A number of indicators of economic freedom are available for review. They differ in the methods by which they have been constructed, the purposes to which they have been put, and the conception of

economic freedom Economic freedom, or economic liberty, is the ability of people of a society to take economic actions. This is a term used in economic and policy debates as well as in the philosophy of economics. One approach to economic freedom comes from the l ...

they embody.

Indices

''Index of Economic Freedom'' – Heritage Foundation and ''Wall Street Journal''

The Index of Economic Freedom is a series of 12 economic measurements created by the

Heritage Foundation The Heritage Foundation (abbreviated to Heritage) is an American conservative think tank based in Washington, D.C. that is primarily geared toward public policy. The foundation took a leading role in the conservative movement during the preside ...

and ''

The Wall Street Journal ''The Wall Street Journal'' is an American business-focused, international daily newspaper based in New York City, with international editions also available in Chinese and Japanese. The ''Journal'', along with its Asian editions, is published ...

''. Per the Heritage Foundation, the index's definition is: "Economic freedom is the fundamental right of every human to control his or her own labor and property. In an economically free society, individuals are free to work, produce, consume, and invest in any way they please, with that freedom both protected by the state and unconstrained by the state. In economically free societies, governments allow labor, capital and goods to move freely, and refrain from coercion or constraint of liberty beyond the extent necessary to protect and maintain liberty itself." The index scores nations on 12 broad factors of economic freedom using statistics from organizations like the

World Bank The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Inte ...

, the

International Monetary Fund The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster glo ...

and the

Economist Intelligence Unit The Economist Intelligence Unit (EIU) is the research and analysis division of the Economist Group, providing forecasting and advisory services through research and analysis, such as monthly country reports, five-year country economic forecasts, ...

: * Business freedom * Trade freedom * Monetary freedom * Government size * Fiscal freedom * Property rights * Investment freedom * Financial freedom * Freedom from corruption * Labor freedom The 12 factors are averaged equally into a total score.

''Economic Freedom of the World'' – Fraser Institute

The annual ''Economic Freedom of the World'' is an indicator of economic freedom produced by James Gwartney and Robert Lawson, and is published by the Canadian

Fraser Institute The Fraser Institute is a libertarian-conservative Canadian public policy think tank and registered charity. The institute describes itself as independent and non-partisan. It is headquartered in Vancouver, with additional offices in Calgary, ...

. This index uses a definition of economic freedom similar to

laissez-faire ''Laissez-faire'' ( ; from french: laissez faire , ) is an economic system in which transactions between private groups of people are free from any form of economic interventionism (such as subsidies) deriving from special interest groups ...

capitalism Capitalism is an economic system based on the private ownership of the means of production and their operation for profit. Central characteristics of capitalism include capital accumulation, competitive markets, price system, private ...

and it has been more widely used than any measure of economic freedom. Its use stems in part from the longer time period covered (data exists from 1980–2008), and the fact that this index is constructed from third party information (in contrast to the index created by the

). According to this index, the cornerstones of economic freedom are personal choice, voluntary exchange, freedom to compete, and security of privately owned property. In practice, the index measures: * Size of government: expenditures, taxes, and enterprises * Legal structure and security of property rights * Access to sound money * Freedom to trade internationally * Regulation of credit, labor, and business The report uses 42 distinct variables collected from a number of different sources (including the

, the

, and others). Some examples:

tax rate In a tax system, the tax rate is the ratio (usually expressed as a percentage) at which a business or person is taxed. There are several methods used to present a tax rate: statutory, average, marginal, and effective. These rates can also be ...

s, degree of juridical independence,

inflation In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduct ...

rates, costs of importing, and regulated prices. Each of the 5 areas above is given equal weight in the final score. Scores are available (largely dependent on data available) for 141 countries.

''World Survey of Economic Freedom'' – Freedom House

Freedom House Freedom House is a non-profit, majority U.S. government funded organization in Washington, D.C., that conducts research and advocacy on democracy, political freedom, and human rights. Freedom House was founded in October 1941, and Wendell Wi ...

published a measure of economic freedom in 1996, but publication of this measure has been discontinued. They defined economic freedom through two dimensions – lack of state infringements on citizens' rights to exchange goods and services, and state establishment of the rules governing contracts, property rights and other institutional prerequisites required for the conduct of economic affairs. To determine level of economic freedom Freedom House used six indicators: * freedom to hold property * freedom to earn a living * freedom to operate a business * freedom to invest one's earnings * freedom to trade internationally * freedom to participate in the market economy

Critical analysis

In a review of the literature, Lawson and Hall documented that " er two-thirds of these studies found economic freedom to correspond to a 'good' outcome such as faster growth, better living standards, more happiness, etc. Less than 4% of the sample found economic freedom to be associated with a 'bad' outcome such as increased income inequality." Furthermore, supporters contend that the size of government has shown correlations with negative growth.

Indices

''Index of Economic Freedom'' – Heritage Foundation and ''Wall Street Journal''

''Economic Freedom of the World'' – Fraser Institute

''World Survey of Economic Freedom'' – Freedom House

Critical analysis

See also

References

Further reading