Ranking U.S. Metropolitan Areas on the Economic Freedom Index
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Policy Study

Ranking U.S. Metropolitan Areas on the Economic Freedom Index

Amongst America’s largest metro areas, Houston, Jacksonville, Tampa, Richmond and Dallas-Fort Worth have the most economic freedom. Riverside, Rochester, Buffalo, New York and Cleveland have the least.

For centuries, experts have been trying to discover why some places are so rich and others so poor. Some economists suggest that a largely unregulated system leaves individuals maximally free to pursue their own plans, spurring entrepreneurial activity and innovation.

About 30 years ago, Nobel Laureate economists Milton Friedman, Gary Becker, and Douglas North, as well as a host of other economists and public policy experts, began an effort to quantify how free the economies of individual nations were. About 10 years later, that resulted in the production of the first Economic Freedom of the World report, and later a state-level version: Economic Freedom of North America (EFNA), which is now produced annually.

That state-level index shows us how the level of economic freedom can vary across sub-national jurisdictions within the same country (e.g., Texas and Florida have less- burdensome economic policies and therefore much greater economic freedom than New York and California). However, levels of economic freedom can also vary within those subnational jurisdictions. For example, the San Jose metro area has substantially higher economic freedom than Los Angeles. The same is true for Nashville compared to Memphis. In some places, metropolitan areas straddle state borders, skewing state-level economic data. This report, the “U.S. Metropolitan Area Economic Freedom Index,”  quantifies those intra-state disparities by providing a local-level version of the EFNA, ranking 382 metropolitan areas by their economic freedom levels.

Because there are important, population-driven differences between the largest metro areas and the smaller ones, for purposes of ranking them, they are divided into two groups: the 52 with 2012 population of one million or higher and the 330 with populations below one million. The top three large areas are Houston, Jacksonville, and Tampa; the bottom three are Riverside, Rochester, and Buffalo. Among the largest 52 MSAs, the top 10 consists of four areas in both Texas and Florida, and one each in Virginia and Tennessee. The bottom 10 has three in both California and New York, two in Ohio, and one each in Oregon and Rhode Island.

U.S. Metropolitan Area Economic Freedom Index Rankings
(Among the 52 largest MSAs with 2012 populations of more than one million)

  1. Houston-The Woodlands-Sugar Land, TX MSA
  2. Jacksonville, FL MSA
  3. Tampa-St. Petersburg-Clearwater, FL MSA
  4. Richmond, VA MSA
  5. Dallas-Fort Worth-Arlington, TX MSA
  6. Nashville-Davidson—Murfreesboro—Franklin, TN MSA
  7. Miami-Fort Lauderdale-West Palm Beach, FL MSA
  8. Austin-Round Rock, TX MSA
  9. Orlando-Kissimmee-Sanford, FL MSA
  10. San Antonio-New Braunfels, TX MSA
  11. Washington-Arlington-Alexandria, DC-VA-MD-WV MSA
  12. Oklahoma City, OK MSA
  13. Virginia Beach-Norfolk-Newport News, VA-NC MSA
  14. Atlanta-Sandy Springs-Roswell, GA MSA
  15. Raleigh, NC MSA
  16. Baltimore-Columbia-Towson, MD MSA
  17. Boston-Cambridge-Quincy, MA-NH MSA
  18. Denver-Aurora-Lakewood, CO MSA
  19. Phoenix-Mesa-Scottsdale, AZ MSA
  20. Memphis, TN-MS-AR MSA
  21. Indianapolis-Carmel-Anderson, IN MSA
  22. St. Louis, MO-IL MSA
  23. New Orleans-Metairie, LA MSA
  24. Kansas City, MO-KS MSA
  25. Salt Lake City, UT MSA
  26. Birmingham-Hoover, AL MSA
  27. San Jose-Sunnyvale-Santa Clara, CA MSA
  28. Hartford-West Hartford-East Hartford, CT MSA
  29. Milwaukee-Waukesha-West Allis, WI MSA
  30. Charlotte-Concord-Gastonia, NC-SC MSA
  31. Pittsburgh, PA MSA
  32. Seattle-Tacoma-Bellevue, WA MSA
  33. Minneapolis-St. Paul-Bloomington, MN-WI MSA
  34. Grand Rapids-Wyoming, MI MSA
  35. San Francisco-Oakland-Fremont, CA MSA
  36. Las Vegas-Henderson-Paradise, NV MSA
  37. Philadelphia-Camden-Wilmington, PA-NJ-DE-MD MSA
  38. San Diego-Carlsbad, CA MSA
  39. Louisville-Jefferson County, KY-IN MSA
  40. Detroit-Warren-Dearborn, MI MSA
  41. Cincinnati-Middleton, OH-KY-IN MSA
  42. Chicago-Naperville-Elgin, IL-IN-WI MSA
  43. Los Angeles-Long Beach-Anaheim, CA MSA
  44. Providence-Warwick-Pawtucket, RI MSA
  45. Sacramento–Roseville–Arden-Arcadee, CA MSA
  46. Portland-Vancouver-Hillsboro, OR-WA MSA
  47. Columbus, OH MSA
  48. Cleveland-Elyria, OH MSA
  49. New York-Newark-Jersey City, NY-NJ-PA MSA
  50. Buffalo-Cheektowaga-Niagara Falls, NY MSA
  51. Rochester, NY MSA
  52. Riverside-San Bernardino-Ontario, CA MSA

When it comes to smaller metro areas,  Naples, FL, Midland, TX, and Sebastian-Vero Beach, FL, offer the most economic freedom. The bottom three, or least free, smaller metro areas are El Centro, CA, Kingston, NY, and Visalia-Porterville, CA. Rankings for all 382 MSAs are available in the complete spreadsheet.

There are three areas of economic freedom measured in the EFNA, and in this local index. Area 1 measures government spending, Area 2 measures taxes, and Area 3 measures labor.  There are three variables used in each of those three areas. For each of those nine variables, the raw data is converted to a standardized 0 to 10 score, in which the value representing highest economic freedom gets a 10, the one representing lowest economic freedom gets a 0, and all others are given a score proportionately in between 0 and 10. For more details on the rankings and methodology, please see the appendix.

Full Report: U.S. Metropolitan Area Economic Freedom Index

Infographic: U.S. Metropolitan Area Economic Freedom Index

Download the Complete Rankings, Tables and Figures For All 382 Markets (.xlsx)

Dean Stansel is a research associate professor at the O’Neil Center for Global Markets and Freedom in the Cox School of Business at Southern Methodist University.