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The 10th annual Economic Freedom of the World Report for 2006, released by the Cato Institute

in conjunction with the Frazier Institute, concluded that economic freedom is the single most important factor in economic development for poor countries more critical even than political freedom or foreign aid.

The author Florida State University Professor of Economics James Courtney, is our guest today.

What indicators do you use to arrive at the data in this report?

Actually, there are 38 different components that enter into the Economic Freedom of the World

Report index and the indicators are by and large things about whether or not people are

free to use voluntary exchange, free to enter into occupations and compete with each other and the

security of property rights.

The index is divided into five areas and those five areas are first of all size of government

and the kinds of components we would

look at there would be like government consumption as a share of total consumption or

government expenditure type of variable.

We would also look at transfer payments as a share of GDP and other indicators of size of government.

The second major area is legal structure and security of property rights, and we use variables there about the even-handedness of the legal

system and its ability to enforce contracts and provide for secure property rights.

The third is access to sound money and it's basically whether money is very important in trade.

If you don't have sound money that it reduces your ability to trade and we look at things like variation in the inflation rate and access to using alternative currencies.

Fourth is freedom to trade with foreigners and we consider restrictions like tariffs, we consider

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