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Strategies & Market Trends : Heinz Blasnik- Views You Can Use
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To: GraceZ who wrote (335)4/20/2003 10:48:33 PM
From: yard_man  Read Replies (1) of 4913
 
>>How does one objectively measure that? <<

I don't think you can objectively measure wealth creation directly -- based on that definition. What you can do, is observe specific items that frustrate real capital formation or market-based allocation of the factors of production.

It is rather easy to show that protective tariffs interfere with a more optimal allocation of the factors of production. Mises' discussion of Ricardo's law of association makes this pt pretty clear. Free trade increases the welfare of all participants, in general, not just for the countries that have superior conditions for production.

Similarly, it is quite easy to show that interest rates set outside of the market process give wrong signals to those making the capital investment decisions. Rates arbitrarily too low and many more ultimately unprofitable ventures will be started than is optimal (of course, this implies that there is an optimal rate of business failures in there somewhere) -- rates arbitrarily too high and too much savings will be held back, etc.

I suppose that it is this way with a lot of things in economics -- it is much easier to describe those things which force the largest deviations from what might be considered optimal.
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