Indices of economic freedom

A number of indicators of economic freedom have been proposed. 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 they embody.

The Index of Economic Freedom is a series of 10 economic measurements created by the Heritage Foundation and Wall Street Journal. The Index's definition of economic freedom is the following; "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 10 broad factors of economic freedom using statistics from organizations like the World Bank, the International Monetary Fund and the Economist Intelligence Unit:

The 10 factors are averaged equally into a total score.

The annual survey 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 index uses a definition of economic freedom similar to laissez-faire capitalism 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 Heritage Foundation). According to the 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:

The report uses 42 distinct variables collected from a number of different sources (including the World Bank, the International Monetary Fund, and others). Some examples: tax rates, degree of juridical independence, inflation 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.

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