Basics of Economics part 3, Production and Consumption

This post has taken a long time to work out, because I was continually dissatisfied with it, and ultimately deleted everything and started from scratch. As the title suggests, this post builds on two earlier posts; it would be best to go back and read them before reading this, though this also touches on some fundamentals that are quite comprehensible without the background of the prior posts.

Production and Scale:

From an economic standpoint, production is the creation of anything with marketable value. This includes everything from a Ferrari sports car, to a piece of wood you personally carve to serve as a decoration with your pocket-knife. Not every produced item ends up on the market, but it does end up being used where one could have instead purchased something off the market for the same purpose. To gain some idea of how a modern economy functions as far as production and consumption goes, I'm going to try to give readers here an impression of the scale a modern economy is capable of functioning on.

Back in yon days of medieval time, the vast majority of economic production was subsistence food production; basically, people farming for the food they needed to live. It's been roughly a year since I last researched this, but as I recall, the percentage of labor division was something in the order of 80-90% dedicated to agriculture. Even with this degree of labor involvement, the nature of muscle-driven agriculture and lack of food preservation methods meant that famine could easily cause mass starvation in a region or nation.

In modern day USA, the division of labor into agriculture is roughly 2%. To put this into perspective, 88 out of every 90 men and women involved in agriculture being able to quit, and move on to some other occupation. Further, the USA exports huge portions of its agricultural output, and on top of that, the nation is functionally immune to famine, due to the many different regions where agriculture is conducted, modern refrigeration and preservation, and modern shipping/globalized economy.

If a particular crop fails in a particular region in a modern nation, most people not directly involved won't even notice, because all they'll experience is some minor price fluctuation at the grocery store. That's it. That's a massive force-multiplication of the production effects of labor.

Now let's move on to metal-working. Most people in modern nations have at least some conception of what was involved in blacksmithing and metal working before industrialization. For a quick recap, there was mining ore (by muscle-powered tools), hauling ore (via muscle or sail-powered transportation), smelting ore (in a hand-constructed smelter), then working ore with muscle-powered hammers and other tools in a forge. Many, many man-hours per finished tool or weapon.

In modern day, mining is handled largely by machines(though I'm not as up on the details of this), transportation is entirely automated, smelting/refining is handled by machines, and final shaping is handled entirely by machines. Metal-working has become so cheap that we mass-produce pop cans for a few cents, made out of aluminum and steel. And your average person working a low wage job can buy a dozen or two of them for a single hour's pay. And it's what's inside the can that they're actually paying for, the can itself is just packaging.

I hope this gives some idea of just how incredibly much industrialization and modernization in general has been a force-multiplier for how much production comes out of a man-hour of labor. In modern nations, the poor (poor, not destitute) live like wealthy merchants once did, in heated houses with glass windows, running water, and electrical appliances that outperform a servant staff. Those who are middle-class or above live better than kings did three hundred years ago.

This understanding of the scale of production is critically important to understand the nature of a modern economy. Now I'll move on to how production and consumption tie into each other.

Production and Consumption:

As stated earlier, everything that an individual makes with a market value, can be considered production. Consumption can be considered the acquisition of a product by its end-user (discounting later resale of used items, such as garage sales and junkyards). To put it more directly; agriculture will produce beef, lettuce, tomatoes, onions, milk, tomatoes, mustard seeds/plants, wheat, yeast, etc, which will the be processed into a hamburger patty, sliced tomatoes, sliced onion, cheese, ketchup, mustard, and a bun, which will then be assembled into a cheeseburger, which will then be sold to the end consumer, who eats it. (At least I assume so, people do strange things with fast food sometimes).

In this chain of economic transactions, you have initial production via agriculture, who are paid by those who turn milk into cheese, wheat&etc into bread, cows into hamburger patties, and etc, for their goods. These processed goods are then purchased by a restaurant or fast food joint, who assemble it into a cheeseburger, whereafter it is sold to the consumer. There are several stages of economic transactions, and in each stage of transaction (in a healthy economy), the person being paid for their product receives moneys totaling their own cost to produce the product, with an additional amount to compensate them for their labor cost. This is called 'profit,' and every individual profits monetarily, save the end consumer, who gained one cheeseburger instead. Note, some products may go directly from the farm to the restaurant, or skip other phases of production, and this doesn't count the shipping element as drivers and whatnot are paid, but all are involved as well.

In this way, not only does each individual or company receive the funds necessary to continue operations, but also enough money to pay for their own housing, food, medical costs, etc. This is healthy economic activity.

In a second example, we will take the production of a house. I won't even try to list all the components and labor that go into the production of a modern house, suffice to say, it's complicated. Ultimately, however, you end up with a lot of money being spent, and ending up in a lot of different people's hands, and in exchange, somebody now owns a house. Unlike with the cheeseburger example, in this case, the house is an essentially permanent product; if it's made of more durable materials, and is properly maintained, it can last hundreds of years. This is an end product that endures, and will be available for continued use, and, as such, is an accumulation of wealth.

This chain of production and consumption is the essence of economic activity, and is defined by the appetites and desires I described back in part 1. As each person along the chain earns their income, it enables them to purchase and 'consume' products themselves, and thus economic activity is self-reinforcing, the more that is produced and consumed, the more that can be produced and consumed. In a dynamic modern economy, due to the immense and still growing force multiplier of modern technology, there will always be more demand for labor. This is because it is continually easier to create wealth, and thus, there is more or less continually more wealth that can be spent employing more people.

To give an example, in the USA in 1948, the Unemployment rate was 3.8% amongst those over the age of sixteen. In 2010, it was reported as 9.6%, but this is not counting any number of ways that people not working have been discounted from that number. Regardless, the unemployment rate in 2010 was more than double that of 1948, despite increased industrialization, more advanced industrial processes, and the information age, making production vastly cheaper, and thus the creation of wealth vastly cheaper.

Now, there is some degree of labor loss that occurs due to automation, machines doing the work that individuals used to, but this is only a temporary situation, workers will retrain themselves, find new work, or retire. Even discounting this, subsequent generations will be trained for more modern occupations. It is an unfortunate hardship for those in the situation, but in a sufficiently dynamic economy, they will be able to find some kind of alternate work, because the demand will simply be so high. In the past, due to the division of labor, this was more difficult, but now, the proportion of people employed in unskilled manufacturing work in modern nations is quite low.

So, in summary, despite every man-hour of labor accomplishing more, going farther, creating more, we are now in a situation where unemployment is higher. Economics are not some mysterious, incomprehensible force, this is not happening for no reason. I will go into why in the next post, Incompetence and Corruption, the issue I originally intended to handle in this post.

The Basics of Economics, part 2. (Also, basics of civil law)

This post builds on what I discussed in The Basics of Economics, part 1, so there'd be little point in reading this, without first reading that. That said, let's get into it.

Free Market economics, vs Command and Control Economics.

Ultimately, all economies fall in a sliding scale somewhere along here. The ultimate extension of either, is pretty much unsustainable, as total Free Market requires no government, IE Anarchy, which is the shortest lived social structure known, and total Command and Control requires an all-pervasive government in control of absolutely every economic interaction there is, which you pretty much just can't do, because it's too resource intensive to be that omnipresent, or enforce control that comprehensively.

To give an example, try to imagine a class of 1st graders with no teacher. There's no authority structure to start with, but if there continues to be no outside authority structure enforced, sooner or later some child is going to make themself the leader, via charisma, threat of force, or both. On the other end of the spectrum, imagine a class of first graders, where the school administration is trying to dictate their every action all the time, every day. When they come to school, how they walk, how they breathe, what they eat, when they eat it, who they talk to, when they talk to them, what school supplies they use, how they use them, and on and on and on. They would literally need one teacher per student, constantly standing over the child to enforce the rules if they wished for total compliance, and that's assuming they can get enough teachers who would be up to maintaining that level of enforcement themselves.

Illustration given, I think it becomes fairly apparent just why the extremes of neither system work. Now, this brings us into how economics is inextricably interlinked to modes of government, social contract, and civil law.

Something that many people don't realize, is that the form a government takes, does not neccessarily indicate how free a society will be. Certain forms of government tend more strongly towards freedom of tyranny (often very strongly), but only tend towards. Specifications and examples below.

(Notably, the following forms and definitions are describing where the functional authority and power in a nation actually resides. You could call the UK a Constitutional Monarchy, and it would technically be true, but all the actual authority rests with the elected members of the government. Similarly, North Korea is 'The Democratic People's Republic of Korea,' but I don't think anyone outside of North Korea, and maybe China, is under the illusion that NK is anything but a dictatorship.)

Democracy: I cannot think of a single nation that is actually a Democracy. A pure-form Democracy has everyone voting on every government issue, not elected representatives. Obviously, due to the size of modern nations, this is pretty much a completely impractical system. If one did exist though, it'd either be unduly influenced or pretty much be owned by those wealthy enough to be able to spend all their time voting on issues, while employees managed their wealth, and less wealthy people were busy making a living.

Democratic Republic: This is the form of government that most 'modern' and 'free' nations employ. The basic dynamic is pretty simple, general elections amongst the citizenry elect representatives to the government, who then run the government, usually hiring clerks, accountants, law enforcement professionals, etc to do most of the work on ground level, while the elected officials determine what work is to be done, and how. This form of government can become a tyranny through a majority (or a majority of the people who actually vote) electing people who then pass laws that favor them, and restrict others, gradually establishing legally-defined class distinctions that grow progressively more and more restrictive for those not of the 'ruling' classes. This process would be entirely legal, if incredibly unethical, under the basic dynamics of the system. Generally speaking, this system tends to be the most resistant to tyranny, but is by no means immune.

Divine Monarchy: This system has receded to near extinction in the last two centuries, but was, up through the 1700's, the most common form of government in the world. Essentially, the government was intertwined with the predominant national religion, and it was believed that the Monarch (be they Duke, King, or Emperor), ruled because of the Mandate of Heaven. Generally, this vested near-absolute legal authority in the Monarch, and existed in a functional form of Feudalism with the Nobility sworn to the Monarch's service, resulting in a balance of power between the Monarch, the Nobles, and the common masses. The degree of social freedom found pretty much universally depended upon the nature of the religion the state was attached to, and the particular form it took, and could also vary wildly from monarch to monarch, and from noble estate to noble estate. As the Nobles and Monarch had pretty much unlimited authority though, social freedoms tended to be rather sparse. I honestly can't think of any modern nations that still use this form of government, except maybe for Saudi Arabia, which isn't terribly modernized anyways.

Military Dictatorship: Someone holds power, and they do it by force of arms. They control the military, the military can kill you, so you'd better do what this person says, or they'll kill you. This system can actually be incredibly socially free, but it can just as easily (and far more frequently) be incredibly oppressive, as it is entirely dependent upon the whims of the dictators. Notably, this form of government includes any government that exists only because of its effective monopoly on force, such as North Korea, Communist China, and Cuba.

As stated, there are far more technical terms for the specific systems of government employed, or different terms that mean more or less the same thing, like Despotism, Police State, Theocracy, etc, etc, but my purpose with the above descriptions and definitions is to lay out the actual mechanics by which modern (or partially modern) nations function.

Something I would like to point out here, is that elective government, is very much the extension of Free Market into Government. If you do not like those who run your government, you pick someone else. Within the USA this is particularly significant, with the State system, as if you don't like the way that your State is run, you simply pick another state to move to. Finding employment in a different state may be difficult, but it is an option, and in a healthy economy, finding employment is not too difficult.

All of this said, we now come to the issue of government run, controlled, and influence economic enterprises, and social freedoms. I'll try to address them by each economic sector of the economy the affect.

Social Security, Welfare, Unemployment benefits, Retirement programs, Entitlement programs: Charity.
   This is probably the most commonly existing form of government interference with the economy in modern nations. To simplify things, consider this anywhere that the government has decided to pay you for not working. Within the USA, this takes the form of the government paying people to not work because they've lost their job (unemployment 'benefits'), paying people not to work because they've hit their retirement age (part of what Social Security does), paying single mothers because they're single mothers (an entitlement program), or giving people food because they're poor (Food Stamps).
   What are the upsides of this?  It provides support for people who are unemployed, single mothers, old and retired, and helps people who just don't have much money be sufficiently well-fed.
   What are the downsides to this? There are a lot of them.
   First of all, all of the above activities, private charities or retirement firms are entirely capable of doing, and doing more efficiently (as described in the last post). Remove the costs of law creation, tax collection, and tax distribution from the system, and it will be done with less overhead.
   Second of all, you are encouraging, or at the least removing some discouragement, from certain behaviors. If you monetarily reward people for not working, it will encourage people to not work. There are limits on how long unemployment benefits will last, but I have personally encountered the explicit attitude of 'I don't care much if I get fired, because then I can have unemployment and not work for X period before trying to find a job again.' This happens. In addition, when you provide support for girls who go and get themselves pregnant in high school, and provide it for the rest of their lives if they don't rise above a certain income bracket, girls will be less likely to be careful about such behavior. Once you include the additional support given for multiple children, I have read first-hand accounts of women who have gotten themselves pregnant multiple times, and had multiple children, solely so that they can get enough support to live off of indefinitely. So, by subsidizing this behavior, you are encouraging it.
   Third of all, you are taxing the economy to do these things. In other words, you are making the nation, as a whole, poorer, to do this. This ties directly into the first issue with this, as the ineffeciency is the lost wealth. This is particularly important, because in order to combat poverty, and the effects of poverty, you are creating more poverty.
   Fourth, and probably the most important, you are giving up your social freedom. You have given the government the power to take away your property (money specifically) and give it to someone else who is not an elected representative, engaged in law enforcement, national defense, or the funding thereof. You have given the government the power to redistribute wealth. Once you've crossed this line, and reached the point where ideologically this is acceptable, you will sooner or later have to justify why you should keep your property, rather than others having to justify why it should be taken away.

   So, in summation, what is the cost/gain analysis of government charity and retirement programs?

Gained: People in economic hardship in retirement, have money.
Cost: More people are in economic hardship, you are encouraging economically destructive behavior (deliberately milking unemployment/child support subsidies), and you have given up key freedoms to implement this.

Ultimately, as people give to Charity without the government taking that role on itself, this is a program that ultimately only changes who is giving money to poor people. Some people may think that such government programs are still worth it, but I have never talked with someone who supported such programs, and also understood the costs they were paying for them.

As a final thought on this issue, I will share some of my personal experience with this. I am not a wealthy person and I never have been. Both of my parents are College graduates, my mother earning a Nursing degree with Honors, and my Father both a Bachelor's Degree in Mechanical Engineering, and later a Masters of Business Administration. For a time, he taught at a Technical college, and rose to the rank of department head; at the most, my family could have been considered upper middle class in wealth, but we were living overseas at that time.

I know what it is like to live in the middle class. I also know what it is like to be poor. I have been kicked out of my father's house (during winter), lived off the gratuity of my friends, been homeless (though only briefly), been employed well enough to be financially independent, been under-employed, and been unemployed. I know what economic hardship is like.

The most I ever earned in a year, was under ten thousand dollars, and in that year I gave hundreds of dollars to not-for-profit/charitable organizations, and sometimes paid for friends to go out for a social dinner, or a movie, when they were broke at the time.

When I was completely broke, in the Summer of 2010, after I had lost my last job, spent months unable to find new employment, and sold my car, I broke down and applied for social security/unemployment benefits. I did not want to, as I do not like the system, think it should be removed, and did not want to be part of the burden on it, but my tax dollars had gone into the system, and I was pretty much completely out of options.

I was denied unemployment benefits. Why? Because it had been too long since I had earned enough money for me to qualify. Looking into the logistics of it though (and the extension Obama pushed for how long unemployment benefits could last), if I had gone on unemployment immediately after losing the job I had into early 2009, I could have still been unemployment benefits then, and I know that other people, who had not tried to avoid burdening the system as much as they could, were still gaining benefits. Fortunately for me, my friends cared enough about my plight to keep me from going homeless and hungry (again), and I'm still alive and functional.

My point in sharing this part of my personal story, is that, even when I was below what would often be considered the poverty line, I was still giving to charitable organizations. I have been homeless, unemployed, and completely flat broke. I have also tried to use the government system that's supposed to provide for such circumstances, and it failed. I am not some rich fat-cat, wealthy business, or heir to family wealth (my parents have been broke due to un and underemployment issues the last few years themselves), that is saying that social entitlement programs are a bad idea.

I am a dirt-poor young man of 25, who wants all the crap cut out of the government, so that the economy, both in my home nation and in the world at large, can live again, allowing me to find gainful employment.

I think this is a good stopping point for now.

The Basics of Economics, part 1.

This was first posted over on SB, but was also written with this Blog in mind; if parts of this post seem a bit odd, they would probably make sense if you’d been on that thread.

Human economic behavior, is defined by how the human psyche functions. The ingrained human desires, motivations, and thought patterns define how all economies function.

The following are some of the primary human motivations:
1. Desire for survival. This affects food, shelter, and clothing.
2. Desire for companionship/acceptance of others. This affects the form the above takes, as well as luxury goods.
3. Desire for pleasurable experiences. This, again, affects all of the above.
4. Desire to create/produce something meaningful. This affects how pretty much everything is produced. Notably, I’m marking this as a desire to create something, for the act of creation itself, not just in order to earn money.
5. Desire for something transcendent/supernatural. As a Christian, I believe this is the desire for a relationship with God, but all except for an extremely small minority of hardened atheists will agree that the desire for this exists, if disagree about the forms.

These things are universal to all human beings, and if you are going to disagree with me at this point, I suggest you ignore the rest of my argument, and go study the world a bit more, taking note of how all of these factors are present in every single culture in the world.

The various desires listed above can take wildly different forms, but some common ones are gaining acceptance by having similar possessions to others, or possessions that are seen as desireable. The desire for pleasure can take the form of eating tasty foods, sexual relationships, adrenaline-junky activities like skydiving, nature hikes, birdwatching, videogames, book reading, movie/TV watching, it goes on and on. The desire to create something meaningful can be anything from a painting, to a song, to a movie, to a book, to a business, to a building or landmark, to an entire freaking nation. Or even just the accumulation of large amounts of wealth. Some people’s desire for a large social circle or family may fall into this category, though I think of relationships more along the lines of number 2 myself.

The desire for the supernatural or transcendent can take the form of everything from meditation, to drug trips, to reading sci-fi/fantasy, to religious orthodoxy, to obsessive scientific study trying to understand the universe at a deeper level. Personally, it takes the form of aggressive pursuit of Truth, as I believe all Truth originates with God, and I should be willing to face it, whether I like it or not.

If you know all of these things, and combine it with the fact that in time, people always desire more (be it more material goods, deeper or more meaningful relationships, more relationships, more time in solitude, more ‘enlightenment,’ whatever), and you can gain a pretty good idea for how economies will function on a gross scale.

Primarily, that there will always be demand for things that fill these desires, and that money can, and will, be made by meeting this demand.

In this mentality, economic behavior can be defined as being either constructive, or destructive, I will describe below.

Constructive behavior:
Farming wheat.
Farming cows.
Mining Iron.
Manufacturing cars.
Servicing cars.
Shipping goods.
Creating entertainment media.
Purchasing any of the above.

In all of these examples, a person is working to a productive end, creating something, or paying another for their work, giving them the funds they need to continue their activity.

Destructive economic behavior:
Theft.
Arson.
Vandalism.
Assault (including lethal and sexual assault.)
Abusive/controlling business practices.

The last is business practices by which you exert influence and power to attempt to force people to do business with you, in a way that is disadvantageous or destructive to them. Examples would be mining companies that moved miners to a settlement where they controlled the only resource access, EG the Company Store, where they charged the workers unreasonable prices, more than they could ever hope to earn, forcing them into functional bondage by charging them more than they could ever earn. Another would be a business trying to control a monopoly on a service by selling their service or product at below cost whenever a competitor tries to enter the field, then charging excessively once the competitor went bankrupt and folded.

Destructive behavior is destructive because (surprise!) it destroys rather than creates. From a purely economic viewpoint, assault, even including rape and murder, is destructive to the economy, because it destroys a person, and damages those connected to the person. As this is about economics, I’ll leave out the visceral/emotional and moral/ethical side of those things for now. Every type of destructive economic behavior decreases the total amount of wealth in the economy, theft by (in effect) removing the value of something that someone has created or purchased by taking it from them without paying them, Arson and vandalism just destroy property outright.

Now that I’ve defined constructive and destructive economic behavior, it’s important to note that humans will engage in all of these activities regardless of what the government does, or even if the government did not exist (true anarchy). The above listed are also not counting *government* action upon the economy.

Now, obviously, as the most powerful body in a society, the way the government interacts with the economy is going to be pretty critical, and heavily influence economic activity. One of the extremely important things to stress here, is that due to the above-described human nature, people will engage in all of the above activity without government interference.

This means that people will provide services, farm food, manufacture goods and homes, all without the government prompting them to. This is a crucial thing to be aware of, as it means that it is not necessary for the government to interfere with such things. Also note that ‘beneficial’ is not the same thing as ‘necessary.’

So, obviously, with all of these things in mind, the objective of the government’s involvement with the economy would be to discourage destructive behavior, and possibly encourage constructive behavior, right?

Well, the question then becomes what can the government do to accomplish these ends?

Dealing with Theft, Vandalism, Arson, and Assault, is all fairly straightforward, as is dealing with their specific forms (robbery, fraud, defacing or destruction of property, murder, rape, etc.). Make laws prohibiting such behavior, and employ law-enforcement officers to do what the job title says, enforce them.

Dealing with destructive business practices is a bit trickier, because the evidence isn’t as obvious (burnt property, dead or damaged bodies, as opposed to impoverished people), but with some discernment, it can be done.

So, now that we’ve established that the government is going to be doing something, how does it fund itself? There are really only three possible answers, taxes (taking money from internal economic activity either from income or sales), tariffs and duties (taking money from economic activity crossing the nation’s borders), or what essentially amounts to piracy, beating up other nations and taking their stuff. I don’t think anyone is going to argue that that is an ethical choice, so we’re going to discard it out of hand.

All of this said, there are other responsibilities the government has than internal law-enforcement, things that any government capable of maintaining national integrity must do, those being international relations, and national defense. These things also cost money, so now your government needs a larger budget, all of which must come from taxes, duties, and tariffs.

These days, most nations use a balance of the three, mostly weighted towards internal taxation. Some very few nations, like the USA, have an immense wealth of national resources, and also an immense variety of national resources, that would allow the nation, if it truly wished, to be entirely self-sufficient, but by and large nations wishing to maintain a modern economy must engage in international trade for the variety of resources involved, so it is best not to discourage trade by holding too many duties and tariffs.

So at this point, you are funding your law enforcement, international diplomacy, and national defense (including all branches of the military, as well as intelligence organizations such as the CIA or MI6), mostly via taxation.

Well, what effect does taxation have on the economy then? Simple, it impoverishes it. Anyone you tax will have less wealth, and any particular industry or activity that you tax, will begin to cost more. If the service or product costs more, people will tend to buy less of it, a lower quality version of it, or if it is simply too essential, will have to buy less of something else instead. So, whenever you implement a tax, your economy becomes poorer. Unfortunately, the basic three services of government are essential to maintaining a lawful and at least somewhat safe society, so you have to pay for these services. This is why some people refer to government as a ‘neccessary evil,’ because if people did not commit evil acts, there would be no need for government, at least government as we know it.

So, now we have defined some of the fundaments of the human psyche, how they affect economic behavior, positive and negative economic behavior, and how government can inhibit negative (destructive) economic behavior. Now that all of this is established, let’s look into how the government can encourage positive (constructive) economic behavior.

First, and most importantly, all government spending is first paid for by the economy. Liquid cash is taxed directly from the economy, debt is paid for either by the nation’s citizens (in forms such as treasury bonds), or by foreign nations, to where it must be repaid later, and printing new money causes inflation. All money spent by a nation’s government is taken, either before or after, from its citizens. This means that the government cannot magically add money to the economy, only move it from one section of the economy to another.

A problem with the government doing that, however, is that someone has to actually do the moving. This means passing laws defining how it will be done, hiring people to collect the money and distribute it. That means that some of the money they are collecting has to go to pay these people, and that ultimately, they are taking more out of the economy than they are putting in, and devaluing the economy on the whole.

This means that if the government decides that it is going to run education, it will do it at a higher base cost than a private education institution, because the institution has to pay only for itself, whereas the government, at an absolute minimum, pays for the laws about the educational system to be passed, the taxes to be collected, then for the tax money to be distributed to the various schools.

This is also true when the government decides to involve itself in any other business, such as health care, welfare (which is basically government mandated charity), utilities, or anything else.

To further clarify things, when your taxes pay for law enforcement, diplomatic relations, and the military, you are paying for a safe and lawful society, this is a service you are paying for. When your taxes pay for anything else, they are paying for something the private sector could do instead, and do cheaper.

All of this means, that before you even get into the issue of personal freedom, competence of the people in government determining how businesses should run, and corruption, the government is already a worse option.

In sum total, this means that what the government can do to encourage economic growth, is stay out of the way. Depending on how you want to look at things, you could view effective and efficient law enforcement as encouraging economic growth, because it means that people won’t have the fruits of their labor stolen from them.

Now, this is looking at things from a purely economic standpoint. This does not touch into the ethical considerations of how to deal with poverty within a nation. The ethics of having the government redistribute wealth to the poor through taxation, via welfare, nationalized health care, and government-run education, is not what I’m addressing here. I am purely addressing the issue of the fundaments of economics.