EconomyPolitics Global Economic Efficiency (updated Jan 20, 2010)
Fraser Institute: Economic Freedom of the world
Per the Fraser institute, the index published in Economic Freedom of the World (EFW) is designed to measure the consistency of a nation’s institutions and policies with economic freedom. The key ingredients of economic freedom are:
• Personal choice
• Voluntary exchange coordinated by markets
• Freedom to enter and compete in markets
• Protection of persons and their property from aggression by others.
These four cornerstones underpin the design of the index. Put simply, institutions and policies are consistent with economic freedom when they provide an infrastructure for voluntary exchange and protect individuals and their property from aggressors. In order to achieve a high EFW rating, a country must provide secure protection of privately owned property, even-handed enforcement of contracts, and a stable monetary environment. It also must keep taxes low, refrain from creating barriers to both domestic and international trade, and rely more fully on markets rather than the political process to allocate goods and resources.
Heritage Foundation: Index of Economic Freedom
Per the Heritage Foundation 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.
The ten measured 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
IMD World Competitiveness Center: World Competitiveness Yearbook
Per the World Competiveness Center, The Yearbook analyzes and ranks the ability of nations to create and maintain an environment that sustains the competitiveness of enterprises. An economy’s competitiveness cannot be reduced only to GDP and productivity because enterprises must also cope with political, social and cultural dimensions. Therefore nations need to provide an environment that has the most efficient structure, institutions and policies that encourage the competitiveness of enterprises.
They look at over 300 competitiveness criteria have been selected as a result of extensive research using economic literature, international, national and regional sources and feedback from the business community, government agencies and academics. They encompass broad measures of freedom based upon:
• Economic Performance • Government Efficiency
• Business Efficiency • Infrastructure
World Economic Forum: Global Competitiveness Report
The Global Competitiveness Report’s competitiveness ranking is based on the Global Competitiveness Index (GCI), developed for the World Economic Forum based on 12 pillars of competitiveness, providing a comprehensive picture of the competitiveness landscape in countries around the world at all stages of development. The pillars include:
• Institutions • Infrastructure
• Macroeconomic Stability • Health and Primary Education
• Higher Education and Training • Goods Market Efficiency
• Labor Market Efficiency • Financial Market Sophistication
• Technological Readiness • Market Size
• Business Sophistication • Innovation
EuroMoney: Country Risk Ratings
A combination of data sources on various debt figures and ratings as well as experts’ opinions on both economic projections and political risk of each country goes into the ratings that are published twice a year. Factors included in the survey include:
• Political Risk • Access to bank finance
• Economic performance/projections • Debt in default/rescheduled
• Debt indicators • Credit Ratings
• Access to short term finance • Access to capital markets
• Discount on forfeiting
To come up with an effective way of comparing the different indices, we first eliminated any countries that were not in common. We them set them to the same scale, where the lowest country rank is set to zero on the scale and highest to one. Then their relative positions are weighted by the corresponding index, not the ranking to preserve their relative positions. Also note that IMD had less countries that we felt were important to include. In the case that there was no score for IMD, we used an average of the four remaining indices. We compensated for this by weighting the lowest country on their scale, Venezuela at 25%, which is roughly where it is on the other scales.
For media inquiries into the EconomyPolitics Index of Indices, please contact Taylor Cottam, at email@example.com. Please feel free to use the full index, but must source back to EconomyPolitics.