The 10 factors are averaged equally into a total score. Each one of the 10 freedoms is graded using a scale from 0 to 100, where 100 represents the maximum freedom. A score of 100 signifies an economic environment or set of policies that is most conducive to economic freedom. The methodology has shifted and changed as new data and measurements have become available, especially in the area of Labor freedom, which was given its own indicator spot in 2007. Another change is that the Index is overseen by an Academic Advisory Board.
An overview of research can be found here , including studies claiming to show that more economic freedom is the cause of beneficial effects. It also states that Economic Freedom of the World has been used in most of the academic research, partly because Index of Economic Freedom only goes back to 1995 and because it uses more subjective variables.
The Millennium Challenge Account, a US government foreign aid program, has used the Trade freedom indicator in determining which countries will receive their performance-based compacts.
Critics, such as Jeffrey Sachs, have criticised its assumption that economic openness necessarily leads to better growth. Sachs, in his popular book The End of Poverty, graphed countries' ratings on the index against GDP per capita growth between 1995 and 2003, claiming to demonstrate no correlation between a countries' rating and its rate of economic. Sachs pointed out, as examples, that countries with good ratings such as Switzerland and Uruguay had sluggish economic performances, others, like China, with poorer rating had very strong economic growth.
Some have also questioned its methodology, such as the country of Qatar which questioned the rating of their country's economic freedom in 2008, comparing its middling rating with the high rating they had received from other indicators such as Transparency International and Moody's. They also noted that the methodology had changed twice in the last two years, rendering its report "unreliable". Many Asian nations have expressed puzzlement at why China has grown so much with such a low rate of economic freedom. The foundation itself explained the inaccuracy of the Index in this regard: in the 1960's, China's rating would have been near zero, and as it is now 54, and has gone up by, on average, a point a year, there is massive growth being unleashed as they grow as much as their current level of freedom allows. They did not address the issue of why the Index has failed to match the rate of China's actual growth. Another article, from Ludwig von Mises Institute, explained some of the failings of the study to show just how free certain countries actually were. The Index has been categorized as using inappropriately weighted indicators for economic freedom, leading to wealthy and/or conservative countries with barriers to trade placing high on the list, while poor and/or socialist countries with fewer restrictions on trade place low.. The Index has only a 10% statistical correlation with a standard measure of economic growth, GDP per capita. Neither does the Index account for the actions of governments to nurture business in the manner of the Japanese Zaibatsus during the late 20th C, that helped lead to the Japanese economic miracle.