When institutions protect the liberty of individuals, greater prosperity results for all.
Economist Adam Smith formed this theory in his influential work, The Wealth of Nations, in 1776. In 2013, his theory is measured – and proven – in the Index of Economic Freedom, an annual guide published by The Wall Street Journal and The Heritage Foundation, Washington's No. 1 think tank.
For over a decade, The Wall Street Journal and The Heritage Foundation, Washington's preeminent think tank, have tracked the march of economic freedom around the world with the influential Index of Economic Freedom. Since 1995, the Index has brought Smith's theories about liberty, prosperity and economic freedom to life by creating 10 benchmarks that gauge the economic success of 185 countries around the world. With its user-friendly format, readers can see how 18th century theories on prosperity and economic freedom are realities in the 21st century.
The Index covers 10 freedoms – from property rights to entrepreneurship – in 185 countries.
Index authors and expert analysts are available for media interviews and speaking events.
Frequently Asked Questions
Q.1. What is economic freedom?
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. Read Chapter 1 - Economic Freedom: Global and Regional Patterns by Ambassador Terry Miller and Anthony B. Kim.
Q.2. What are the benefits of economic freedom?
Studies in this and previous editions of the Index of Economic Freedom demonstrate important relationships between economic freedom and positive social and economic values such as per capita income, economic growth rates, human development, democracy, the elimination of poverty, and environmental protection. For further information, see especially:
Q.3. How do you measure economic freedom?
We measure ten components of economic freedom, assigning a grade in each using a scale from 0 to 100, where 100 represents the maximum freedom. The 10 economic freedoms are grouped into four broad categories or pillars of economic freedom:
- Rule of Law (property rights, freedom from corruption);
- Limited Government (fiscal freedom, government spending);
- Regulatory Efficiency (business freedom, labor freedom, monetary freedom); and
- Open Markets (trade freedom, investment freedom, financial freedom).
Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country's overall economic freedom score is a simple average of its scores on the 10 individual freedoms. Detailed information about the methodology used to score each component is contained in the appendix.
Q.4. Which components of economic freedom are most important?
In the Index of Economic Freedom, the ten components of economic freedom are weighted equally in determining country scores. For a country considering economic reforms, those components on which it scores the lowest are likely to be the most important in terms of providing significant opportunities for improving economic performance.
Q.5. What is your period of study?
For the 2013 Index of Economic Freedom, the authors generally examined data for the period covering the second half of 2011 through the first half of 2012. To the extent possible, the information considered for each factor was current as of June 30, 2012. It is important to understand, however, that some factors are based on historical information. For example, the monetary policy factor is a 3-year weighted average rate of inflation from January 1, 2009, to December 31, 2011. Other factors are current for the year in which the Index is published. For example, the taxation variable for this Index considers tax rates that apply to the taxable year 2012.
Q.6. Can I access the data online?
The Heritage Foundation's website offers an interactive edition of the Index rankings and scores (Explore the Data). This feature allows anybody to rank countries by a specific factor (e.g. how well does my country score solely in terms of its trade policy?); it also allows users to see how economic freedom changed in a particular country or particular region since 1995, when the Index started.