Economic Freedom of the World
Economic Freedom of the World (EFW) is an annual study from the Fraser Institute that measures how economically free countries are. It grew out of debates among libertarian economists about what makes markets work best and how freedom relates to prosperity.
What is economic freedom? It means people can make their own choices, markets coordinate voluntary exchanges, new businesses can start and compete, and governments protect people and their property from aggression.
How is it measured? The study looks at five big areas:
- Size of government (spending, taxes, and state-owned enterprises)
- Protection of property rights
- Sound money (stable inflation and reliable money)
- Freedom to trade internationally
- Regulation of credit, labor, and business
Forty-two indicators from sources like the World Bank are used, such as tax rates, inflation, import costs, and regulated prices. Each of the five areas is given equal weight in the final score.
What does it find? Generally, more economic freedom is linked to better outcomes:
- Higher average income and higher income for the poorest people
- Longer life expectancy and higher literacy
- Less corruption and better access to clean water
- Greater happiness and a lower likelihood of war
Environmental findings are nuanced. Some environmental health indicators improve with wealth, while pollution can rise during the early stages of development. The overall relationship between freedom and the environment is not simple, but research often shows positive or neutral effects of freedom on environmental health.
Why is it used? The index is widely used in economic and political science research because it covers a long time period and has been cited in many studies. It has helped shape thinking about how policies affect growth and poverty.
Criticism and debates. Critics argue that the link between freedom and growth isn’t always strong or consistent. The way the index is built, including how components are weighted, can be questioned. Some developing countries grow quickly with relatively lower measured freedom, while some wealthy welfare states have extensive regulations.
Examples of rankings. In past editions, top ranks often go to places like Hong Kong and Singapore, with others such as New Zealand, Switzerland, the United States, Ireland, the United Kingdom, Canada, Australia, and Mauritius also ranking highly. Countries far down the list tend to face conflict or extensive government control.
In short, Economic Freedom of the World tries to quantify how free markets are in different countries and what that freedom means for prosperity, health, and peace.
This page was last edited on 3 February 2026, at 11:31 (CET).