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:
6th Sweden
9th Denmark
10th Switzerland
14th Germany
16th France
18th Austria
22nd Spain
Italy was ranked outside of the top 25 in 63rd place.
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