2012 Index of Economic Freedom
initiative. Individuals are empowered—indeed,entitled—to pursue their dreams by means o their own ree choice.In an economically ree society, individualssucceed or ail based on their individual eortand ability. The institutions o a ree and opensociety do not discriminate either against or inavor o individuals based on their race, ethnicbackground, gender, class, amily connections,or any other actor unrelated to individual merit.Government decision-making is characterizedby openness and transparency, and the brightlight o equal opportunity replaces the shadows where discrimination can be most insidious.In an economically ree society, the power o economic decision-making is widely dispersed,and the allocation o resources or productionand consumption is on the basis o ree and opencompetition so that every individual or irm hasa air chance to succeed.These three undamental principles o economic reedom—empowerment o theindividual, non-discrimination, and open com-petition—underpin every measurement andpolicy idea presented in the
Index of Economic Freedom.
economic freedom:aUtonomy, not anarcHy
In general, state action or government con-trol that intereres with individual autonomy limits economic reedom. The
Index of Econom-ic Freedom
is not, however, a call or anarchy.The goal o economic reedom is not simply anabsence o government coercion or constraint,but the creation and maintenance o a mutualsense o liberty or all. As individuals enjoy theblessings o economic reedom, they in turnhave a responsibility to respect the economicrights and reedoms o others. Governments areinstituted to ensure basic protections againstthe ravages o nature or the predations o onecitizen over another so that positive economicrights such as property and contracts are givensocietal as well as individual deense against thedestructive tendencies o others. A comprehensive deinition o economic ree-dom should
encompass all liberties and rights of production, distribution, or consumption of goodsand services. The highest form of economic free-dom should provide an absolute right of propertyownership; fully realized freedoms of movement for labor, capital, and goods; and an absoluteabsence of coercion or constraint of economicliberty beyond the extent necessary for citizensto protect and maintain liberty itself.
In other words, individuals in an economically ree soci-ety would be ree and entitled to work, produce,consume, and invest in any way they chooseunder a rule o law, with their reedom at onceboth protected and respected by the state.Some government action is necessary orthe citizens o a nation to deend themselves,promote the peaceul evolution o civil society,and enjoy the ruits o their labor. For example,citizens are taxed to provide revenue or the pro-tection o person and property as well as or thecommon deense. Most political theorists alsoaccept that certain goods—what economists call“public goods”—can be supplied more eiciently by government than through private means.Some public goods, such as the maintenance o a police orce to protect property rights, a mon-etary authority to maintain a sound currency,and an impartial judiciary to enorce contractsamong parties, are themselves vital ingredientso an economically ree society. When govern-ment action rises beyond the minimal necessary level, however, it can become corrosive to ree-dom—and the irst reedom aected is oten eco-nomic reedom.
Throughout history, governments haveimposed a wide array o constraints on econom-ic activity. Though oten imposed in the name o equality or some other noble societal purpose,such constraints are most oten imposed or thebeneit o societal elites or special interests, andthey come with a high cost to society as a whole.Constraining economic choice distorts anddiminishes the production, distribution, and
3 “The property which every man has in his ownlabor, as it is the original oundation o all otherproperty, so it is the most sacred and inviolable.” Adam Smith,
An Inquiry into the Nature and Causesof the Wealth of Nations
(New York: The ModernLibrary, 1937), pp. 121–122; frst published in 1776.