Rating Scales Research Papers - Academia.edu (original) (raw)

This is the second year’s Economic Freedom Index for the States of India. This year’s ratings follow the same methodology, broadly the same data sources, but updated to the latest available. The difference in ratings for each of the states, therefore, allows us to follow how economic freedom has been changing in different parts of India. We find that many states have improved their ratings, but some have fallen significantly, reflecting greater intervention in the economy by the government as well as a general fall in the freedom with which people can carry on their economic activities.
The term economic freedom has many connotations. Different studies and measures of economic freedom use different definitions of economic freedom. According to Milton Friedman economic freedom is one part of the concept of ‘human freedom’- which is a mix of economic, social and political freedom. The state economic freedom ratings for India are limited to measuring economic freedom. Economic freedom itself here is considered to be one where the involvement of the government is minimal, are largely aimed at protecting property and life and facilitating smooth transactions.
The Index of Economic Freedom (Heritage Foundation, 2002) defines economic freedom as “the absence of government coercion or constraint on the production, distribution, or consumption of goods and services beyond the extent necessary for citizens to protect and maintain liberty itself”. This Economic Freedom Index for India accepts this definition of freedom but carries it a little further. While identifying that the government should not interfere in the working of the market, it further requires that the government should fulfil its duty of protecting life and property, and enforcing legal contracts and law. This study is
more on the lines of the Economic Freedom of the World conducted by the Liberales Institut and the Fraser Institute for various years. (Liberales Institut, Economic Freedom of the World: Annual Report, various years, The Fraser Institute, Vancouver, Canada.).
Few studies are available on the calculation of economic freedom at the sub-national level. Canada (Economic Freedom of North America, Fraser Institute, December 2002), and United States (Byars, J., R. McCormick and B. Yandle, Economic Freedom in America’s 50 States, Clemson University, Clemson, USA, 1999) have attempted this. A recent effort has also been made in China (See National Economic Research Institute. 2001. NERI Index of Marketization of China’s Provinces, Beijing). In India, this is the second year of the first such study. At the sub-national level, some of the issues are different from those that apply at the national level. For one, the scope of powers of sub-national governments tends to be limited and therefore many areas are irrelevant for sub-state economic freedom. Which factors are more relevant for nations and which for sub-nations is, of course, a matter of country-specific policy.