Heritage foundation index

Alexandre Fenelon afenelon at zaz.com.br
Wed Oct 10 18:32:02 PDT 2001


-Have you already studied the Heritage foundation index of economic freedom? -Do you know some critical review of the methodology used in this index?

-I´m asking this because I took a look at the index and found it heavily biased to "prove" that economic freedom is good. My main critics are:

1-This index is very recent so it can´t be used to evaluate long term rowth rates. 2-Sometimes this index doesn´t have too much to do with reality. Brazil had relatively extensive liberalization and extremely extensive privati- zation from 1994 to 2001 and its freedom index had almost no changes. Sweeden had an index almost equal to the US one despite very high rates of taxation (4,5/5) and government intervention (4/5). Maybe the values used to build the index are not well weighted. 3-Some indexes used to make the overall score are more surrogates for poor economic performance than direct measures of freedom (for example "freedom" increases when inflation decreases and black market is not only a measure of state intervention but also a result of poverty and relative scarcity of hard currency and consumer goods) 4-Some of the less "free" countries are under economic sanctions (North Korea, Iraq, Iran, Cuba and Lybia), so it´s difficult to say that their hardships are due to "state intervention".

The only evaluation I saw about the methodology used in this kind of index is from Harvard Un. and it makes a very brief mention of the Heritage index.

http://ksghome.harvard.edu/~.drodrik.academic.ksg/skepti1299.pdf



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