Chasing the Norm

Australian academic and blogger on politics, international relations, and culture

Corrupting one’s own figures

Via the Washington Monthy comes the news that the Heritage Foundation has substantially shifted the position of the USA in its Index of Economic Freedom. The USA is now only “mostly free”.

The Heritage Foundation’s latest world ranking of economic freedoms shows the U.S. falling farther than any other large economy in the world. The foundation says the TARP Program, the auto industry bailout and the stimulus package, among other factors, have caused in the country’s economy to go from “free” to “mostly free.” […]
Factors like business regulation, the labor market, monetary stability, property rights and corruption are used to determine the rankings.

Terry Miller, director of the Center of International Trade And Economics at the Heritage Foundation, says the U.S. ranking may continue to fall.”Certainly looking at the government policies that have been followed over the last year, since our last data cut off, I’m very concerned,” Miller told TPM, adding that health care reform was likely to further hurt our economic freedom.


Heres the top ten on the right for your quick viewing. But it’s an odd list. New Zealand, Canada and Australia all have significantly greater regulations in economic sectors (and weren’t we glad of that in 2008). Likewise all offer true universal healthcare delivery as well as insurance (as opposed to the USA’s just passed universal insurance) and it is hard to argue that property rights and the labor market are in general more regulated in the USA than in Australia.

While Government Spending must be seen as part of the mix, its weighting here seems to utterly distort the figures. You’d therefore have therefore to suspect some ideological politics is at work. The (Conservative) Heritage Foundation gets a 1-2 day headline downgrading the USA as ‘mostly free’ instead of ‘free’, but the long term effect of this is going to damage the credibility of the list. This type of index gets a lot of work in academic circles as a handy reference point, but that’s going to drop off once people start suspecting more than just world view, but domestic politics is interfering with the results. Hardly a worth while pay off.

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  1. All these composite indexes are inherently highly contentious because of weighting issues; the difficulties of international comparisons make them more so.

    According to Heritage, Australia’s labour market freedom increased slightly between 2007 and 2010. Clearly this isn’t true.

    But such is the human fascination with lists and rankings that these criticisms just bounce off.