The 2008 Heritage Foundation Index of Economic Freedom. Blue is Free, Green is Mostly Free, Yellow is Moderately Free, Orange is Mostly Not Free, Red is Not Free, Grey is ungraded

The Index of Economic Freedom is a series of 10 economic measurements created by the Wall Street Journal and The Heritage Foundation to measure the degree of economic freedom in the world's nations. Economic freedom is freedom to produce trade and consume any goods and services acquired without the use of force fraud or theft

History

The Heritage Foundation and the Wall Street Journal created the Index of Economic Freedom in 1995 based on economic theories like Adam Smith's The Wealth of Nations, explaining that "basic institutions that protect the liberty of individuals to pursue their own economic interests result in greater prosperity for the larger society. The Heritage Foundation is an American conservative Think tank. Adam Smith ( baptised 16 June 1723 – 17 July 1790) was a Scottish moral philosopher and a pioneer of Political economy. An Inquiry into the Nature and Causes of the Wealth of Nations is the Magnum opus of the Scottish economist Adam Smith. "^{[1] [2]} It was the first economic freedom index released, although the Frasier Institute released Economic Freedom of the World a year later after 10 years of research with the help of economist Milton Friedman, who set out to show that economic freedom does actually track with high levels of prosperity,. See also Index of Economic Freedom The annual survey Economic Freedom of the World is an indicator which attempts to measure the degree of Economic Milton Friedman (July 31 1912 November 16 2006 was an American Nobel Laureate Economist and Public intellectual. ^[3][2]

Methodology

The Index's 2008 definition of economic freedom is the following; "The highest form of economic freedom provides an absolute right of property ownership, fully realized freedoms of movement for labor, capital, and goods, and an absolute absence of coercion or constraint of economic liberty beyond the extent necessary for citizens to protect and maintain liberty itself. " ^[4]

The index scores nations on 10 broad factors of economic freedom using statistics from organizations like the World Bank, the IMF and the Economist Intelligence Unit:

• Business Freedom
• Trade Freedom
• Monetary Freedom
• Freedom from Government
• Fiscal Freedom
• Property Rights
• Investment Freedom
• Financial Freedom
• Freedom from Corruption
• Labor Freedom

The 10 factors are averaged equally into a total score. The World Bank is an internationally supported Bank that provides financial and technical assistance to developing countries for development programs (e The International Monetary Fund ( IMF) is an International organization that oversees the Global financial system by following the Macroeconomic The Economist Intelligence Unit ( EIU) is part of The Economist Group. Each one of the 10 freedoms is graded using a scale from 0 to 100, where 100 represents the maximum freedom. A score of 100 signifies an economic environment or set of policies that is most conducive to economic freedom. ^[4] The methodology has shifted and changed as new data and measurements have become available, especially in the area of Labor freedom, which was given its own indicator spot in 2007. ^[2] Carl Schramm, who wrote the first chapter of the 2008 Index, recounts how cities of Medieval Italy and mid-19th century Midwestern American cities all flourished to the degree they possessed economic fluidity and institutional adaptiveness created by economic freedom. ^[5]

Ratings

Since 1995, world Economic Freedom has increased 2. 6 points using the 2008 index methodology. ^[6] There was a slight increase in economic freedom in 2008, with the largest positive change in Egypt, which jumped to 85th in the world. This article is about the country of Egypt For a topic outline on this subject see List of basic Egypt topics. ^[7] Since the Index was created in 1995, Hong Kong has been the top performing economy. Hong Kong ( officially the Hong Kong Special Administrative Region, is a territory located on China 's south coast on the Pearl River Delta, and borders ^[8]

Reception

An overview of research can be found here [1], including studies claiming to show that more economic freedom is the cause of beneficial effects. It also states that Economic Freedom of the World has been used in most of the academic research, partly because Index of Economic Freedom only goes back to 1995 and because it uses more subjective variables. See also Index of Economic Freedom The annual survey Economic Freedom of the World is an indicator which attempts to measure the degree of Economic

The Millennium Challenge Account, a US government foreign aid program, has used the Trade freedom indicator in determining which countries will receive their performance-based compacts. The Millennium Challenge Account (MCA run by the Millennium Challenge Corporation, is a bilateral development fund announced by the Bush administration ^[9]

Critics, such as Jeffrey Sachs, have criticised its assumption that economic openness necessarily leads to better growth. Jeffrey David Sachs (born November 5, 1954, in Detroit Michigan) is an American Economist and Director of the Earth Institute Sachs, in his popular book The End of Poverty, graphed countries' ratings on the index against GDP per capita growth between 1995 and 2003, claiming to demonstrate no correlation between a countries' rating and its rate of economic. Sachs pointed out, as examples, that countries with good ratings such as Switzerland and Uruguay had sluggish economic performances, others, like China, with poorer rating had very strong economic growth. Switzerland (English pronunciation; Schweiz Swiss German: Schwyz or Schwiiz Suisse Svizzera Svizra officially the Swiss Confederation Uruguay.(official full name in República Oriental del Uruguay;, Oriental Republic of Uruguay) is a country located in the southeastern part of South America China ( Wade-Giles ( Mandarin) Chung¹kuo² is a cultural region, an ancient Civilization, and depending on perspective a National ^[10]

Some have also questioned its methodology, such as the country of Qatar which questioned the rating of their country's economic freedom in 2008, comparing its middling rating with the high rating they had received from other indicators such as Transparency International and Moody's. Qatar ( قطر; ˈqɑtˁɑr local pronunciation giṭar officially the State of Qatar (Arabic دولة قطر transliterated Transparency International ( TI) is a leading international Non-governmental organization addressing corruption Moody's Corporation ( is the holding company for Moody's Investors Service which performs financial research and analysis on commercial and government entities They also noted that the methodology had changed twice in the last two years, rendering its report "unreliable". ^[11] Many Asian nations have expressed puzzlement at why China has grown so much with such a low rate of economic freedom, to which the foundation stated that in the 1960's, their rating would have been near zero, and as it is now 54, and has gone up by, on average, a point a year, there is massive growth being unleashed as they grow as much as their current level of freedom allows. China ( Wade-Giles ( Mandarin) Chung¹kuo² is a cultural region, an ancient Civilization, and depending on perspective a National ^[12] Another article, from Ludwig von Mises Institute, explained some of the failings of the study to show just how free certain countries actually were. The Ludwig von Mises Institute ( LvMI) based in Auburn Alabama, is a Libertarian academic organization engaged in research and scholarship in the fields ^[13]

An article in Counterpunch questioned the ideology motivating the index, claiming that it replaces Franklin D. Roosevelt's "Freedom from want" with individual economic freedom. CounterPunch is a biweekly Newsletter published in the United States that covers politics in a manner its editors describe as "muckraking with a radical The Four Freedoms are goals famously articulated by United States President Franklin D ^[14]

See also

• Index of Economic Freedom 2003-2006
• List of indices of freedom

References

External links

• Index of Economic Freedom
• Free, Free at Last critique from Dollars & Sense magazine
• Laissez-Faire Olympics (critique by Doug Henwood). Dollars & Sense is a Magazine dedicated to providing Left-wing perspectives on Economics.