Macroeconomics is a tautology and a myth, a dangerous one at that, sustaining the illusion that prosperity is necessarily linked with territory, national units, and government spending in general.
—Reuven Brenner, Labyrinths of Prosperity
A relatively weak economy has diminished the confidence of the American people. The refrain of some of the best-known economists in the United States is that the future holds only stagnation because we’ve allegedly forgotten how to grow. In short, economic growth has become difficult to achieve.1
Happily, the prevalent view within the economics profession is false. Economic growth is not only simple, it is also easy to understand. There is nothing mysterious about economics. It is all around us—in the movies and sports we watch, the products we enjoy, and in what we do each day.
The problem, strangely enough, is the economics profession itself. Increasingly reliant on charts, graphs, indecipherable equations, and incomprehensible numbers, economists have turned what is perfectly basic and a matter of common sense into something that is mystifying.
In truth, nothing is less complicated than the subject of economics, and therefore nothing is easier than economic growth. This is particularly true in the United States. A country of individuals descended from immigrants, or immigrants themselves, America is populated by people who wanted something better, who abandoned the familiarity of home to migrate to a place that has long prized personal and economic freedom.
Entrepreneurs are by definition risk takers, and immigrants have in many ways taken the ultimate risk. When talented and entrepreneurial people from all over the world populate a country, it’s not surprising that they make it wealthy.
Another human trait, one that we all share and that makes economic growth easy, is that our wants are unlimited. We always desire something more, and the exchange of our labor for the food, clothing, and shelter that we do not possess makes economic growth a simple matter of reducing the barriers to production.
At the most basic level, a person must first supply something of value before he can purchase something else. The path to economic growth, then, is stimulating the supply side of the economy. Governments can stimulate the supply side by reducing tax, regulatory, trade, and monetary barriers to production.
Taxes are nothing more than a penalty on work. When politicians talk about raising our income taxes, they are really saying that they are going to increase the cost of getting up and going to work each morning.
Regulations are similarly a tax placed on economic activity, a cost of doing business. They rarely achieve their stated objectives, but they succeed insofar as they suffocate the economy. Regulations rob workers and businesses of time and resources that could otherwise go into producing goods desired by the marketplace.
Trade is, in many ways, the simplest of the four basics of economic growth. Each of us is a free trader because trade is the purpose of our work. We go to work each day precisely because there is so much that we want but do not have. Government tariffs on imported goods penalize our work and make it less desirable in the process.
The purpose of money is to facilitate the exchange of consumable goods. Money itself is not wealth. It is how we measure our own work and then trade products. McDonald’s does not seek my writing skills in return for the Quarter Pounders it provides me. Money serves as the broadly accepted medium of exchange for all producers. It is a unit of measure, and a unit of measure cannot perform its function well if it changes all the time. Until 1971, the U.S. dollar had a constant value tied to gold. When we dissolved that connection to gold, we sent the dollar—and our economy—on a never-ending roller coaster ride.
In modern times, economics has become too intimidating. It should not be. We are all microeconomists in our daily lives, and we are surrounded by economic lessons. Indeed, the purpose of this book is to shed sunlight on what is so logical, free of charts, and mostly free of statistics. Nothing is easier to understand than economics. It’s everywhere you look.