Frasier Institute North American Freedom Ranking

The Frasier Institute recently published its Economic Freedom of North American 2024 report. The study looks at indices of economic freedom from around the world. It compiles them into scorings of economic freedom that can compare states within their countries and across country borders. For instance, one set of scores allows us to compare Nebraska, Kansas, and Iowa to each other. In contrast, another set of scores enables us to compare Nebraska, Kansas, and Iowa to Manitoba and Quebec in Canada and Campeche and Zacatecas in Mexico.  The Frasier Institute, a think-tank based in Canada, also publishes an Economic Freedom in the World report.  

As defined in the report, economic freedom concerns “transacting, working, acquiring and using property, and contracting with others.” Governments can prevent people from making their own economic choices—through regulations, taxes, barriers to trade, and manipulation of the value of money—and can safeguard individual economic choices by protecting persons and their property from fraud or force. The index in the report explores all of these things across jurisdictions to develop their rankings. 

Calculations are made for all 10 Canadian provinces, 50 US states, 32 Mexican states, and the US territory of Puerto Rico—93 jurisdictions.  

North American Ratings 

The ratings for all jurisdictions are split into quartiles, from most free (top quartile) to least free (bottom quartile).  

Looking at the map that the Frasier Institute generated, a few mostly unsurprising results can be seen: 

1. Most states in the U.S. fall into either the first quartile (most economically free) or the second quartile. Exceptions are the states of California, Hawaii, Alaska, Rhode Island, and Delaware, which fall into the third quartile. Nebraska is in the first quartile. No US states are found in the bottom quartile.  
2. The Canadian province of Alberta is the only one in the top quartile, just above Nebraska on the scale. British Columbia is in the second quartile, with an economic freedom ranking comparable to Minnesota and New Mexico.  
3. With few exceptions, Mexico’s states fall into the bottom quartile for economic freedom. Those that aren’t in the bottom quartile are universally at the bottom of the third quartile.  
4. The US territory of Puerto Rico has an economic freedom score in the third quartile, comparable to that of Baja California, Mexico.  

United States Ratings  

Among US states (plus the territory of Puerto Rico), New Hampshire scores as the most economically free, while Puerto Rico comes in last.  

Among Great Plains states (in the nationwide rankings), South Dakota comes in second, North Dakota comes in tenth, and Oklahoma comes in eleventh, followed by Nebraska completing the top quartile of states at thirteenth.  

Nebraska’s neighbors of Kansas (14th), Colorado (15th), Missouri (17th), Wyoming (21st) and Iowa (26th) are all in the second quartile of rankings. 

Components of the Rankings 

Key components of the rankings for economic freedom included:  

1. Government spending as a percentage of individual income. 
2. Transfers and subsidies by the government as a percentage of income. 
3. Insurance and retirement payments as a percentage of income.
4. Income and payroll taxes as a percentage of income. 
5. Marginal income tax rate and the income threshold at which it applies.
6. Property tax and other taxes as a percentage of income.
7. Sales tax revenue as a percentage of income.
8. Labor market regulation.
9. Minimum wage.
10. Government employment as a percentage of total state employment. 
11. Union density.
12. Legal System and Property rights. 
13. Judicial Independence, impartial courts. 
14. Property rights, integrity of the legal system.
15. Contracts, Real Property.
16. Crime rates.

 General Conclusions 

The study discusses various components of economic freedom in a nearly 150-page report. As a general rule, it finds: 

1. The most economically free areas had more significant increases in inflation-adjusted incomes during the ten-year periods being compared.  
2. The more economically free, the greater the growth in total employment.  
3. Areas with more economic freedom tended to have greater population growth.  

Policymakers at all levels should consider those things that tend to raise or lower the levels of economic freedom in their jurisdictions and pursue a thoughtful course of increasing economic freedom across all components of the ranking.  

While rankings like this do not prescribe specific solutions, they do provide a comparison for policymakers looking for ways to improve standing among similarly situated jurisdictions.