Why Economic Freedom Matters

By David R Henderson. 

"Each year the Economic Freedom of the World report does something important: it measures whether ordinary people are allowed to make economic choices—work, save, start a business, trade, invest, and keep what they earn—without being pushed around by the government. The newest edition, published in 2025 by the Fraser Institute’s global network, compiles data through 2023 and ranks 165 jurisdictions.

The premise is simple. If you want a society in which people can pursue their own plans—especially people who do not have political connections—you need a framework that protects property, enforces contracts, keeps money reasonably sound, permits trade, and limits regulatory barriers. The report’s value is not that it settles every argument, but it does settle a good many. Among those many is the biggest issue in economic policy: free markets versus government. Which kind of economic policies make it easier for people, including the poor, to succeed? In each of the many reports done since 1985, the answer is clear. Economic freedom works well to generate well-being for pretty much everyone. (bold added)

The good news is that economic freedom rose fairly steadily until 2019. The bad news is that it has fallen since then. For the United States, the good news is that we rank fifth out of 165 political jurisdictions. The bad news is that our absolute score is lower than it was in 2019.

These are the opening paragraphs of my latest article for the Hoover Institution: “Why Economic Freedom Matters,” Defining Ideas, February 19, 2026.

The December 2025 report didn’t make as big a splash on the web as I think it should have. That’s why I wrote this piece.

Another excerpt:

The report also points out one tragic fact: “The 10 lowest-ranked countries were Chad, Libya, Syria, Argentina, Myanmar, Iran, Algeria, Sudan, Zimbabwe, and Venezuela.” Venezuela was the lowest, with a score of 3.11, and the highest of the ten was Chad, with a score of 4.84. Where were Cuba and North Korea? There were not enough reliable data available for the authors to assign a score.

And:

Here is the uncomfortable headline: global economic freedom peaked in 2019 and has declined each year for four years afterward. The report ties the post-2019 drop to the policy response to the coronavirus pandemic and notes that all five areas declined after 2019, with “sound money” experiencing the largest drop.

Since 2019, therefore, the direction is clearly down. That matters because many people—especially in rich countries—talk as if freedom is the default setting and only dictatorships threaten it. The data say otherwise: freedom can shrink by “temporary” emergency measures, and the shrinkage can linger. Adam Smith famously said, “There is much ruin in a nation,” but that doesn’t mean that declines in freedom are to be ignored.

And:

Start with income. Comparing the freest quartile of countries to the least free quartile, the report finds that average incomes are 6.2 times as great in the freest countries as in the least free. And the income of people in the bottom 10 percent is 7.8 times as high in the freest quartile as in the least free. Those are ratios. The report also provides concrete dollar levels in purchasing power parity dollars. The average income threshold for the poorest decile is about $9,771 in the freest quartile versus about $1,255 in the least-free quartile. If you care about poverty in a serious way—meaning you care about what poor people can actually buy—those numbers should end a lot of fashionable conversation.

Read the whole thing."