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The Indexes of Economic Freedom are several similar indexes released annually. One is published by The Wall Street Journal and conservative think-tank the Heritage Foundation. Another by the Fraser Institute.

The Heritage index measures how countries score on a list of 50 independent variables divided into 10 broad factors of economic freedom. The higher a country's score on a factor, the greater the level of government intervention in the economy and the less economic freedom there is. The Heritage Foundation's view is that countries with the most economic freedom also have higher rates of long-term economic growth and are more prosperous than are those with less economic freedom.

These 50 variables are grouped into the following categories:

• Trade policy
• Fiscal burden of government
• Government intervention in the economy
• Monetary policy
• Capital flows and foreign investment
• Banking and finance
• Wages and prices
• Property rights
• Regulation
• Informal Market Activity (Black market)

Depending on their score, countries are then separated into four categories: Free, Mostly Free, Mostly Unfree, and Repressed.

Current ratings

The most current ratings are for 2006. Note: countries sharing the same rank received a tie score. For example, Iceland and the United Kingdom are tied for the rank of 5th most economically free country. Also note that a detailed description of the conditions in each country can be found on: http://www.heritage.org/research/features/index/countries.cfm.

Developments

• Overall, 99 countries worldwide are freer than they were last year and 51 are less free. Five countries remained in the same degree of freedom.
• The 10 most-improved countries this year were: Pakistan, Romania, Kyrgyzstan, Suriname, Armenia, Turkmenistan, Georgia, Turkey, Tajikistan and Kazakhstan.
• The 10 worst-improved countries this year were: Iran, Italy, Guinea, Bolivia, United Arab Emirates, Oman, Sri Lanka, Equatorial Guinea, Egypt and Nicaragua.

Similar Indices

• the Fraser Institute: the "Economic Freedom of the World Annual Report"; and
• the World Economic Forum: the "Global Competitiveness Report."

Research

Many peer-reviewed articles have used these indices. One question has been what subcomponents are responsible for economic growth. Strong property rights and low inflation may be particularly important. Regarding the size of government and free trade there is much conflicting evidence.

More economic freedom correlates strongly with higher average income per person, higher income of the poorest 10%, higher life-expectancy, higher literacy, lower infant mortality, higher access to water sources and less corruption. The share of income in percent going to the poorest 10% is the same for both more and less capitalistic countries. .

An overview of research can be found here , including studies showing that more economic freedom is the cause of beneficial effects.

Criticism

Some economists and commentators have criticized the Index on several grounds—asking, for instance, if Canada's slightly higher income tax rates make it a less economically free country than the United States. Critics of the index's methodology most commonly take issue with its equation of regressive taxation, low tax rates generally, and weak worker protection regulations with economic freedom. Some critics go further, saying that the index judges countries against a specious list of 'ideal' economic and fiscal policies, which reflect the Heritage Foundation and Wall Street Journal 's own laissez-faire economic and fiscal policy ideas more than they do a substantive concept of economic freedom. For such critics, the list is simply a promotional tool for laissez-faire policy, rather than a meaningful index of economically free countries.

In response, proponents point out that the indexes and their subcomponents have been used in much research, independent of the creators of the indices, published in numerous peer-reviewed papers. Such peer-review includes the methodology used in creating the indices. That the creators of the indexes support laissez-faire capitalism does not invalidate the empirical research.

External links

• Index of Economic Freedom
• The Wall Street Journal
• Heritage Foundation
• Free, Free at Last (a critique from Dollars and Sense)
• Laissez-Faire Olympics (critique by Doug Henwood)

See also

• List of Indices of Freedom

Template:Lists of countries

• Freedom