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On the Methodology of the Economic Freedom of the World Index

In: The Design and Use of Political Economy Indicators

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  • Robert A. Lawson

Abstract

Anyone who has taught macroeconomics knows that students sometimes have difficulty grasping the enormity of the concept of GDP. The usual definition given is, “the market value of all final goods and services produced in a nation in a year,” and a number, $13,620 billion according to the latest estimate (Bureau of Economic Analysis 2007). But what does it mean? It is just a number to them. To make it seem more concrete, I ask my students to imagine a long printout that lists every activity in America this year: production of 10 million cars, 1.2 billion haircuts, 2430 major league baseball games. Then I ask them to imagine the same printout but with dollar values instead of quantities: $200 billion worth of cars, $12 billion in haircuts, $2 billion in ticket sales at major league games. Finally I ask them to imagine adding up all the numbers. Slowly it dawns on them what we are talking about. Clearly the total production of the United States is a big, multidimensional thing and GDP boils it down to a single, mind-bogglingly huge number.

Suggested Citation

  • Robert A. Lawson, 2008. "On the Methodology of the Economic Freedom of the World Index," Palgrave Macmillan Books, in: King Banaian & Bryan Roberts (ed.), The Design and Use of Political Economy Indicators, chapter 0, pages 171-185, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-61662-2_9
    DOI: 10.1057/9780230616622_9
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    Citations

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    Cited by:

    1. Samuel Brazys & Krishna Chaitanya Vadlamannati, 2021. "Aid curse with Chinese characteristics? Chinese development flows and economic reforms," Public Choice, Springer, vol. 188(3), pages 407-430, September.
    2. Olalekan Charles Okunlola & Anthony E. Akinlo, 2021. "Does economic freedom enhance quality of life in Africa?," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 68(3), pages 357-387, September.
    3. Alali, Walid Y., 2010. "Impact of Natural Environment, Regional Integration, and Policies on FDI," MPRA Paper 115612, University Library of Munich, Germany.
    4. Alali, Walid Y., 2010. "Role of Political Institutions on Economic Growth: Empirical Evidence," MPRA Paper 115611, University Library of Munich, Germany.
    5. Christian Bjørnskov, 2012. "How Does Social Trust Affect Economic Growth?," Southern Economic Journal, John Wiley & Sons, vol. 78(4), pages 1346-1368, April.
    6. Harold Creusen & Arjan Lejour, 2009. "The contribution of trade policy to the openness of the Dutch economy," CPB Document 194, CPB Netherlands Bureau for Economic Policy Analysis.
    7. Pourya Darnihamedani & Siri Terjesen, 2022. "Male and female entrepreneurs’ employment growth ambitions: the contingent role of regulatory efficiency," Small Business Economics, Springer, vol. 58(1), pages 185-204, January.
    8. Alali, Walid Y., 2010. "Impact of Institutions and Policy on Economic Growth: Empirical Evidence," MPRA Paper 115610, University Library of Munich, Germany.
    9. Marc Audi & Marc Poulin & Amjad Ali, 2024. "Determinants of Business Freedom in Developing Countries: The Role of Institutional Development and Policy Mix," International Journal of Economics and Financial Issues, Econjournals, vol. 14(4), pages 188-199, July.
    10. Olalekan C. Okunlola & Olumide A. Ayetigbo, 2022. "Economic Freedom and Human Development in ECOWAS: Does Political-Institutional Strength Play a Role?," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(3), pages 1751-1785, September.

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