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 they embody.
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What's So Great About Economic Freedom? - Learn Liberty
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Fraser Institute: The Benefits of Economic Freedom
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World's 10 Most Prosperous Countries
Transcription
Economic freedom is about, yes, the freedom to buy and sell stuff, but it’s also about the freedom to interact with people, to converse with people, to travel where we want, to say the things we want to say. These things [that] involve interaction with others are truly at the core of economic freedom. There’s a tremendous body of evidence that suggests that economic freedom is associated with many of the things we think of when we think of a healthy society. We can look at the Economic Freedom of North America Index. States with more economic freedom have higher growth rates of the economy, they have lower unemployment rates, they have less debt per GDP than states that are less free. All of these things we associate with economic health are also associated with economic freedom, but we see the same phenomenon when we compare countries of the world. The most economically free countries have GDPs per capita that are about 10 times the size of less economically free countries. One might argue that what we’re seeing is the big country effect. That is, big countries will tend to be economically free, and they’ll also tend to have high GDP per capita. But if we restrict our vision to just the poorest 20 percent of countries, the poor countries that have the most economic freedom have GDP per capita that are 50 percent greater than the poor countries that have less economic freedom. One counterargument is that GDP per capita only measures average income. It’s possible that you could have a country with a small number of elite, rich people and a large number of destitute people. But if we examine inequality measures, what we find is that the countries that are more economically free also have more equitable income distributions. That is, economic freedom is not only associated with higher income levels on average, but it’s also associated with a more equitable income distribution. Skeptics might argue that economic freedom achieves greater income because of exploitation, exploitation of people and exploitation of the environment. Let’s look at the data and see if this is the case. On average, women in economically free countries have more gender equality than women in economically less-free countries. Also, child-labor rates tend to be lower in economically free countries and higher in economically unfree countries. One might argue that child-labor rates are lower in economically free countries because economically free countries are richer and therefore can import products from poor countries that do not have child-labor laws. In effect, the rich countries encourage the poor countries to exploit their children so the rich countries don’t have to exploit theirs. But if we look at the poorest countries, we see the same phenomenon. Even amongst the poorest countries, those with more economic freedom have lower child-labor rates than those with less economic freedom. Economic freedom also accompanies reduced exploitation of the environment. For example, deforestation is worst amongst the least economically free countries. Meanwhile the most economically free countries actually experience reforestation: Their forests are growing. Economic freedom is about the freedom to act. The more freedom we have to act, the more able we are to do the things we want to do: to create wealth, to protect the environment, to help people be equal across genders, to help children no longer have to work in factories. It’s about being free to make your own choices and to live with the consequences of those choices, provided that you do not violate anyone else’s freedom. The more economic freedom we have, the more able we are to make the world a better place.
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 and The Wall Street Journal. According to 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."[1]
The index scores nations on 12 broad factors of economic freedom using statistics from organizations like the World Bank, the International Monetary Fund and the Economist Intelligence Unit:
- 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. This 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 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 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.[2]
World Survey of Economic Freedom – Freedom House
Freedom House 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:[3]
- 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
Meta analysis
In a review of the literature, Lawson and Hall documented that "[o]ver 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."[4][5] Furthermore, supporters contend that the size of government has shown correlations with negative growth.[6][7][8][9]
See also
References
- ^ "Frequently Asked Questions". Index of Economic Freedom. Archived from the original on 2009-07-03. Retrieved 2009-01-25.
- ^ "Economic Freedom of the World: 2008 Annual Report" (PDF). Archived from the original (PDF) on December 4, 2008.
- ^ World Survey of Economic Freedom 1995–1996: A Freedom House Study. Transaction Publishers. 1996. ISBN 978-1-56000-929-0. pp. 5–7
- ^ Hall, Joshua C.; Lawson, Robert A. (2014). "Economic Freedom of the World: An Accounting of the Literature". Contemporary Economic Policy. 32 (1): 1–19. doi:10.1111/coep.12010. S2CID 154941466.
- ^ De Haan, Jakob (2006). "Market-oriented institutions and policies and economic growth: A critical survey". Journal of Economic Surveys. 20 (2): 157–91. CiteSeerX 10.1.1.1023.6932. doi:10.1111/j.0950-0804.2006.00278.x. S2CID 13286949.
- ^ Bergh, Andreas; Henrekson, Magnus (2011). "Government Size and Growth: A Survey and Interpretation of the Evidence" (PDF). IFN Working Paper No. 858.
- ^ Afonso, Antonio; Romero-Barrutieta, Alma; Monsalve, Emma (December 2013). "Public Sector Efficiency: Evidence for Latin America". ISEG Economics Working Paper No. 20/2013/DE/UECE. SSRN 2365007.
- ^ Afonso, António; Schuknecht, Ludger; Tanzi, Vito (2005). "Public sector efficiency: An international comparison" (PDF). Public Choice. 123 (3): 321–47. doi:10.1007/s11127-005-7165-2. S2CID 153621605.
- ^ Barro, Robert J. (1991). "Economic Growth in a Cross Section of Countries" (PDF). Quarterly Journal of Economics. 106 (2): 407–43. doi:10.2307/2937943. JSTOR 2937943.
Further reading
- For a comparison of the 3 major indices see Aleksynska, Mariya; Cazes, Sandrine (2014). "Comparing indicators of labour market regulations across databases: A post scriptum to the employing workers debate" (PDF). Conditions of Work and Employment Series. 50. Geneva: International Labour Office. ISSN 2226-8944. Retrieved 27 July 2017.
This paper offers a critical overview of labour market regulations' indicators developed by the World Economic Forum, the IMD, and the Fraser Institute. [Abstract]
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This page was last edited on 22 March 2024, at 11:08