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There’s Nothing Fishy About 
Growth 
Daniel James Sanchez 
Ludwig von Mises Institute 
November 8, 2013
 Production 
 Product: Fish on the plate 
 Consumer’s Good 
 Factors of Production 
 Body (labor) 
 Fish in the sea ...
 Poverty 
 Little time for leisure 
 Little time to produce anything 
else they might want. 
 Vulnerability
 Wants to improve living standards 
 New Factor
 Delaying Consumption 
 Why would he be willing to go hungry 
to make a net? 
 Ignoring risk for now. More on this 
fro...
 Success! Greater Productivity 
 To make analysis easier, let’s say that with 
the net he catches 3 fish per day. 
 Com...
…it frees him up to make even more 
capital goods, which adds to his 
productivity, which allows him to save 
even more, a...
Cycle of Growth 
 “Divvy Up!” 
 Egalitarianism 
 Envy 
 Primitivism 
 Discourage saving 
 Breaks the Cycle of Growth...
 There are only so many fish Able can 
eat. There are only so many uses he has 
for nets. 
 Steve Jobs and iPhones 
 Bi...
Nothing Fishy About Growth - Dan Sanchez - Mises Institute
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Slides for "Nothing Fishy About Growth," presented by Dan Sanchez at the Mises Institute's "How Does an Economy Grow? A Seminar for High School and College Students"

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Nothing Fishy About Growth - Dan Sanchez - Mises Institute

  1. 1. There’s Nothing Fishy About Growth Daniel James Sanchez Ludwig von Mises Institute November 8, 2013
  2. 2.  Production  Product: Fish on the plate  Consumer’s Good  Factors of Production  Body (labor)  Fish in the sea (“land”)  Productivity  Low
  3. 3.  Poverty  Little time for leisure  Little time to produce anything else they might want.  Vulnerability
  4. 4.  Wants to improve living standards  New Factor
  5. 5.  Delaying Consumption  Why would he be willing to go hungry to make a net?  Ignoring risk for now. More on this from Peter later.  Capital Good: Produced factor of production
  6. 6.  Success! Greater Productivity  To make analysis easier, let’s say that with the net he catches 3 fish per day.  Compare Production Processes  Hand Fish: Short, Low Productivity  Build Net then Net Fish: Long, Greater Productivity  Chose 3 fish tomorrow over 1 fish today  “Exchange” across time  Baker and Charlie won’t make that “exchange.”  They have higher “time preference.”  The importance of “now” or “soon”  Maybe only would sacrifice if they get 5 fish tomorrow over 1 fish today.  Able has lower time preference, which means he will be willing to save more.  Savings is important because…
  7. 7. …it frees him up to make even more capital goods, which adds to his productivity, which allows him to save even more, and so on. Cycle of Growth Able’s living standard improves with every lap around the cycle. The more he has, the less vulnerable he is. And because he is so productive, and has so much stuff, he can consume more than he used to AND save more than he used to at the same time! This is how living standards rise in a market economy too. More on this from Mark later.
  8. 8. Cycle of Growth  “Divvy Up!”  Egalitarianism  Envy  Primitivism  Discourage saving  Breaks the Cycle of Growth  Capital consumption  Limits productivity  Plunder: “Or How About This?!  Brigands (land “pirates”)  Kings  Taxation  Proscription  Buried Treasure  Democracies  Progressive Taxation  Egalitarianism plus Plunder
  9. 9.  There are only so many fish Able can eat. There are only so many uses he has for nets.  Steve Jobs and iPhones  Big savers can only benefit from their savings if they use them for exchanges with other people.  Exchanges are by definition win-win.  Prefer thing received over thing given up.  Savings-supported production and sale.  Lending his savings at interest.  Paying wages with savings.  Non-savers get access to capital goods without saving.  If Able gets rich by making many exchanges, he’s benefited many people.  When egalitarianism and plunder break the Cycle of Growth, it hurts everyone.  Nothing fishy about growth. But there is definitely something fishy about egalitarianism and plunder.

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