Anyone new to quantitative research ought to take a look at this fantastic blog post examining some of the findings reached using the Heritage Foundation’s Index of Economic Freedom. The blogger convincingly shows that most of the correlation between the Index and social goods like income and economic growth are driven by measures of good government, while measures of the size of government are irrelevant, or often show a correlation between larger government and good outcomes. But the Heritage Foundation likes to say that size of government impedes growth, displaying that they are are either unaware of what their own Index shows, are they just don’t care about the facts.
Statistics are tricky – don’t take them at face value. At that applies to indexes just as much as the actual models.
Oh, and for what it’s worth, North Wallis and Weingast also found a correlation between larger government and better economic outcomes.