Friday, April 11, 2014

Index of Economic Freedom

The Heritage Foundation's Index of Economic Freedom is one of my favorite websites to look at for economic research.

Here is the link to the site: http://www.heritage.org/index/

Here is another link that describe what economic freedom is: http://www.heritage.org/index/about

The Heritage Foundation believes that greater economic freedom leads to a stronger economy:

"Economic freedom brings greater prosperity. The Index of Economic Freedom documents the positive relationship between economic freedom and a variety of positive social and economic goals. The ideals of economic freedom are strongly associated with healthier societies, cleaner environments, greater per capita wealth, human development, democracy, and poverty elimination."

I did a regression analysis in Professor McKinney's Econometrics class last spring and during my SIP research. As a result, I found a strongly positive correlation between economic freedom and GDP per capita.

Which is the most optimal economic environment? Strong economic freedom, weak economic freedom, or a balance between the two?


5 comments:

  1. I think a balance between the two will be the most optimal economic environment. we do not live in a perfect world so there is going to be need for governments to regulate economic freedom. characteristics such as race, class or gender plays an important role in one's experience of economic freedom. the index of economic freedom gives a general conclusion on the impacts of economic freedom on the socioeconomic aspects of people's lives. however, a closer study by geographical location, age, class, gender and sexual orientation might reveal the inequalities that exist within an economy. it is the duty of the government to implement policies that ensure that one group people is not exploitative by another.

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  2. This is a very interesting way to present the data. The two categories I found most compelling were Property Rights and Freedom from Corruption. When you click these on the World View, practically the entire world except for "the West" and Australia turns red. To me these are two very important aspects of an economic environment that nurtures growth, and the data seem to support this notion.

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  3. Thanks Tyler. Very helpful site! It's interesting to me that the US has poorer fiscal freedom than many countries. I tend to associate fiscal freedom to business freedom (how fast it is to get a license for a business for eg) but I may be wrong...

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  4. Very compelling data. What was most interesting for me is that the data seemed to confirm some of the Heritage Foundation's libertarian claims (generally speaking), but dispelled others.

    Crucially, there appears to be a correlation between bad fiscal freedom and government spending scores and high levels of economic development (bad scores for fiscal freedom = higher taxation levels and bad scores for govt. spending = higher levels of government expenditure).

    Maybe a little taxation and government spending isn't so bad for economic strength after all? Of course, correlation ≠ causation..

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