Index of Economic Freedom

The creators of the index assert that they take an approach inspired by Adam Smith's The Wealth of Nations, that "basic institutions that protect the liberty of individuals to pursue their own economic interests result in greater prosperity for the larger society".

In 2011, with the exception of Europe and North America, there were increased levels of freedom recorded in all regions, with the greatest improvement shown in Sub-Saharan Africa.

The top five "free" economies identified by the 2011 index were Hong Kong, Singapore, Australia, New Zealand, and Switzerland, each scoring over 80 on the economic freedom grading scale.

[11] In 2012, results from the Index showed an overall decline in global economic freedom; according to The Heritage Foundation, the average score in its ranking was the second- lowest of the last ten years.

[15] According to the report, activity in the private sector is threatened by the greater government spending, which has increased public debt and led to more bureaucracy.

[17] The Index evaluates 184 countries in four broad policy areas that affect the economic freedom, which are rule of law, government size, regulatory efficiency, and open markets.

[18][19] It also takes into consideration some specific categories like property rights, judicial effectiveness, government integrity and tax burden.

[27] In September 2007, the Millennium Challenge Account, a U.S. government foreign aid program, used the Index in determining which countries will receive their performance-based compacts.

It is divided into the following sub-factors: Analyzes how prevalent are forms of political corruption and practices such as bribery, extortion, nepotism, cronyism, patronage, embezzlement, and graft.

Its sub-factors are: Quantifies the burden of government expenditures, including consumption by the state and all transfer payments related to various welfare programs.

It is divided into the following sub-factors: Analyzes the cost, time and freedom to open, operate and close a business, taking into consideration factors like electricity.

It is divided into the following sub-factors: Quantifies the extent to which tariff and nontariff barriers affect imports and exports of goods and services into and out of the country.