Abstract
We recall the historically admitted prerequisites of Economic Freedom (EF). We have examined 908 data points for the Economic Freedom of the World (EFW) index and 1884 points for the Index of Economic Freedom (IEF); the studied periods are 2000–2006 and 1997–2007, respectively, thereby following the Berlin wall collapse, and including 11 September 2001. After discussing EFW index and IEF, in order to compare the indices, one needs to study their overlap in time and space. That leaves 138 countries to be examined over a period extending from 2000 to 2006, thus 2 sets of 862 data points. The data analysis pertains to the rank-size law technique. It is examined whether the distributions obey an exponential or a power law. A correlation with the country’s Gross Domestic Product (GDP), an admittedly major determinant of EF, follows, distinguishing regional aspects, i.e., defining 6 continents. Semi-log plots show that the EFW-rank relationship is exponential for countries of high rank (≥20); overall the log–log plots point to a behaviour close to a power law. In contrast, for the IEF, the overall ranking has an exponential behaviour; but the log–log plots point to the existence of a transitional point between two different power laws, i.e., near rank 10. Moreover, log–log plots of the EFW index relationship to country GDP are characterised by a power law, with a rather stable exponent () as a function of time. In contrast, log–log plots of the IEF relationship with the country’s gross domestic product point to a downward evolutive power law as a function of time. Markedly the two studied indices provide different aspects of EF.
Highlights
Numerous empirical studies [1] pretend to show that Economic Freedom (EF) favours economic growth, prosperity, poverty reduction, and has many other beneficial effects, beside being a necessary condition for the development of democracy
2006, respectively: the semi-log plots show that the relationship is exponential for countries of high rank (≥20); the log–log plots point to a behaviour close to a power law
Let us recall the research questions: can one find an empirical law for describing the economic freedom (EF) of nations through the main measure indices, i.e., the Economic
Summary
Numerous empirical studies [1] pretend to show that Economic Freedom (EF) favours economic growth, prosperity, poverty reduction, and has many other beneficial effects, beside being a necessary condition for the development of democracy. A second paper is intended for later years as explained below This is due to different definitions and changes in geo-political economic conditions. It is expected that the paper can be useful for econo-physicists and other researchers, due to the somewhat original approach, more numerical, i.e., along the lines of econophysics thought. The oldest of these publications, The Wealth of Nations by Adam Smith in 1776, shows that the preservation of individual freedom to pursue their own interests is due to the necessity of creating a social and more prosperous civilisation [2]. EF and discussing such measures, let us briefly examine the framework in the following three subsections
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