Dave Armstrong writes:
I [Armstrong] recently written a blog post that might be of interest to the Monkey Cage readers concerning the recently released Heritage Foundation Index of Economic Freedom — specifically what they did wrong methodologically and how they could fix it with some original analysis of their data and re-examination of their key conclusions.
Armstrong writes:
Recently, the Heritage Foundation released its 2010 Index of Economic Freedom. No doubt, in the interest of replicability and transparently, Heritage released all of the data required to produce all of their indices. . . . Heritage employs a simple method of using multiple measurements to get a better sense of what is happening with economic freedoms around the world. Their main conclusions are that Hong Kong and Singapore still top the list of most economically free countries and that the US is rapidly and significantly losing economic freedom as it falls out of the seven top “free” economies.
But then:
I [Armstrong] argue that these findings don’t tell the whole story. When a more appropriate model is used to estimate economic freedom, Denmark and New Zealand are found to be the two most free economies and the US, while significantly less free than these top two economies, is not significantly different from the any of the other top 20 economies. While I find that the US does have a lower score this year than last, it is not a statistically significant drop (i.e., from a statistical point of view, economic freedom in the US is not different in 2010 than it was in 2009). In fact, none of the top 20 most free economies is significantly more or less free in 2010 than they were in 2009.
I haven’t read Armstrong’s blog in detail, nor have I seen the Heritage Foundation Index before, but I like the idea of taking this sort of index apart and understanding how it works. Those of you who are interested in this topic can follow up from here.