Market Economy Countries 2026
Market Economy
Borderline
No
Yes
Market Economy
127 countries
9 countries
29 countries
- Significant debate exists between economists as to where the dividing line between market economies and mixed economies lies. Data shown are informed by the Cato Institute’s research and should be viewed as educated assessments that are nonetheless open for discussion, particulary in the case of “borderline” countries.
- Sources often differ on the matter of what constitutes a market economy country.
- Many sources maintain that in actual practice, no country has true economic freedom (one of the six requirements for a true market economy) because the government’s influence on the economy is always too significant, which makes the economy a mixed economy rather than a market economy. Other sources argue that some economies, such as the United States, are largely self-regulating and therefore still qualify as a market economy.
- One of the simplest measures used when classifying an economy is the country’s economic score on the Cato Institute’s annual Human Freedom Index. Countries with an economic freedom score of 8.0 or higher almost always have a market economy and countries from 7.50-7.99 may or may not have a market economy, depending upon which of the six main characteristics (see body text) they possess (and the degree to which they possess them).
- The Economic Freedom Index (EFI) is a separate study published annually by the Heritage Foundation and evaluates economic freedom, defined as the ability of a country’s residents to control their own labor and property, in 184 countries.
A market economy is a system in which individual citizens and privately held businesses—and the customers who patronize them—determine the prices of goods and services through the forces of supply and demand. Those prices, in turn, guide economic decisions in related areas such as investment, production, and distribution. Businesses are free to succeed or fail in market economies, and competition drives innovation and optimizes efficiency. Market economies are typically utilized in capitalist countries, whereas socialist and communist countries typically utilize a command economy, in which the government controls the price, supply/manufacture, and distribution of most goods. Market economies have six defining characteristics which enable them to exist and function properly:
The Six Defining Characteristics of Market Economies
- Private property
- Freedom of choice
- Motive of self-interest
- Competition
- System of markets and prices
- Limited government
Pure free-market economies are extremely rare, as the government nearly always has a hand in some aspect of the economy, such as offering subsidies to struggling/fledgling industries, capping utility prices, or providing “public goods” (roads, military defenses, universal healthcare) to its citizens. Therefore, most developed countries in the world today include elements of both free market and command economies, making them mixed economies. Most economists agree that market-oriented economies are healthier and more efficient than command economies, but considerable debate exists about which balance of free markets vs central planning results in the greatest economic stability, equity, and long-term benefits.
Countries with Market Economies
Although there are currently no purely free-market economies in the world, some mixed economies are freer than others. According to the Fraser Institute’s Economic Freedom of the World Rankings, the five countries with the most economic freedom in 2021 were Taiwan, Hong Kong, Singapore, New Zealand, and Switzerland. This report ranks countries based on these cornerstones of economic freedom: personal choice rather than collective choice, voluntary exchange coordinated by markets, freedom to enter and compete in markets, and protection of persons and their property.
The Top 25 Most Economically Free Countries in the World (2021)
Cuba, China, and North Korea are examples of mixed economies that hew closer to a command economy than a free market economy.
