Index of Common Sense Economics 2024

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The Index of Common Sense Economics is an aggregate indicator that assesses the degree to which common sense axioms are taken into account in the development and implementation of the Government's economic policy. The index is a tool for determining the economic IQ of a country and government.

The International Liberty Institute has created the Index of Common Sense Economics as an innovative tool and barometer for assessing the quality of economic policies of governments around the world and their adequacy to the criteria of common sense and economic science, and their compliance with the principles of human activity.

It also shows the quality of the economic education in the country, understanding of economic science by the elites, as well as the Government's orientation towards applying the best global practices.

Key human development factors for economic policy:

laws of economics, system of motivations for various economic entities;
experience in the field of economic development of different countries in the world;
condition of economic science, quality of its interaction with the Government, business and society;
level of economic literacy of the Government, society and business;
quality of democratic institutions, influence of the society on the Government, regarding economic policy;
quality of public administration institutions;
level of understanding the nature of modern forms of capital, in particular, economic freedom.

The 2024 Common Sense Index includes 131 countries. The countries are divided into five groups based on their economic IQ. The details for each group and country are provided in the overall report.

The Common sense economics, based on true economic science, is a solid foundation for both a personal well-being of every person and a long-term strategy of any country in the world.

Measuring the Economic IQ of Countries in the World

We have integrated six indices that assess the main qualitative and quantitative parameters of economic development institutions, business and investment climate.

10 basic axioms of common sense economics are as follows

it is better to be free than unfree;
it is better to be safe;
it is better to have rights than to be without rights;
it is better when the Government is for the people, accountable, transparent;
it is better to be rich than poor;
it is better to be advanced than backward;
it is better to be with profit than with losses;
it is better to be healthy than sick;
it is better to have a long life than a short one;
it is better to live in a clean environment than in a polluted one.

A country's economic IQ reflects the extent to which these axioms are integrated into the economic policy.

We have selected six authoritative, internationally recognized indices. They cover all the main parameters of human development and economic growth.

Human Freedom Index from Cato Institute;
Index of Economic Freedom from Frazer Institute;
Property Rights Protection Index from Property Rights Alliance;
Rule of Law Index from World Justice Project;
Prosperity Index from Legatum Institute;
Global Innovation Index from WIPO.

Each of these indices includes an assessment of the level of human freedom, legal and institutional aspects of the business and investment climate, the quality of property rights protection institutions, trade and competition modes, the quality of public administration and infrastructure, and parameters of social protection and environmental protection. Each index has a rich empirical base that shows a positive impact of common sense economics on various aspects of people's lives.

Methodology for Calculating the Index of Common Sense Economics

The Index of Common Sense Economics is the sum of a country's rankings in six international indices that measure various aspects of the economy from a common sense perspective. The indices validate these claims using absolute numerical data, sociological tools, and expert assessments.

In the Human Freedom Index 2023 there are 165 countries.
In the Economic Freedom Index 2024 there are 165 countries.
In the International Property Rights Index Індексі 2024 there are 125 countries.
In the Rule of Law Index 2024 there are 142 countries.
The 2023 Legatum Prosperity Index includes 167 countries.
In the Global Innovation Index 2024 there are 133 countries.

Overview of the Index of Common Sense Economics 2024

The highest economic IQ of countries in Group 1 range from 24 points in Denmark (1st in the world) to 141 points in Belgium (24th). In this group, 11 countries are members of the EU.

46% of the countries with the highest economic IQ in the world are the European Union members. Of the 27 EU countries, 40.7% are in the group with the highest Index of Common Sense Economics.

Of the 24 countries in Group 1, 22 are in the Top 30 countries in the Index of Economic Freedom. All 24 countries in this group are in the Top 30 countries in the Index of Property Rights Protection and the Rule of Law Index.

All Anglo-Saxon and Scandinavian countries have a very high economic IQ. It is significant that the values, traditions, and social habits formed within these cultures largely coincide with the axioms of common sense. When the cultural code of a country is based on the Human, the philosophy of individualism, the protection of rights and freedoms, including the right to private property and economic freedoms, it demonstrates considerable achievements in the economy, has a high level of people’s satisfaction with their lives, as well as qualitative parameters of ecology, infrastructure, and support for people in need.

The lower a country ranks on the Common Sense Index, the more its political, intellectual, business, and cultural elites underestimate the importance of freedom, private property, and open competition.

To increase a country’s economic IQ and make its ranking in the Index of Common Sense Economics higher, it is crucial to “de-Marxize” economic education, to ensure that real economic science is taught in high school and university. Its main part is the Austrian School of Economics.

A systematic and long-term application of the advice of the Index of Common Sense Economics from the International Liberty Institute guarantees the movement of each country into the Top 30 of this global ranking, and therefore the country’s transition to the group of high-income countries.

The position of countries in the Index of Common Sense Economics, the level of their economic IQ allows us to draw the following conclusions:

More than 2/3 of the world's countries are experiencing an acute shortage of common sense in the economic policies of Governments. Their legal and economic institutions sharply reduce and limit the potential of Human, paralyzing their freedom, will and motivation for entrepreneurship and creative self-realization.
In the countries with a high economic IQ, there is a constant confrontation of different political forces, economic interests, a clash of ideas is observed, which often leads to an expansion of the size and functionality of the State.
The economic IQ of a country is not inherited from generation to generation.
The countries with a high economic IQ have a large amount of internal resources and capital, including human resources, to adequately respond to threats, risks and crises, and neutralize them with minimal damage and losses.
A high national economic IQ cannot be obtained through a formal increase in the coverage of the population with secondary and higher education at the budget expense.
The content of programs, courses in economics, humanities in general, as well as the elimination of the state monopoly on education are of critical importance.
For an institutionally weak country with a low level of incomes, fragile institutions for the protection of property rights, a high level of distrust of the State on the part of business and society, and a widespread corruption, "gray" schemes and operations, the optimal way to get on a stable trajectory of increasing the country's economic IQ is to switch to a small state model by limiting government expenditures to < 25% of GDP, inflation to < 2%, budget deficit to < 2% of GDP or its prohibition, public debt to < 20% of GDP, the maximum amount of state assets to < 10% of the total, employment in the public sector to < 7% of the workforce, carry out a large-scale privatization, liberalization, introduce a currency competition, flat rates of universal, neutral taxes and duties, and create conditions for the development of a full-fledged competition in the field of educational services.

Economic IQ of Ukraine - 2024

Ukraine's move to Group No. 1 would mean the country has joined the group of states with an economy of over one trillion dollars, transforming into a country with a high income level and competitive economic development institutions by global standards.

Of the six indices, Ukraine's weakest place is economic freedom (150th place in 2024).
In terms of the quality of property rights protection in 2024, Ukraine ranked 102nd.
Ukraine’s highest place is in the Global Innovation Index. It is the 60th and is a result of assessing human capital, but not the quality of institutions or regulatory policy.
The Legatum Prosperity Index (74th place) confirms the conclusions of the World Bank and other organizations, which record the low quality of the investment and business climate despite the high quality of human capital.

The development strategy of Ukraine as a country should be focused on getting into the Top 30 of the Index of Common Sense Economics, increasing the country's economic IQ to ~100 points.

The adoption of such a KPI (key performance indicator) of economic policy will allow for a quick and adequate assessment of the Government's activities to ensure rapid, long-term economic growth, as well as to neutralize political populism, information fraud, and lobbying by theorists and beneficiaries of the State of general interventionism.

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