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Is “economic freedom” the same as free market capitalism? A decompositional analysis of the Economic Freedom of the World index.

Cohen, Joseph N (2011): Is “economic freedom” the same as free market capitalism? A decompositional analysis of the Economic Freedom of the World index.

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Abstract

The Frasier Institute’s Economic Freedom of the World is often taken as a metric of market capitalism, and relationships between the index and macroeconomic outcomes are presented as signaling the consequences of free markets. This paper warns analysts that the index may be conflating three distinct concepts: free markets, good governance and price stability. Analysts should remain cognizant of this conceptual conflation when using the index to develop policy prescriptions.

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