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Economic Freedom of the World: Economic Freedom of the World: 2012 Annual Report2012 Annual Report

Economic Freedom of the Economic Freedom of the World ProjectWorld Project

• Objective: find a way to measure economic freedom and explore the connection between it and other variables

• 25 year project• Led by the late Milton Friedman and Rose

Friedman, and Michael Walker• Involved 60 of the world’s top scholars,

including three Nobel Laureates

What is the Economic What is the Economic Freedom of the World Index?Freedom of the World Index? An annual compilation of data representing factors

which make a country economically free Authors: James Gwartney, Robert Lawson, and Joshua

Hall A compendium of 42 government policies affecting

economic freedom based on objective data or independent surveys

A ranking of 144 countries representing 95% of the world’s population according to the extent to which they permit their citizens to be economically free

Now a collaboration of Institutes in 85 nations and terrritories

What is Economic FreedomWhat is Economic Freedom

Individuals have economic freedom when property they acquire without the use of force, fraud, or theft is protected from physical invasions by others and they are free to use, exchange, or give their property as long as their actions do not violate the identical rights of others. An index of economic freedom should measure the extent to which rightly acquired property is protected and individuals are engaged in voluntary transactions.

James Gwartney et al. 1996

Components of the Economic Components of the Economic

Freedom of the World IndexFreedom of the World Index

• Size of government and taxation• Private property and the rule of law• Soundness of money• Trade regulation and tariffs• Regulation of business, labour and

capital markets

Talk about making a difference …Talk about making a difference …

Afghanistan Economic and Legal Studies Afghanistan Economic and Legal Studies Organization (AELSO), AfghanistanOrganization (AELSO), AfghanistanAlbanian Center for Economic Research (ACER), Albanian Center for Economic Research (ACER), AlbaniaAlbaniaFundación Libertad, ArgentinaFundación Libertad, ArgentinaCentre of Political, Legal and Economic Researches Centre of Political, Legal and Economic Researches and Forecasting (PLERF), Armeniaand Forecasting (PLERF), ArmeniaInstitute of Public Affairs, AustraliaInstitute of Public Affairs, AustraliaTIGRA®, AustriaTIGRA®, AustriaCenter for Economic and Political Research, Center for Economic and Political Research, AzerbaijanAzerbaijanThe Nassau Institute, BahamasThe Nassau Institute, BahamasMaking Our Economy Right (MOER), BangladeshMaking Our Economy Right (MOER), BangladeshScientific Research Mises Center, BelarusScientific Research Mises Center, BelarusCentre for the New Europe, BelgiumCentre for the New Europe, BelgiumPoliticas Publicas para la Libertad (POPULI), BoliviaPoliticas Publicas para la Libertad (POPULI), BoliviaInstituto Liberal do Rio de Janeiro, BrazilInstituto Liberal do Rio de Janeiro, BrazilInstitute for Market Economics, BulgariaInstitute for Market Economics, BulgariaLe Centre des Affaires Humaines (CEDAH), Burkina Le Centre des Affaires Humaines (CEDAH), Burkina FasoFasoThe Cambodia Institute of Development Study, The Cambodia Institute of Development Study, Cambodia Cambodia Instituto Libertad y Desarrollo, ChileInstituto Libertad y Desarrollo, ChileCenter for China & Globalization, ChinaCenter for China & Globalization, ChinaInstituto de Ciencia Politica, ColombiaInstituto de Ciencia Politica, ColombiaInstituto para la Libertad y el Análisis de Políticas, Instituto para la Libertad y el Análisis de Políticas, Costa RicaCosta RicaAudace Institut Afrique, Côte d’IvoireAudace Institut Afrique, Côte d’IvoireThe Institute of Economics, CroatiaThe Institute of Economics, CroatiaLiberální Institut, Czech RepublicLiberální Institut, Czech RepublicCenter for Politiske Studier (CEPOS), DenmarkCenter for Politiske Studier (CEPOS), DenmarkFundación Economía y Desarrollo Inc, Dominican Fundación Economía y Desarrollo Inc, Dominican RepublicRepublicInstituto Ecuatoriano de Economía Política, EcuadorInstituto Ecuatoriano de Economía Política, EcuadorInstitut Economique Molinari, FranceInstitut Economique Molinari, FranceSociety for Disseminating Economic Knowledge: New Society for Disseminating Economic Knowledge: New Economic School, GeorgiaEconomic School, Georgia

Initiative for Public Policy Analysis, NigeriaInitiative for Public Policy Analysis, NigeriaCenter for Business and Society Incorporated (Civita), Center for Business and Society Incorporated (Civita), Norway Norway International Research Foundation (IRF), OmanInternational Research Foundation (IRF), OmanAlternate Solutions Institute, PakistanAlternate Solutions Institute, PakistanPal-Think for Strategic Studies, PalestinePal-Think for Strategic Studies, PalestineFundación Libertad, PanamaFundación Libertad, PanamaCentro de Investigación y Estudios Legales (CITEL), PeruCentro de Investigación y Estudios Legales (CITEL), PeruThe Center for Research and Communication, PhilippinesThe Center for Research and Communication, PhilippinesCentrum im. Adama Smitha, PolandCentrum im. Adama Smitha, PolandCausa Liberal, PortugalCausa Liberal, PortugalRomania Think Tank, RomaniaRomania Think Tank, RomaniaInstitute of Economic Analysis, RussiaInstitute of Economic Analysis, RussiaFree Market Center (FMC), SerbiaFree Market Center (FMC), SerbiaThe F.A. Hayek Foundation, Slovak RepublicThe F.A. Hayek Foundation, Slovak RepublicThe Free Market Foundation of Southern Africa, South The Free Market Foundation of Southern Africa, South AfricaAfricaFundacio Catalunya, SpainFundacio Catalunya, SpainPathfinder Foundation, Sri LankaPathfinder Foundation, Sri LankaNile Institute of Economic Studies, SudanNile Institute of Economic Studies, SudanTimbro, SwedenTimbro, SwedenLiberales Institut, SwitzerlandLiberales Institut, SwitzerlandTajikistan Free Market Centre, TajikistanTajikistan Free Market Centre, TajikistanArthur Lok Jack Graduate School of Business, The Arthur Lok Jack Graduate School of Business, The University of the West Indies, Trinidad and TobagoUniversity of the West Indies, Trinidad and TobagoAssociation for Liberal Thinking, TurkeyAssociation for Liberal Thinking, TurkeyThe Ukrainian Center for Independent Political Research, The Ukrainian Center for Independent Political Research, UkraineUkraineThe Institute of Economic Affairs (IEA), United KingdomThe Institute of Economic Affairs (IEA), United KingdomCATO Institute, USACATO Institute, USAThe Centre for the Dissemination of Economic Knowledge The Centre for the Dissemination of Economic Knowledge (CEDICE), Venezuela(CEDICE), VenezuelaResearch Center for Entrepreneurship Development, Research Center for Entrepreneurship Development, VietnamVietnamZambia Institute for Public Policy Analysis (ZIPPA), Zambia Institute for Public Policy Analysis (ZIPPA), ZambiaZambia

Member Institutes of Economic Freedom of The World Network

Liberales Institut, GermanyLiberales Institut, GermanyThe Institute of Economic Affairs, GhanaThe Institute of Economic Affairs, GhanaCentro de Investigaciones Económicas Nacionales, Centro de Investigaciones Económicas Nacionales, GuatemalaGuatemalaInafEcon-Institute of African Economics, GuineaInafEcon-Institute of African Economics, GuineaInstitut de Recherche pour la Liberté Economique et la Institut de Recherche pour la Liberté Economique et la Prospérité (IRLEP), HaitiProspérité (IRLEP), HaitiCentro de Investigaciones Economicas y Sociales (CIES), Centro de Investigaciones Economicas y Sociales (CIES), HondurasHondurasHong Kong Centre for Economic Research, Hong KongHong Kong Centre for Economic Research, Hong KongSzazadveg Foundation, HungarySzazadveg Foundation, HungaryCentre for Social and Economic Research (RSE), IcelandCentre for Social and Economic Research (RSE), IcelandCentre for Civil Society, IndiaCentre for Civil Society, IndiaThe Institute for Development of Economics and Finance, The Institute for Development of Economics and Finance, IndonesiaIndonesiaOpen Republic Institute, IrelandOpen Republic Institute, IrelandJerusalem Institute for Market Studies, IsraelJerusalem Institute for Market Studies, IsraelCentro Einaudi, ItalyCentro Einaudi, ItalyYoung Entrepreneurs Association, JordanYoung Entrepreneurs Association, JordanCentral Asian Free Market Institute, KazakhstanCentral Asian Free Market Institute, KazakhstanAfrican Research Center for Public Policy and Market African Research Center for Public Policy and Market Process, KenyaProcess, KenyaCenter for Free Enterprise, KoreaCenter for Free Enterprise, KoreaGroup for Legal and Political Studies, KosovoGroup for Legal and Political Studies, KosovoEconomic Policy Institute-Bishkek Consensus, Kyrgyz Economic Policy Institute-Bishkek Consensus, Kyrgyz RepublicRepublicLithuanian Free Market Institute, LithuaniaLithuanian Free Market Institute, LithuaniaD'Letzeburger Land, LuxembourgD'Letzeburger Land, LuxembourgInstitute for Democracy and Economic Affairs (IDEAS), Institute for Democracy and Economic Affairs (IDEAS), MalaysiaMalaysiaCentro de Investigación para el Desarrollo A.C., MexicoCentro de Investigación para el Desarrollo A.C., MexicoOpen Society Forum, MongoliaOpen Society Forum, MongoliaThe Center for Entrepreneurship and Economic The Center for Entrepreneurship and Economic Development, MontenegroDevelopment, MontenegroThe Prosperity Foundation, NepalThe Prosperity Foundation, NepalThe New Zealand Business Roundtable, New ZealandThe New Zealand Business Roundtable, New Zealand

Translations and Sub-national and Translations and Sub-national and Regional IndicesRegional Indices

Economic Freedom of the Arab WorldEconomic Freedom of the Arab World

Economic Freedom of North AmericaEconomic Freedom of North America

Economic Freedom of the Mexican statesEconomic Freedom of the Mexican states

Economic Freedom of Latin AmericaEconomic Freedom of Latin America

Economic Freedom of the Indian StatesEconomic Freedom of the Indian States

Economic Freedom of the World: SpanishEconomic Freedom of the World: Spanish

Economic Freedom of the World: South AfricaEconomic Freedom of the World: South Africa

Economic Freedom of the German Economic Freedom of the German BundesländernBundesländern

Introducing the 2012 Economic Introducing the 2012 Economic Freedom of the World Index ResultsFreedom of the World Index Results

Overall Economic Freedom Index Overall Economic Freedom Index and the Top 10and the Top 10

Source: The Fraser Source: The Fraser Institute.Institute.

0 2 4 6 8 10

Score (out of 10)

Hong Kong

Singapore

New Zealand

Switzerland

Australia

Canada

Bahrain

Mauritius

Finland

Chile

Overall Economic Freedom Overall Economic Freedom Index and the Bottom TenIndex and the Bottom Ten

0 2 4 6 8 10

Score (out of 10)

Mozambique

Chad

Algeria

Guinea-Bissau

Congo, Dem. R.

Angola

Congo, Rep. Of

Zimbabwe

Myanmar

Venezuela


World Average World Average Economic Freedom Over TimeEconomic Freedom Over Time

5.89 5.31

5.30

5.35

5.66

6.12

6.59

6.79

6.83

6.86

6.80

6.79

6.84

0

2

4

6

8

10

Eco

no

mic

Fre

edo

m S

core

1970 1975 1980 1985 1990 1995 2000 2005 2006 2007 2008 2009 2010


Why is Economic Freedom Why is Economic Freedom Important?Important?

• Economic rights are fundamental rights in the sense that without them there can be no political freedom or civil freedoms

• They are a prerequisite for growth and development

• They are a prerequisite for broader human development

The impact on prosperityThe impact on prosperity and development and development

Per Capita Income and Economic Per Capita Income and Economic Freedom QuartileFreedom Quartile

$0$5,000

$10,000$15,000$20,000$25,000$30,000$35,000$40,000

GD

P P

er C

apit

a (p

pp

), 2

010

Least FreeQuartile

3rd Quartile2nd QuartileMost FreeQuartile

Sources: The Fraser Institute; The World Bank, World Development Indicators, Sources: The Fraser Institute; The World Bank, World Development Indicators, 2012.2012.

Most Free ……………. Least Free Most Free ……………. Least Free

Growth in Developing Nations Per Growth in Developing Nations Per Capita and Economic Freedom QuartileCapita and Economic Freedom Quartile

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

GD

P P

er

Ca

pit

a %

Gro

wth

,

19

90

-20

10

Least FreeQuartile




Economic Freedom, the Poor, andEconomic Freedom, the Poor, andInequalityInequality

Income Share of the Poorest 10% and Income Share of the Poorest 10% and

Economic FreedomEconomic Freedom

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

Inco

me S

hare

Held

by

Lo

wes

t 10

%,

1990

-201

0

Least FreeQuartile

3rdQuartile

2ndQuartile

Most FreeQuartile



Income of the Poorest 10% and Income of the Poorest 10% and

Economic FreedomEconomic Freedom

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

Inco

me o

f th

e L

ow

est

10%

, 19

90-2

010

Least FreeQuartile

3rdQuartile

2ndQuartile

Most FreeQuartile



Economic Freedom, Governance, Economic Freedom, Governance, and Democracyand Democracy

Economic Freedom and Political RightsEconomic Freedom and Political RightsLow scores indicate high level of rights Low scores indicate high level of rights

0.0

1.0

2.0

3.0

4.0

5.0

Po

litic

al R

igh

ts (

ou

t o

f 7)

Least FreeQuartile


Sources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings, Sources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings, 2011, available at http://www.freedomhouse.org/.2011, available at http://www.freedomhouse.org/.


Economic Freedom and Civil RightsEconomic Freedom and Civil RightsLow scores indicate high level of rights Low scores indicate high level of rights

0.0

1.0

2.0

3.0

4.0

5.0

Civ

il L

iber

ties

(

ou

t o

f 7)

Least FreeQuartile


Sources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings, Sources: The Fraser Institute; Freedom House, Freedom in the World Country Ratings, 2011, available at http://www.freedomhouse.org/.2011, available at http://www.freedomhouse.org/.


Economic Freedom and CorruptionEconomic Freedom and CorruptionHigh scores indicate low corruptionHigh scores indicate low corruption

0

2

4

6

8

10

Co

rru

pti

on

Ra

tin

g

(ou

t o

f 1

0)

Least FreeQuartile


Sources: The Fraser Institute; Transparency International, Corruption Perceptions Index, Sources: The Fraser Institute; Transparency International, Corruption Perceptions Index, 2011 available at http://www.transparency.org.2011 available at http://www.transparency.org.


The impact of Economic Freedom on The impact of Economic Freedom on other indicators of well-beingother indicators of well-being

Economic Freedom and Economic Freedom and Life SatisfactionLife Satisfaction

0.0

50.0

100.0

150.0

200.0

250.0

Lif

e S

atis

fact

ion

(o

ut

of

10)

Least FreeQuartile


Sources: The Fraser Institute; White, A. (2007). A Global Projection of Subjective Sources: The Fraser Institute; White, A. (2007). A Global Projection of Subjective Well-being:Well-being:


LiteracyLiteracyMale FemaleMale Female

0.5

20.5

40.5

60.5

80.5

100.5

Least FreeQuartile

3rd Quartile2nd QuartileMost Free Quartile


Sources: The Fraser Institute; World Development Indicators 2012Sources: The Fraser Institute; World Development Indicators 2012

Life Expectancy at Birth and Life Expectancy at Birth and Economic Freedom QuartilesEconomic Freedom Quartiles

0

20

40

60

80

Yea

rs

Least FreeQuartile


Sources: The Fraser Institute; The World Bank, World Development Indicators, Sources: The Fraser Institute; The World Bank, World Development Indicators,

2011.2011.


ConclusionsConclusions

Economic Freedom

• Increases prosperity for all

• Reduces poverty

• Increases other freedoms

• Improves quality of life

www.freetheworld.comwww.freetheworld.com

www.fraserinstitute.orgwww.fraserinstitute.org