We are a commune of inquiring, skeptical, politically centrist, capitalist, anglophile, traditionalist New England Yankee humans, humanoids, and animals with many interests beyond and above politics. Each of us has had a high-school education (or GED), but all had ADD so didn't pay attention very well, especially the dogs. Each one of us does "try my best to be just like I am," and none of us enjoys working for others, including for Maggie, from whom we receive neither a nickel nor a dime. Freedom from nags, cranks, government, do-gooders, control-freaks and idiots is all that we ask for.
Via RCP, a superb essay by Carl Schramm Up From Poverty. How economic growth occurs remains a mystery to economists - or at least a subject of endless debate.
An enduring truth often forgotten (or ignored) by proponents of state-led development: economic growth owes more to the forbearance of the state than to its intervention. Governments do not, indeed cannot, make wealth-only their citizens can. And when government protects their freedom, the world's growing population of entrepreneurs, in the bargain, expands human dignity and establishes the foundation of ongoing growth on which civil society ultimately depends.
One quote from the essay:
In the touchstone year of 1820, 84% of the world's population lived in what would today be judged "extreme poverty." Today, only 16% do. That is such an astounding achievement that it is difficult even to comprehend. According to the World Bank, in the last 30 years alone-a time of rapid globalization-the number of people living in extreme poverty fell by 25%, or 500 million people. The outbreak of entrepreneurial capitalism within the Communist political system of the People's Republic of China accounts for most of this achievement, but almost every region of the world has seen a decline in the share of its population living in extreme poverty. Bright spots such as Israel and Mauritius, moreover, have proven that growth can occur in regions previously thought allergic to it.
I'm not sure it's true that economic growth is a mystery to economists. I studied economics for years and there is an understanding that the addition of value to a product creates growth.
That is, a lump of iron is useless, except as a rock. But smelt it and turn it into a hammer and nails, and you suddenly have something very valuable that can add value to other products (wood).
The mathematical deterrmination of this value is a mystery, but only for one reason - it's fluid. You can no more assign a value to the hammer and nails in an environment without lumber than you can assign value to it in an environment WITH lumber and thousands of people who want to have and use all these things. Demand and supply take over. As a result, you can't KNOW what it's worth because the worth is determined by how many wish to have these tools.
This is the great flaw of state management - it presumes to know the cost of everything, but knows the value of nothing. A government will assume that manufacturing 20,000 cars will add value to the economy, but if only 10 of these cars are what consumers seek - it has actually subtracted value.
In addition, if it manufactures 20,000 cars, and the consumers want 500,000, it will not alter the cost structure to accomodate the overconsumption because that would not lend itself to the internal "fairness" of what the government is trying to accomplish.
A study of the Physiocrats, as flawed as their basic structure was, gives a wonderful analysis of the addition of value and determination of economic growth. While they viewed manufacturing as "non added value" and based all their value beliefs on the agricultural nature of their economy (this stands to reason), it wasn't long before Adam Smith saw much deeper insights which escaped them.
Regardless, the Physiocrats knew the inherent value of keeping government OUT of economic activity. It mattered little where value was derived - it was clear to them that governments represented a dead weight loss to all economic activity....even as it does today.