Saturday, September 23, 2006

Economic Freedom of the World

Q1: Which are the five most economically free countries in the world?

In order, the most economically free countries are: Hong Kong (#1), Singapore (#2), and the U.S., New Zealand, and Switzerland (tied for #3).

Q2: Which are the five least economically free countries in the world (Note: Cuba and North Korea were not considered because data were not available)? In order, least economically free countries are: Zimbabwe, Myanmar, Congo (Republic), Congo (Democratic Republic), and Venezuela.

See the
Economic Freedom of the World: 2006 Annual Report, just released by the Cato Institute. Professor James Gwartney is the main author and researcher for the annual report, and he is also the author of the economics textbook I use for my classes.

Each country's economic freedom is measured on an index scale from 1 (economically least free) to 10 (economically most free) based on economic freedom in five areas (size of government, property rights, sound money, free trade, and regulation). Then those quantitative measures of economic freedom can be used to see how economic freedom correlates with economic variables, health measures, political freedom, income inequality, etc.

As you might expect, the overall standard of living is significantly higher in countries with economic freedom compared to countries with low levels of economic freedom: per-capita GDP is much higher in economically free countries, economic growth rates are higher, unemployment rates are lower, life expectancy is longer, fewer children are in the labor force, and political rights are stronger.

Freedom works.

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