James Gwartne y Economic Robert Lawson Freedom Walter Bloc k United States Economic Freedom of the World: 1975-1995 co-publishers Cato Institute, Washington, D.C., United States of America a charitable trust. Untill 992 it was affiliated with the Chinese University Founded in 1977, the Cato Institute is a public policy research foundation of Hong Kong, and since then it has been affiliated with the University dedicated to broadening the parameters of policy debate to allow con- of Hong Kong. The Centre recognizes that the economic success of Hong sideration of more options that are consistent with the traditional Amer- Kong is the result of policies that protected private property rights, free ican principles of limited government, individual liberty, free markets, enterprise, and limited the role of the government. It also recognizes that and peace. 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The Centre was established in 1987 as world. www.fraserinstitute.org ECONOMIC FREEDOM OF THE WORLD: 1975-1995 www.fraserinstitute.org www.fraserinstitute.org ECONOMIC FREEDOM OF THE WORLD: 1975-1995 by James Gwartney Robert Lawson Walter Block www.fraserinstitute.org Copyright © 1996 by The Fraser Institute. All rights reserved. No part of this book may be reproduced in any manner whatsoever without written permis- sion except in the case of brief quotations embodied in critical articles and reviews. The authors of this book have worked independently and opinions expressed by them, therefore, are their own, and do not necessarily reflect the opinions of the members or the trustees of The Fraser Institute. Printed in Canada. Canadian Cataloguing in Publication Data Gwartney, James D. Economic Freedom of the World, 1975-1995 Includes bibliographical references. ISBN 0-88975-157-9 1. Free enterprise. 2. Economic history—1971-1990. 3. Economic history—1900- 4. Economic development— Measurement. I. Lawson, Robert A. (Robert Allen), 1967- II. Block, Walter, 1941- III. Fraser Institute (Vancouver, B.C.) IV. Title HB95.G92 1995 330.9'045 C95-911182-4 www.fraserinstitute.org TABLE OF CONTENTS Foreword vii List of Exhibits ix About the Authors xii Acknowledgments xiii Executive Summary xv Graphic Summary of Major Findings xix Introduction: The Historical Development of The Economic Freedom Index by Michael A. Walker 1 Chapter 1 Construction of the Economic Freedom Index 11 • The Concept of Economic Freedom / 12 • The Components of Our Index of Economic Freedom / 14 • Attaching Weights to the Components / 37 Chapter 2 Rating the Economic Freedom of Countries in 1993-1995, 1990, 1985, 1980, and 1975 47 • Country Ratings in 1993-1995 / 47 • Country Rankings: 1975-1995 / 62 • The Persistently High and Persistently Low Rated Countries: 1975-1995 / 66 Chapter 3 Changes in the Economic Freedom of Countries: 1975 to 1995 71 • Changes in the Economic Freedom of Countries / 71 • Changes in the Economic Freedom of the World / 80 • Changes in Economic Freedom By Development Status and Region / 84 www.fraserinstitute.org Chapter 4 Economic Freedom and Economic Growth 89 • Measurement Problems and the Relationship Between Economic Freedom and Income / 90 • The Level of Economic Freedom, Income, and Growth / 92 • Changes in Economic Freedom and the Growth of GDP / 97 • Economic Freedom and Economic Growth: