Economic freedom in terms of kinds of government actions: An empirical investigation

This paper evaluates the Economic Freedom of the World (EFW) Index on the basis of the Hayekian concept of freedom (Hayek 1960), more precisely on that of its conceptualisation in terms of the character of government actions developed in Kapás — Czeglédi (2007a). As a result of a detailed criticism, the components of the EFW index are regrouped in freedom-related, policy and other categories. Although the EFW index is not considered a good measure of economic freedom, its components and the index itself are used in empirical investigations. In these examinations the aim is to show that using freedom-related components of the EFW index (which is more in line with authors’ concept of economic freedom) instead of the index itself may lead to even more plausible propositions than those provided by the EFW index. The results provide support for this argument