not conclude that “markets” are degrading.

  6. 6.

    When choices are what really matter, then simply having more or less available stuff does not carry the same weight. Instead, the conditions which influence the types and amount of choices individuals make may determine whether or not an individual is materialistic.

  7. 7.

    In the literature, Area 1: Size of Government and Area 3: Soundness of Money do not always behave in the same way as the other areas (Ott 2018; Bergh and Henrekson 2011; Rode and Coll 2012). Results and a short discussion for areas 1 and 3 are located in the appendix of this paper.

  8. 8.

    We include only one measure of institutional quality for the purpose of brevity. Adding dummy variables to account for whether a country is a colony of if a country is under a communist regime does not alter our findings. Results including these controls are available upon request.

  9. 9.

    Y002 was converted into POST.

  10. 10.

    When Areas 1 and 3 are used, the marginal effects are less pronounced, but the signs and significance levels of the results are the same in nearly all specifications. See appendix for results and a discussion on this.

  11. 11.

    Gehring (2013) explores a similar argument in addressing a reverse causality concern in his own work: is the positive relationship between subjective well being and economic freedom caused by happy people moving to countries with higher levels of economic freedom? Or in our case, do materialistic individuals move to places with lower levels of economic freedom and vice versa?

  12. 12.

    See, again, Ahuvia (2002); Sirgy et al. (1998), Sirgy (1998), Ryan and Dziurawiec (2001), Belk (1984), Dawson and Bamossy (1991), Keng et al. (2000), La Barbera and Gürhan (1997).

  13. 13.

    Since the dependent variable is obtained at the individual level, but economic freedom is measured at the country level, one may argue that this gets at some of the causality concerns. The economic institutions are likely to affect the attitudes of individuals, however it is highly unlikely that the attitudes of one individual will exert a notable difference on the macro-level institutional environment. Further, if the causality ran in the opposite direction, one would suspect people who highly prize material possessions would desire much greater protection of their property and thus demand greater levels of economic freedom. The empirical relationship we find in this study runs in the opposite direction, with economic freedom and materialism having a negative relationship and not a positive one.

  14. 14.

    Implied from the two preceding reasons, economic freedom, through its effect on economic growth, may result in a cultural shift away from a more collectivist mindset to a more individualist one (Ahuvia and Wong 2002). It is this cultural shift that might results in the presence (or absence) of materialism. Wealth diminishes the dependence upon group and kin-based organizations as a means of providing goods (necessities) and services (protection from predation). So, as countries grow (economic freedom improves) culture shifts from a commune-based system to one which emphasizes individualism and innovation. As individualist values emphasizes the desire to maximize happiness and materialist values consistently makes us unhappy, materialism is costly for individualists relative to communal-types.


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A Appendix

A Appendix

A.1 Descriptive statistics

See Tables 12, 13 and 14.

Table 12 Descriptive statistics for dependent variables
Table 13 Descriptive statistics for continuous and dummy control variables
Table 14 Descriptive statistics for categorical control variables

A.2 Area 1 and Area 3: ordered logistic regression

Area 1: Size of Government and Area 3: Sound Monetary Policy were not included in the analysis above because the results when using these measures as key explanatory variables were either not compelling enough in significance or because economic theory does not enable us to predict a precise directional change (Table 15).

Table 15 Ordered logistic regression analysis of world values survey question Y001 and economic freedom Area 1

One might expect that higher scores in Area 3, sound monetary policy, would be important to someone with materialist sentiments because sound monetary policy would protect the value of their currency and keep their purchasing power stable and predictable. If this aspect of economic freedom was associated with greater materialism, we would observe a negative coefficient for the two binary dependent variables and higher odds of being in the lower two categories of the ordered logit estimates.

In the two logit models with the binary dependent variable, Table 16, Area 3 has a positive coefficient which is consistent with the relationship observed for the summary EFW index score and Areas 2, 4, 5 that we include in the paper. These results are also significant at the 1% level in all specifications. When looking at the ordered logit results, the coefficients for Area 3 have the correct signs, but it is not significant in the first specification (thought the other two explanatory variables are). Area 3 is, however, significant at the 1% level for the second specification. These results provide some evidence that sound monetary policy is correlated with less materialistic sentiments, though this relationship is less robust than the results we include and discuss in detail in the paper (losing significance in one out of six regression specifications).

Table 16 Ordered logistic regression analysis of world values survey question Y001 and economic freedom Area 3

For Area 1, size of government, theory suggests that the coefficient signs could be either positive or negative. It could be the case, for instance, that people who have materialist sentiments would demand smaller government size in order to have lower taxes so that they have a higher amount of disposable income. If this is true, this would result in a negative correlation between Area 1 and our measures of materialism. On the other hand, it might be the case that materialistic people are more likely to utilize the government’s ability to redistribute resources to themselves—that is, they might be more likely to rent seek and demand greater government intervention. If this is true, we would expect to see a positive relationship between our measures of materialistic sentiments and Area 1 of the EFW index. Thus, the theory underlying our predictions about this relationship does not provide much clarity. Further, the empirical results we obtain are mixed. Referring to Table 16, for the two logit models exploring the relationship between Area 1 and our binary measures of materialistic sentiments, one estimates positive coefficients that are significant at the 1% level, suggesting smaller government size is associated with less materialistic sentiments, while the other estimates negative coefficients suggesting the opposite. When looking at the results of the ordered logit regression, we see that higher scores on Area 1 increases the likelihood of having more materialistic attitudes. This result is again significant at the 1% level, but the signs are the opposite of what the results are the opposite of what we find for the summary EFW score and all other areas of the EFW index. Our empirical results do not offer any clear explanation of the relationship between materialism and the size of government, though it estimates an inverse relationship between Area 1 and our measure of materialism in two out of three cases. Further, empirical studies using the disaggregated EFW index frequently show that Area 1 exhibits a different relationship with the dependent variable than the other four areas, raising the question of whether it is simply the size of government or the quality of government that matters more for economic freedom. Ott (2018) has even suggested that the EFW index could be improved by removing Area 1 altogether.

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Teague, M.V., Storr, V.H. & Fike, R. Economic freedom and materialism: an empirical analysis. Const Polit Econ 31, 1–44 (2020).

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  • Markets
  • Materialism
  • Values
  • Economic freedom

JEL Classification

  • Z1
  • Z10
  • Z19
  • P5
  • P52