Although New York placed dead last among the 50 states in a recent index of “economic freedom,” a new report from a University of Iowa economics professor tells Big Apple residents not to worry. In the 89-page study, Peter Fisher argues that state-by-state business climate rankings should be ignored.

Mr. Fisher’s findings, published today by the Washington, D.C.-based Economic Policy Institute, will come as a relief to New Yorkers after a series of recent rankings panned the Empire State for its high tax rates and endless red tape.

Last October, the Small Business and Entrepreneurship Council, also based in Washington, ranked all 50 states on how well their public policies nurture the growth of small companies and start-ups. New York placed a dismal 45th. That same month, when the Tax Foundation released its State Business Tax Climate rankings, only Hawaii received a lower score than New York.

To top off a discouraging autumn, the San Francisco-based Pacific Research Institute reported that New York scored at the bottom of the nation in the think tank’s Economic Freedom Index, which is based on the size of state bureaucracy, the degree of taxation, and the extent of regulations.

Mr. Fisher, 58, recommends that policy-makers ignore these headline grabbing rankings.

“Newspapers love rankings. …They eat ’em up,” Mr. Fisher said. But, he added, “Attempts to rank are doomed to failure.”

For example, Mr. Fisher argues that New York – which he writes has among the lowest overall tax rates on new investment, due largely to generous incentives – is a much more conducive climate to business growth than the Tax Foundation’s findings would suggest.

However a spokesman for the Tax Foundation, William Ahern, said that low tax rates on new investment in New York actually reflected a misguided state policy that rewards newcomers at the expense of existing businesses, which are hit with higher taxes.

Mr. Fisher saved his harshest criticism for the Pacific Research Institute’s rankings. “That index is, frankly, pretty bizarre when you get into it,” he said.

For instance, one variable used by the PRI to gauge “economic freedom” is the number of attorneys per capita – a measurement that inevitably disadvantages New York, where the securities industry requires large numbers of lawyers to facilitate complex trades.

And the PRI Economic Freedom Index includes several variables that can scarcely be described as “economic,” such as mandatory seat-belt laws. (States without these statutes fare better on the rankings.)

“States do better [on the PRI index] if they allow 12-year-olds to drive cars,” Mr. Fisher said. “What does that have to do with economic development?”

A PRI economist who co-authored its 2004 report, Lawrence McQuillan, said Mr. Fisher’s criticism of the index is “extreme hyperbole.”

Mr. McQuillan said that the number of attorneys per capita does accurately gauge businesses’ vulnerability to lawsuits. As to driver licensing, “An excessively high age to allow someone to drive does impede commerce,” he said. “It disadvantages people from joining the labor market sooner and getting to the job of their choice.”

New York, while at the back of the pack in most rankings, comes in fourth on the libertarian Cato Institute’s Fiscal Policy Report Card, released in March 2005. In fact, the various surveys’ rankings vary so dramatically that 34 different states can claim to be one of the “top 10” in terms of business climate or competitiveness, depending on which of five frequently used indexes they choose to cite.

But Mr. McQuillan said that matching his index against the Cato report card is like comparing apples to oranges. The Cato survey is designed to highlight governors who cut taxes and control spending-without looking at the state’s initial tax rates or spending levels.

Cato gives high marks to Governor Pataki for fiscal conservatism, placing him fourth among the 17 state executives who were inaugurated before 2003.

Mr. Fisher said that the disparity between New York’s last-place finish on the PRI index and its stellar showing on the Cato Institute report card illustrates the unreliability of state-by-state competitiveness rankings. And New York’s highly variable performance on the state-by-state rankings is not unusual. For example, Kansas, which comes out on top in PRI’s economic freedom index, places a distant 32nd on the Tax Foundation’s rankings.

But according to the Tax Foundation’s Mr. Ahern, “The notion that states can’t be graded against each other is rather silly.”

“There’s no question about whether some states have a better business tax climate than others,” Mr. Ahern said.

Mr. Fisher’s report comes just two days after Mayor Bloomberg and the speaker of the City Council, Gifford Miller, reached an agreement to lift the city’s 4% sales tax on clothing and footwear costing less than $110.

But Mr. Ahern said that the clothing tax cut would have “little or no effect” on New York’s performance in his group’s state-by-state ranking.

“Every exemption that you carve out of your sales tax base is going to be made up in the end with a higher rate,” Mr. Ahern said. He acknowledged that the city’s tax break on lower-cost items reflected a “special consideration for poor people,” but, he added, “A lot of people who aren’t poor are buying clothing items that cost less than $110.”

“That’s not very well-targeted,” Mr. Ahern said.