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"

1. There’s Nothing Fishy About
Growth
Daniel James Sanchez
Ludwig von Mises Institute
November 8, 2013

3.  Production
 Product: Fish on the plate
 Consumer’s Good
 Factors of Production
 Body (labor)
 Fish in the sea (“land”)
 Productivity
 Low

4.  Poverty
 Little time for leisure
 Little time to produce anything
else they might want.
 Vulnerability

5.  Wants to improve living standards
 New Factor

6.  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

7.  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…

8. …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.

9. 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

10.  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.