Principles of a Free Market Economy in South Carolina

At Palmetto Promise Institute, we are proud to advance policies that support a free market economy in South Carolina. The term “free market” is frequently used, yet often misinterpreted as a free-for-all economic melee without a governmental role. It is essential to clarify this.

In a theoretical model of pure free markets (see your Econ 101 textbook), the government plays no role and market dynamics are driven solely by the forces of supply and demand. Economic actors – individuals and firms – are self-interested utility maximizers where “utility” refers to the satisfaction derived from consuming goods and services. While such a pure system is theoretical, it would likely devolve into a winner-take-all end-state. This scenario could entail violent conflicts over resources, extreme wealth concentration, and resource depletion. Such a system has never existed.

A prosperous economic system should unleash the utility-maximizing nature of individuals and firms while limiting the government’s role to essential functions that support the economy. In alignment with the American commitment to democratic individual freedom, South Carolina should lead the nation in promoting such a system. However, this ideal economy cannot exist in the presence of excessive governmental interference, such as over-regulation and undue taxation. According to The Heritage Foundation, the United States’ economic freedom score is 70.2, ranking it 26th in the 2025 Index of Economic Freedom and 3rd out of 32 countries in the Americas region. The U.S. economy is classified as “mostly free.”

Index of Economic Freedom: United States | The Heritage Foundation 

At Palmetto Promise Institute, we strive to encourage a free market system in South Carolina. With diligent efforts from organizations like ours, we can enhance our economic performance and achieve an even higher freedom score in years to come.

Our economic prosperity is tied directly to the expansion of our personal and economic freedoms. The economist Milton Friedman argued that a free-market system requires limited government interference and is the most effective mechanism for economic prosperity. While no one is advocating the total absence of government, a prosperous economy results when government focuses its intervention on the following:

• Property Rights: The right to own and benefit from one’s work is the fundamental incentive for a productive society. If individuals cannot retain their assets, they have little incentive to create or innovate. The question arises: why would one work for something (e.g., a wage or an asset) if it can be taken away? This principle is supported by the Nobel work of Douglass North.
• Core Institutions: An economy requires clear, yet minimal, organizations and rules that establish the rule of law and accountable governance, and that facilitate trade and ensure open markets that encourage competition, the participation of firms and workers. Building on North’s work, three economists were awarded the Nobel Prize in 2024 for their work showing how such institutions lead to prosperity.
• Essential Infrastructure: A successful economic system requires a stable banking and monetary system, efficient transportation networks, communication systems, and an education system. While elements of this might be provided privately (and sometimes is), no successful economic system has developed in their absence. The importance of the restrained role of government is developed by the economists Ludwig von Mises and Friedrich Hayek (though the two differed slightly on the appropriate limits of intervention).
• Market Oversight: To ensure genuine free markets, the government must provide oversight to prevent monopolies and protect consumers. In a monopoly, a single seller can dictate prices and the quality of goods and services. Similarly, consumer protections are vital to prevent deception and to build consumer trust. While over-regulation can stifle growth, regulation or oversight that is overly influenced by industry can result in gains, known as “regulatory capture”, for those firms at the public’s expense. This notion of regulatory capture is developed by Nobel Laureate, George Stigler. Ultimately, limited but appropriate oversight fosters the trust necessary to encourage commerce.
• Encouraging Entrepreneurship: Entrepreneurship involves investing in or harnessing resources to meet unmet demand, often with uncertain (or non-existent) rewards. The government’s role should be limited to encouraging entrepreneurship (e.g., through favorable tax policies for losses) and not burdening it with excessive regulations, licensing requirements, or complex filings. Appropriate policies support the “creative destruction” process described by Joseph Schumpeter and can result in more innovation as described in the work of Paul Romer. When individuals are free to act, they will do so.

American values align with capitalism and a society that values and defends its freedom. At the Palmetto Promise Institute, we are dedicated to maintaining South Carolina as a free state that prioritizes its citizens. The Tenth Amendment to the U.S. Constitution states that powers not enumerated in the Constitution are reserved for the states. We are committed to reducing regulatory overreach and to ensuring our government provides only the minimally essential functions necessary for our path to prosperity.

According to the Fraser Institute, South Carolina is leading the nation in economic freedom and in resisting federal government overreach. Currently, South Carolina is tied for third place (with Oklahoma) in the all-government index of Economic Freedom of North America 2024. We take pride in South Carolina’s leadership in free markets and will work diligently to expand this position as a leader in economic freedom.