Free market

A free market is an idealised market where all transfers of money, goods, and services are devoid of coercion and theft (some definitions of "coercion" are inclusive of "theft").

The degree of market freedom

The Heritage Foundation, a conservative think tank, tried to identify the key factors which allow to measure the degree of freedom of economy of a particular country. In 1986 they introduced Index of Economic Freedom, which is based on some fifty variables. This and other similar indices do not define a free market, but measure the degree to which a modern economy is free, meaning in most cases free of state intervention. The variables are divided into the following major groups:

Related Topics:
Heritage Foundation - Conservative - Think tank - Index of Economic Freedom

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• Trade policy,
• Fiscal burden of government,
• Government intervention in the economy,
• Monetary policy,
• Capital flows and foreign investment,
• Banking and finance,
• Wages and prices,
• Property rights,
• Regulation, and
• Informal market activity.

Each group is assigned a numerical value between 1 and 5; IEF is the arithmetical mean of the values, rounded to the hundredth.

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Initially, countries which were traditionally considered capitalistic received high ratings, but the method improved over time. Today one can see a vivid correlation between EOF value and country's GDP.

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