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Economics and wealth


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Economics and wealth

  1. 1. Page 1 of 4 Economics and wealth By José Luis Tapia (*)Professor Mark Skousen in his book “Economic Logic” defines economics as the study ofhow people improve their standard of living through the creation of wealth. This modern,realistic and suitable concept displaces other pointing to the economy as a resourceallocation, holding economists thought arrogant.In the past, who brought this mistaken idea ran from the government central planning of theeconomy that caused lack of economic freedom, increased poverty, social exclusion andinjustice. With this new concept, the economy is limited to studying the economicdevelopment of the population, and assesses and analyzes the application of economiclaws to make the system convenient and economic policies do not fail.Another aspect of this new concept is the unit of analysis. People individually analyze thebehavior by which people act to survive and achieve their goals. Only human action mayenable the economy, so that everything produced, invested, consumed, exported andimported is motivated by this factor. Therefore, those wishing to better understand theeconomics are advised to be aware of the principle of causality, which will be discussedlater.As the standard of life it is given according to their components such as: quality, quantityand variety. People are given the label of poor when it has none of these three elements.On the other hand is not enough that people have goods and services, most importantly,these are quality in order to raise their quality of life. Another basic condition is the varietyof products and services, for instance, the alternative of choice.Finally, what is wealth? In this new concept of economic wealth are all goods and services.And why are called goods to products that meet the needs?. They are so called becausethey generate comfort to people and improve their standard of living. To the extent thatpeople have more goods and services will be richer in material terms, psychological andeven spiritual.Therefore, it must be given the importance it deserves the employer, meaning the person"who discovers profit opportunities that others have not noticed, and acts accordingly totake advantage." This concept comes from two eminent economists Israel M. Kirzner andJesus Huerta de Soto, representatives of the Austrian School of Economics, a school ofthought that promotes and defends economic freedom and entrepreneurship.Having considered the definition of economy and stressed the importance of wealth as thenatural effect of human action, we must explain how causal reasoning.Everything we see around us: objects, machinery, buildings, food, clothing, education,services are products of creative action business. The human being is creative andproductive and what it does not by chance but because of the causality of human action,which is the phenomenon by which relate causes with effects. The hard part is to establishcause and effect relationships from front to back so we can appreciate the different humanactions that have been part of this complex reality of the commercial division of labor thatAdam Smith noted over 200 years ago in his treatise "The Wealth of Nations ".
  2. 2. Page 2 of 4 Economics and wealth By José Luis Tapia (*)Consequently, none of the processed products could be sooner if they had not been for thebusiness process of wealth creation. Therefore, if there is no corporate action creatingwealth. For instance, a factor causing the others existence.The right environment for business processEconomy operates on the insubstantial. Economic actions of individuals operating in anenvironment that ensures the production of wealth to sustain their lives. If there is nominimum guarantee of protection for entrepreneurs, failed to realize these goods orservices.In this context there is need for an entity that protects the right to life, liberty and privateproperty and this is called Government. The famous economist Murray Rothbard in hisbook “Power and Market” considered the governmental agency that monopolizes the legaluse of violence to protect the freedoms. However, if the state is exceeded in this way,causes serious damage to the commercial tissue causing poverty, unemployment, inflation,bankruptcies, changes in exchange rates, all due to abuse of its mechanisms andinstruments to intervene in the economy.Poverty is defined as the absence of wealth and there are two reasons why people arepoor. The first is the impediment of an external entity (government) and the second bychoice of people. In both cases, it is inevitable poverty. As for the latter is unusual, becauseits the same people who do not aspire to create wealth. So common is it realistic toconsider that the external factor is the predominant or government to be a predator of theproduce and thus causing this misfortune.Although it is rarely used in current approaches on the economy, in my opinion, the law isthe instrument by which the state intervenes to impoverish. With the legality controls,regulates plans, supervises, and implements interventions in the free actions of individuals,preventing them to achieve their goal of being prosperous. As pointed out by politicalscientist Alberto Mansueti in his book out, is the legislative hyperinflation that produceshipe inflation of poverty.The laws of nature and manSince, we identified the government as the cause of the massive destruction of wealth, wemust know its main instrument negative for the business economy: positive law.Nobody can deny that the free market economy is self-regulating with its natural laws.These laws were not created by humans either intentionally but arose from the interactionitself, for instance, spontaneously, as Hayek says in his book “The Fatal Conceit”. We referto the laws: supply, demand, opportunity cost, time preference, non-discrimination,incentives, minimum waste, economy of scale, diminishing returns, marginal productivity,marginal utility derived demand, profit and loss budget constraint, substitution effect, effectof competition, accountability among others.
  3. 3. Page 3 of 4 Economics and wealth By José Luis Tapia (*)You cannot modify or abolish these principles. If we try to do this would cause damage,inconvenience and discomfort. This found that when a government seeks to control prices,for example, imposing a minimum wage, the effect it creates is rising unemployment andcost of production or when decreed wage increases threatens the job security of thousandsof workers and pushes to micro and small enterprises to the informal sector becauseotherwise disappear from the marketThe natural laws of economics have one purpose: to guide individuals to perform acts thatare successful production. If you follow these laws you have ensured business success bycreating wealth.When we pointed out that the only purpose of existence of government is to protect theright to life, liberty and public and private property, it is understood that it must enact rulesthat prevent human conduct can come to peaceful acts and cooperative. It should be notedthat any government regulation has its coercive and coercive as natural law.Government laws should not only protect those acts cooperative economic market but alsoto punish those who violate aggressive and violent economic order. With violence therecan be productivity, let alone the business may occur if they violate their rights to libertyand private property.The coercive and coercive part of natural law is a threat to the economic meltdown thatdeliberately inflicts the decision maker. Failure to follow the economic laws, failure is a fact.The fear of frustration prevents you violate these rules. There is no governmentbureaucracy to monitor and punish the breach of an economic law. In terms of positive lawthis government has a cost because it requires more bureaucracy to prevent and controlpredators. If we were respectful of the moral law would have a minimal presence ofgovernment, therefore we would assume a lesser extent the cost.The market order needs of economic laws to operate the exchange. The market is acomplex network where individuals in their roles as consumers, producers, investors,exporters, importers and savers exchange values. In that environment works well self-regulation does not need more laws of nature. This complex commercial network is largelyindependent of political society which has its own market. Economists at the Public ChoiceSchool have identified different incentives where human actions in this market havenegative sum (zero sum).When political society superimposes its positive laws on the market two things can happen:1) government regulations match the economic and 2) government regulations impede theproper functioning of the economy.In the first case the effects are: increased wealth, savings, investment, employment,income, exports, imports, this due to the economic laws have not been interfered with butrather protected by artificial rules of government. It means that it has not been forciblyentered the merchant network, making it possible that human actions have deployed their
  4. 4. Page 4 of 4 Economics and wealth By José Luis Tapia (*)full economic potential within the framework of respect for freedom and private property.However, when the laws penetrate the commercial network violently, economic laws areaffected and do not fulfill their function of guiding human actions. This displays all perversedistortive economic coordination creating unnatural phenomena as informality,unemployment, low income, low savings, low consumption, low production, low investment,dishonesty, corruption and pollution which would prevent the government if not legislate oneconomic .It should be mentioned that the government as an entity legal monopoly on the use ofviolence can be legitimate acts in defense of life, liberty and private property. The missionof government is to protect the citizen and not interfere in economic matters that are privatein nature. While human actions are peaceful, cooperative and there is no economic reasonfor government intervention, may do so only when life, property and personal freedom areendangered by the actions of others.They are illegitimate because their actions beyond the limits of protection and enters thesurgery. It interferes when there are not cases of deception, fraud, robbery or kidnapping. Itis unfair, because all governmental intrusion is violent and causes damage to the economicfabric, which is counter to the very essence of government. So what is the real work ofgovernment in the economy? Course, is to ensure that every individual can exercise theirfreedom without harming others with their economic activities, activity peaceful principles.(*) ILE’s General Director, economist and university professor.