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What causes an economy to prosper?

Carrie Lukas

Economies prosper when innovative thinkers are able to put their ideas to work, creating new advancements in technology and productivity, making it cheaper and easier to create and sell products that we need and want.

It's worthwhile to step back and consider how most people have lived throughout human history. For most of civilization, man had to attempt to secure food for himself and his family, build a shelter, and create clothes. How have we moved so far beyond that now? It's because some bright people figured out better ways to produce things so that we could all start specializing in the duties for which we are best suited. We don't need to grow our own food, because now a few farmers and agriculture companies produce enough to feed everyone at a relatively low cost. That allows the rest of us to spend out times on other activities.

The technological developments that we've witnessed in just this passed generation are the perfect example of what makes an economy prosper: Today it's easier to communicate, work, produce and trade goods with people around the world than at any other time in human history.

Policymakers and the public need to think about how to we create an environment that maximizes the likelihood that someone will develop and bring to fruition the next round of life changing innovations.

Independent Women's Forum director and Goldwater Institute senior fellow, Carrie Lukas

Dinesh D

Economies prosper because of the creativity, dynamism and hard work of the people in them. So ultimately, economies prosper because people are able to put their intelligence and their energy to work to fulfill their own needs and those of others. The most creative entrepreneurs not only meet, but anticipate the needs of other people and thus end up inventing things that didn’t exist before. The system which fosters this is what Adam Smith called the “system of natural liberty” and what today is called free market capitalism.

Free mark capitalism is not so much an ideology as it is simply a doctrine of limitation. It’s a doctrine of letting human creativity go, letting people devise and make and exchange stuff freely, the fundamental premise of which is called the morality of content (or contentment).

If I offer you a job and you freely take it, we’re both better off. I wouldn’t have offered the job and you wouldn’t have taken it if both of us weren’t better off by that transaction. So the corporation, for example, which refuses to hire someone, or the customer who refuses to buy something isn’t doing anyone an injustice. If I refuse to hire you, you’re no worse off than you were before and if you go into a store and you don’t want to buy some things, the store isn’t any worse off than it was before.

So there’s no way, in the structure of natural liberty, for oppression to take place by itself. The system can be distorted and people may work outside the system and call it oppression, but within it, as long as you respect rules of content, it’s a very moral system.

Author, Commentator and President of The King's College, Dinesh D'Souza

Ben Shapiro

What causes an economy to prosper is giving freedom to the people who are able to produce new products and services that other people want. It's really as simple as that. If you allow the productive people to be productive and you don't penalize them for being productive through excessive taxation and excessive regulation, an economy will prosper.

Syndicated columnist and author, Ben Shapiro

Peter Schiff

Freedom causes an economy to prosper. People are inherently motivated to pursue their own interests by providing products and services that others want at a price they can afford. And as people earn profits and save money they are able to use these funds to more effectively and efficiently do so. But when a government intervenes in an economy, despite its best intentions, the regulations and taxes which it imposes impedes the ability and willingness of these people to start businesses and employ workers.

(SEE: How an Economy Grows and Why It Crashes)

Economist, investment advisor, author and commentator, Peter Schiff

Star Parker

The economy is not a machine, rather, it’s human beings producing and exchanging goods and services. So when people are able and willing to do this freely and creatively, an economy will prosper. What impedes this ability and willingness to do so is burdensome regulations and high taxes. In other words, if the time and effort required by a person or group of people to produce or sell a product or service isn’t worth the amount of money that they make by doing so, they simply won’t.

For instance, if I was thinking about entering the property rental business, the sheer volume of paperwork, the excessive insurance requirements and regulations like price controls likely would discourage it. In this case, if, in my estimation, the return on my investment doesn’t adequately compensate for the time and effort that is required, then I will simply discard the idea.

President of the Center for Urban Renewal and Education, Star Parker

Mike Connolly

Economies grow when they are free to grow. When people are free to keep more of what they produce, they will produce more. Free, competitive markets encourage transparency, innovation, and honest dealing. Free markets, featuring low barriers to entry, constantly encourage new investment and innovation. Prices are driven down while the quality of products and services are driven up.

Economies controlled by informed consumers and competitive entrepreneurs – and not by politicians and bureaucrats – meet the needs of a society far better than political manipulation of economics. Market-oriented economies create jobs, opportunities, and wealth – undue government intervention in the economy squelches all three.

Communications Director, Club For Growth, Mike Connolly

Tim Robinson

The degree to which an economy prospers depends on the quantity and quality of economic resources available to be used within that economy. This will be a function of the nation’s endowment of natural resources, the educational achievement of the population, and the rate at which capital can be accumulated (which is largely dependent on the rate of saving in the economy). In addition, good governance in the political, government and business domains is required. A nation’'s capacity for creativity and its inventiveness will also be important factors. As it is with nations, so it is with families. Thus well organized families comprising well educated individuals with a strong savings ethic and a creative streak will, on average, prosper to a greater degree than unimaginative, disorganized families with low educational levels and a spendthrift nature.

Professor & Head of QUT's School of Economics and Finance, Tim Robinson

Grover Norquist

Low tax rates. Low taxes increase the return to work, savings and investment. If the top rate is 90% (as it was during World War II) and you work on Saturday to earn $100 then you keep ten dollars and the state gets 90 dollars. When Reagan brought the top rate to 28%, the same amount of work yields 72 dollars for you and 28 for the government. The return to work increased by seven times. Lower rates have the same effect on savings and investment. The return on savings and investment increases. The cost of immediate consumption increases.

Limited government spending. The true cost of government is spending. Money can be extracted from the economy through taxes, debt or inflating the currency every dollar spent will eventually be wrung from the private sector. Keep your eye on total spending, not side issues like the deficit.

Property rights respected by and enforced by a limited government that is funded by low taxes. People invest in things they own: land, houses, cars, clothing. No one washes a rented car.

Free Trade. Free Trade is another word for free markets and low taxes across the globe. Tariffs are just taxes at the border and they are paid by Americans who must pay extra to buy a shirt from Brazil.

President of Americans For Tax Reform, Grover Norquist

Tad DeHaven

These days, the US government does much more infringing upon our rights than protecting them. Chiefly among them is property rights. If a citizen is secure in their ability to freely conduct trade, or commerce, it decreases the risk of and increases the willingness to, put up one's own money or to borrow or to invest. Private investment suffers when there's a concern about what Washington is going to do with regard to legislation, from health care mandates to increasing taxes which, to me are all infringements upon the ability of investors, entrepreneurs and individuals to conduct commerce.

Writer and Cato Institute Budget Analyst, Tad DeHaven

James Taranto

The freedom to pursue one's interests, in both senses of the word; a common culture that allows people to trust each other but doesn't demand a rigid conformity; and a government that does what is necessary to protect people from force and fraud--but only what is necessary.

Wall Street Journal columnist and editor, James Taranto

Steven Malanga

An economy will prosper if the people in it are able and willing to innovate, to create new methods, ideas and products. From government’s point of view, a democratic system with a fair and just set of laws and a reliable courts system encourages this because people can feel confident that they can keep the fruits of their labors.

Contributing editor of City Journal and Manhattan Institute senior fellow, Steven Malanga

Pete Sepp

Perhaps a better way to put it is: What conditions lead to prosperity?

Those would be low taxes, reasonable regulation, and a fiscally stable and sustainable government. History shows that societies where the state has first claim on the people’s resources do not produce the same level of income growth and general well-being as societies that allow individuals, working together, to innovate and increase their
wealth to everyone’s benefit.*[

Limits on the amount that government may consume from the private sector are also vitally important over the long run. For example, one of the world’s most stable and prosperous societies, Switzerland, has strong constitutional limits on government taxing, spending, and borrowing.

See also, for example, the Heritage Foundation’s Index of Economic Freedom and the connection
between limited government prosperity here.

It is also increasingly doubtful that traditional Keynesian responses to economic downturns are effective.
The following studies are worth considering in this regard: 1, 2 and 3.

Vice President of the National Taxpayers Union, Pete Sepp

William Niskanen

If each individual has the opportunity to exploit his or her own comparative advantage which means that they have the opportunity to do what they do best relative to other people. That means that there should be no artificial restrictions on the division of labor, on what can be traded and sold, and so forth. That's the most general condition.

Cato Institute Chairman Emeritus and Senior Economist, William Niskanen

Timothy Johnson

After factors like quality education and family stability, I think it's a combination of the government understanding its responsibilities and free enterprise allowing us unlimited opportunities to earn an unlimited amount of money. It's not about what the government can do for me, but what I can do for myself and I ask that the government restrict itself to its constitutional responsibilities and allow me to go out and look for those opportunities. I want everybody to eat, I just don't want the responsibility of catching it for them. I would rather teach them them how to fish, so they can catch carp, they can catch bass, they can catch catfish or whatever they want to catch. I think we have a host of people who want you to catch it for them, clean it for them, cook it for them, and even feed it to them then wipe their face when they're done eating.

Entrepreneur and Chairman of The Frederick Douglass Foundation, Timothy Johnson

Ira Stoll

No one knows for sure. A consistent rule of law, property rights and low marginal tax rates that allow people to reap the rewards of their labor and capital investments all help, but those are all also desirable for other reasons than assuring a prosperous economy, reasons that may even be more important than assuring a prosperous economy. Other factors may include openness to trade and immigration, educational institutions, geography (a port); infrastructure (an airport); and religion or culture.

Editor of and author of "Samuel Adams: A Life", Ira Stoll

Michael J. Boskin

Private initiative, incentives and competition leading to capital formation, human capital formation and technological progress. Low inflation, low tax rates. Sensible government spending and regulation.

Professor of Economics at Stanford University, Michael J. Boskin

David Ranson

The willingness of domestic and foreign savers to invest their capital there.

President of H. C. Wainwright and Company, Economics, David Ranson

Jonathan Alter

A spirit of innovation, liquidity, and an investment in human capital.

Author, commentator and lead Bloomberg View columnist, Jonathan Alter

Steve Deace

The most prosperous economies are those that truly understand the role of government. As it's stated in our founding document: there is a God, our rights come from Him, and the only purpose of government is to secure and
defend those God-given rights. To put it another way, government is to encourage (not do) good and punish evil.

Of course, government in and of itself is not a moral agent, and usually inflicts the most horrors on humanity when it attempts to be, so it needs another institution to define for it what is good and what is evil. That is the role of the church and the family.

These clearly defined spheres of jurisdiction between cultural institutions are what produce the proper balance of liberty and morality, thus allowing for the most prosperity.

Talk radio host and author, Steve Deace

Stephen Golub

The private sector is the engine of growth, but the government must provide the institutions that support entrepreneurship and investment, while restraining the excesses of capitalism—inequality, instability and environmental damage. Entrepreneurship thrives under a strong state, but one which supports rather than predates on business.

The most rapid growth in the world economy, particularly in Europe and the United States, occurred in the 1945-1970 period, when countries dismantled the protectionism of the 1930s, gradually liberalized world trade, but also strengthened social safety nets and regulatory systems, in particular of the financial system.

The Reagan-Thatcher-led turn towards more radical free-market liberalization, deregulation and privatization policies has been marked by slower growth and much greater inequality than the earlier post-war years. East Asian growth has also featured an eclectic mix of liberalization and government intervention, in countries such as South Korea and China.

Professor of Economics at Swarthmore College, Stephen Golub

Rabbi Aryeh Spero

A people raised on the belief of personal responsibility and a desire to be good at what they do, and a government that, for the most part, believes in leaving people alone.

Columnist and commentator, Rabbi Aryeh Spero