2009 Index of Economic Freedom

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. (See the Methodology.)

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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 the Executive Summary and Chapter 2: Fifteen Years of Advancing Freedom

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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 ten component scores are then averaged to give an overall economic freedom score for each country. The ten components of economic freedom are:

Business Freedom | Trade Freedom | Fiscal Freedom | Government Size | Monetary Freedom | Investment Freedom | Financial Freedom | Property rights | Freedom from Corruption | Labor Freedom

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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.

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Q.5. What is your period of study?

For the 2009 Index of Economic Freedom, the authors generally examined data for the period covering the second half of 2007 through the first half of 2008. To the extent possible, the information considered for each factor was current as of June 30, 2008. 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, 2005, to December 31, 2007. 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 2008.

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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.

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Q.7. What changes did you make in the Index this year?

The Index includes 21 additional economies, to bring the total number included to 183, of which 179 are scored and ranked. Though the methodology is essential the same as last year, small refinements were made to the formula for the Labor Freedom score (see Methodology). Regional analysis was expanded by dividing the Americas into two regions: the North America region (covering Canada, Mexico, and the United States); and the South and Central America/Caribbean region (covering all other economies in the Western Hemisphere).

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