Common sense economics

We live in an interesting and a hard time. At the crossroads of historical trends. At the bifurcation point of long-term historical cycles. At the core of another clash of civilizations. At the very beginning of the line of systemic transformations. In the chaos of informational, cultural, and intangible flows.

We live in a time of a radical uncertainty, informational clutter, immoral corruption, postmodern network herd mentality, chronic dissatisfaction, collectivist confrontation, political and social immaturity.

We live in the context of the Third World War, the confrontation between the Axis of Evil and the West, the debt trap, migration and demographic crises, total state interventionism, and severe distortions of the market structure of capital.

We live in a time of revising the indicators, tools for measuring various economic, as well as social, quantitative and qualitative indicators. GDP (gross domestic product), GNP (gross national income), inflation, even such parameters as revenue, exports, asset value, the size of the state in the economy, profitability, labor productivity are being tested in the light of the changing nature of production, exchange, and payment format. The basic economics textbook, sources of knowledge about the functioning of the modern economy, and even mainstream professors in this field are being revised, and international organizations are looking for new, more adequate methods and tools for assessing and analyzing economic processes.

People elect politicians for their beautiful eyes, sweet speeches, and bright images. They are rarely interested in their economic knowledge, because they themselves get confused about it. Among government officials and authorities, there are also very few people with a systemic and deep knowledge of economics. Most of them understand it at the level of slogans, memes, or short notes from social networks. It is a paradox, but knowledge of the science of “economics” does not shine in the business environment. Management, organization of production, marketing, financial and accounting are definitely not the science of “economics”. After all, it is this that is needed to create a model that would ensure a rapid, long-term, inclusive growth and development of the country.

It is difficult to explain to ordinary people what GDP or aggregate demand is. People do not understand what transaction costs or a financial multiplier are. People have difficulty perceiving complex models. Ordinary people, businessmen, and government employees are united by common sense, folk wisdom, and those cultural norms that are basic at the level of informal communication between people.

We do not support an economy of absurdity, nonsense and senselessness, because it creates misery, poverty and disorder on the one hand, and VIP-favorites of the government, demagogues and swindlers on the other.

There exist many different ways to measure these common sense parameters in the world. Some experts use such indicators as gross domestic product in various dimensions, gross national income, wages, labor productivity, life expectancy, the amount of household assets accumulated, etc.

Each of these indices includes dozens, even hundreds of parameters. They include an assessment of the level of human freedom, legal aspects, property, trade, competition, government, the quality of the business climate, parameters of social protection, the environment and infrastructure. There is a rich empirical base that shows, of course, a positive impact of a common sense economy on people. The explanation for this phenomenon is surprisingly simple.

The full text of the Common Sense Index is in the pdf file below.