The Legatum Prosperity Index measures how a country's government supports 'personal freedom' in the eyes of its people.
The Nordic nation was only beaten by New Zealand as the country where people feel most free.
Other countries who ranked high were Australia (third), Iceland (fourth) and Norway's neighbour, Sweden, in sixth.
The US has shown one of the biggest index ranking drops. They went from 9th place in 2009, down 12 places in four years, to 21st place.
How The Local's other nations fared:
Italy was ranked outside of the top 25 in 63rd place.