Some economists defend that Economic Freedom is closely related to Human Development - I remember have read it from Allan Greenspan, Amartya Sen, and, of course, the metaphor coined by Adam Smith . There are two indexes that can express these two aspects:
- The Human Development Index: assembles life expectancy, education level and gross domestic product and is an international index for mesuring life quality.
- The Index of Economic Freedom: assembles Business Freedom, Trade Freedom, Fiscal Freedom, Government Size, Monetary Freedom, Investment Freedom, Financial Freedom, Property rights, Freedom from Corruption, Labor Freedom, and reflects the economic freedom of a country.
Recently, both indexes updated were released, and I had to analyse whether this correlation exists in fact.
What I have observed?
I observed a considerable positive correlation between the ranks of HDI and EFI, both, visually (see figure bellow) and numerically (Pearson's product-moment correlation of 0.7084 with 95% confidence interval from 0.6177 to 0.7805).
By these results, it is possible to conclude that economic freedom is positively correlated to human development. By the scattering on the graphic, we can also conclude that, if economic freedom promotes human development (Correlation not always means cause-consequence), although economic freedom is strongly correlated to human development, the former is not the unique actor on the latter.
Interestingly is the fact that Cuba (identified as a Communist country), although having one of the worst position in the economic freedom rank (156th), does not has so bad human development position (51th). It would be interesting also analyse North Korea, however, its human develoment level is analysed together with South Korea, as Republic of Korea.
Other countries having very different ranks are: Belarus, Mozambique, Uganda, Madagascar, Botswana and Libya.
According to the table of the Index of Economic Freedon, the following countries were not inclued in the analysis (one of the indexes are missing): Slovak Republic, Ivory Coast, Somalia, Laos, Korea, Montenegro, Vietnam, Kyrgyz Republic, Iraq, Burma, Serbia
I tryed to be as rigorous as possible, trying to not commit errors during the analysis, however, it is not an official publication, I am not an economist and, consequently, it can contain errors.
