100 Best Books for an Education

A Revision and Update of Will Durant's 100 Best Books for an Education

Note 96

 

 

A Précis of Charles J. Wheelan’s Naked Economics

1. Consumers act to maximize their “utility,” firms act to maximize their profits and the two interact through markets.

a. Economics can be defined as the study of “the art of making the most out of life.” Or the study of how goods and services are produced and allocated.

i. There is a finite supply of everything worth having i.e. there are scarce resources available at any given time.

ii. Scarce resources mandate that choices must be made allocating them between rival alternatives.

b. Opportunity cost is the cost of something that must be given up when a choice is made.

c. Declining opportunity costs increase demand.

d. A market economy directs scarce resources to their most productive use.

e. Profit opportunities trigger firms to supply more of that product.

f. However, many markets have barriers that prevent new firms from entering.

g. Firms may also practice “price discrimination.”

h. For an economy as a whole the market equilibrium is where the Benefit-Costs equal i.e. a Supply and Demand Curve.

i. The market has many attributes.

i. It is a powerful force for improving human lives.

ii. It is “amoral.”

iii. A market economy uses prices to allocate scarce resources.

iv. Because prices allocate goods and services, most markets are self-correcting.

v. If prices are fixed in a market economy, firms will find some other way to compete.

vi. Every market transaction makes all parties better off.

vii. Governments can and should be used to modify markets in several different ways.

2. Incentives matter.

a. Communal resources do not provide an incentive to people to manage them wisely.

i. Rather, it causes what economists term the “free rider” problem.

ii. It is better to give people an incentive to preserve communal resources and thereby better manage them.

b. Self-interest makes the world go round. Any system that does not rely on markets results in personal incentives being divorced from productivity. Firms and workers are not rewarded for innovation and hard work nor are they punished for sloth and inefficiency.

c. There are also “perverse incentives” or what is termed the “law of unintended consequences.”

i. The Principal-Agent problem results when for instance an Employer (principal) has a competing incentive from the Agent (employee).

ii. The “Prisoner’s Dilemma” shows that “unfettered self-interest leads to very poor outcomes.”

d. Market economies not only provide incentives for “winners” but also “crush losers” in a process of “creative destruction” using the term coined by economist Joseph Schumpeter.

e. Taxes provide a “powerful incentive to avoid or reduce the activity that is taxed.”

i. If taxes are high individuals and firms have an incentive “to slip into the underground economy.”

ii. Government benefits create perverse incentives, too. E.g. not wanting to find work or willing to stay on benefits for a lifetime.

iii. Economists favor a tax that is broad, simple and fair.

iv. Economists favor the Earned Income Tax Credit because it provides the right incentives as opposed to traditional welfare programs.

3. Government provides benefits as well as costs.

a. An “externality” is defined as a difference in the private cost of something vs. the “social” cost.

b. When an “externality” is large individuals have an incentive to do things that make them better off at the expense of others. The market, left alone, will do nothing for this problem.

c. One crucial role for government in a market economy is dealing with “externalities” by regulations or via taxes.

d. Governments make markets possible in the first place.

i. Government sets the “rules” and enforces them.

ii. Government protects private property rights.

iii. Government lowers the cost of doing business by providing uniform rules and regulations, by rooting out fraud, by circulating a sound currency and most importantly building and maintaining infrastructure i.e. roads, bridges, locks, dams, telecommunications, gas and electrical routes etc.

iv. Government provides “public goods” i.e. goods that cannot be provided to only “paying customers.”

v. Government also redistributes wealth.

e. However, government should not be the sole provider of a good or service “unless there is a compelling reason to believe that the private sector will fail in that role.”

i. When government controls some element of the economy, “scarce resources are allocated by autocrats or bureaucrats or politicians rather than by the market.

ii. Governments interfere in the economy by regulations that can prevent the flow of resources to where the market values them most. “Regulations can disrupt the movement of capital and labor, raise the cost of goods and services, inhibit innovation, and otherwise shackle the economy . . .”

iii. Taxes can also exert a “fiscal drag” on the economy that discourages both work and investment.

f. Finally, government is a mixed bag of benefits and costs.

i. It has the potential to enhance the productive capacity of the economy and make us much better off as a result. See d i-iv. Above.

ii. Some government activity shrinks the size of the economic pie but still may be socially desirable. See d v. above.

iii. Some government involvement in the economy is purely destructive. See e. above.

4. Information is also a scare resource.

a. What we don’t know can hurt us!

b. Insurance provides benefits to individuals who don’t have perfect information about what the future holds.

i. Providing coverage for a group lowers the risk to an insurance company as opposed to writing policies to just individuals.

ii. Deductibles act as “screens” for insurance companies: individuals willing to pay high deductibles are most likely not to need coverage!

iii. Future genetic testing may provide insurance companies with all the information about potential policyholders that they would ever need/want. But it may not be ethical.

c. A firm like McDonald’s provides (as do many brand named firms) a plethora of information about the product it sells anywhere in the world—just by its name alone.

i. Branding helps to provide an element of trust that is necessary for a complex economy to function.

ii. Branding can be a very profitable strategy by convincing consumers that the brand is different than the competition—a form of monopoly.

iii. Brand names can also signify a higher quality to potential consumers.

d. Racial profiling too is an “information problem.”

i. Are we willing to systematically harass individuals who fit a broad racial or ethnic profile? From an economic point of view it doesn’t matter!

ii. Economics teaches us to weight the Benefit/Costs of an action. If the benefits outweigh the costs society should and would do just that i.e. racially profile individuals.

5. Human capital is the source for the growth in productivity over time.

a. “Human capital is the sum total of skills embodied within an individual: education, intelligence, charisma, creativity, work experience, entrepreneurial vigor, even the ability to throw a baseball fast” or one’s health.

b. “As with other aspects of the market economy, the price of a certain skill bears no inherent relation to its social value, only its scarcity.”

c. Investments in human capital can transform people with low wage skills into people with high wage skills.

d. The lump of labor fallacy is pernicious in much public policy.

i. It is a mistaken belief that there is a “fixed amount of work to be done in the economy.”

ii. Jobs are created continually anytime an individual provides a new good or service, or finds a better (or cheaper) way of providing an old one using technology. In the short term some workers are displaced but over the long term “more jobs are created than lost.”

e. Human capital has many other benefits than an increased income.

i. It makes us better citizen, parents, more informed people, more appreciative of art and culture and generally more able to enjoy the fruits of life.

ii. Economists have found that an additional year of schooling for a woman in the developing world is associated with a 5 to 10% reduction in her child’s infant mortality.

f. Our total stock of human capital—everything we know as a people—defines how well off we are as a society.

i. Economist Gary Becker, a Nobel Laureate, estimates that up to 75% of a nation’s capital is in the form of human capital i.e. our stock of education, training, skills and health of the people.

ii. Physical capital e.g. inventories, buildings, equipment, machinery and plants and financial capital e.g. cash, financial investments etc. only comprise the remaining stock of capital in any economy.

g. There is a striking lack of correlation between a nation’s natural resources and its standard of living. Rather, per capita income is greater in nations with higher human capital.

h. Human capital is inextricably linked with the concept of “productivity” i.e. “the efficiency with which we convert inputs into outputs.”

i. A nation is rich because it is productive. For example, it takes dramatically less worker hours now to acquire a family’s food supply than it did a century earlier—the result of increased productivity of the average worker.

ii. Productivity growth is what improves our standard of living.

iii. Productivity growth depends on investments in physical capital, in research and development, even things like more effective government institutions, but above all on human capital.

iv. Investment by definition requires us to forego present consumption in order to consume more in the future. Education is a “textbook” example of an investment.

v. Legal, regulatory and tax structures also affect productivity growth.

vi. Poor countries are not poor because of rapidly growing populations—they are poor because the “opportunity cost” to women in poor countries is low if they have many children. As productivity grows the opportunity cost of these children also grows.

i. In summary, human capital has grown ever more important (and therefore better rewarded) than ever before.

i. The world’s economy has evolved in ways that favor skilled workers.

ii. Technology makes “smart workers more productive while making low-skilled workers redundant.”

iii. International trade puts low skilled workers in greater competition with other low-skilled workers around the world and makes high skilled workers better off.

iv. This leads to rising income inequalities.

v. However, as the world’s population becomes more productive, we begin to substitute technology for labor. “Unpleasant” jobs that cannot be automated provide great economic inducements for a highly paid “someone” to perform.

j. Human capital creates opportunities. It “makes us richer, and healthier; it makes us more complete human beings; it enables us to live better while working less.” Above all, it separates the haves from the have-nots.

6. An investment strategy must obey the basic laws of economics.

a. Financial markets are remarkably complex, but all financial instruments are based on four simple needs.

i. Raising capital to all who need it to do things today that they could not otherwise afford; the financial markets provide it to them—for a price.

ii. Storing, protecting and making profitable use of excess capital.

iii. Insuring against risk e.g. a futures contract, catastrophe bonds and diversifying investments i.e. mutual funds.

iv. Speculation i.e. betting “on the short-term price movements.”

b. “Financial markets do for capital what other markets do for everything else: allocate it in a highly productive, albeit imperfect, way.”

c. How does one get rich in the market given that everyone else has access to the same information?

i. It’s the things no one can predict that make the difference.

ii. Financial markets are “efficient” i.e. all known relevant information is factored into the price of a financial instrument.

iii. Best advice is to: save your money, invest it broadly i.e. diversify, acknowledge that with risk comes reward and invest for the long run.

7. Economics and politics are often at loggerheads.

a. Pork-barrel legislation succeeds despite its usually economic drawbacks because politicians derive great benefit from providing it to a “small” subset of the electorate whilst not excessively burdening the remainder of them.

b. Groups often benefit from regulations that either helps them or hobbles their competitors.

i. E.g. teacher certification to teach public school.

ii. Other professions require complex certification and/or licensing requirements before anyone from the “outside” can practice that profession.

iii. Individuals and groups who stand to lose out from “capital’s path of progress” will use any and every tool to avoid it including politics.

iv. Society as a whole suffers when “we don’t get the benefits of the new economic structure if politicians decide to protect the old one.”

c. Politics often demands that a “safety net” be provided for those who lose out in economic change.

d. “Ordinary” citizens are often the “special interests” for the “democratic process will always favor small, well-organized groups at the expense of large, diffuse groups.”

e. Campaign finance reform is powerless to prevent organized interests from influencing public policy.

8. All economies grow in fits and starts that can be measured and this process is termed the “business cycle.”

a. GDP represents the value of all final goods and services produced in an economy.

i. Real GDP has been adjusted for inflation as opposed to nominal GDP.

ii. What really matters is per capita GDP i.e. GDP divided by population.

b. Real per capita GDP in America over time has grown consistently.

i. The American economy is “massive” in comparison to the rest of the world.

ii. The American per capita GDP doubled between 1970 and 2002 and tripled from 1950 to 2002, the result of increased productivity. See section 5 above.

iii. One of the best ways to measure real per capita GDP is to calculate how many labor hours (or minutes) it takes to buy something now vs. in the past.

c. A poor country (one with low per capita GDP) is unable to provide its citizens with even the most basic of goods and services that one could find in the developed world.

d. GDP is just a statistic.

i. It may be an “imperfect measure of how well off we really consider ourselves to be . . . richer may not be happier.”

ii. Others have sought to provide a “social report card” or “index of leading cultural indicators” as a true measure of well-being.

e. However, when GDP turns negative “the damage is real” e.g. lost jobs, closed businesses and productive capacity idled.

i. Recessions are hard to predict

ii. Recessions have a tendency to spread across borders.

iii. Paradoxically, people naturally curtail spending if they fear an economic slowdown, which only brings on a recession.

f. Fiscal policy attempts to use the government’s capacity to tax and spend as a lever for prying the economy forward.

i. Governments can attempt to stimulate the economy by spending more and thereby get others to follow.

ii. Or a government can stimulate an economy by cutting taxes.

g. Monetary policy is the second tool a government can use to manage the economy.

h. There are 8 other economic indicators that measure the strength or weakness of an economy.

i. Unemployment rate; Okun’s law states that a growth rate in the GDP of 3% will generally leave the unemployment rate unchanged in the U.S.

ii. The poverty rate i.e. the fraction of people living below a certain income level.

iii. Income inequality gap i.e. what percentage of the population earns what percentage of the national income.

iv. The size of government spending as a percentage of GDP.

v. Budget deficits/surpluses. A deficit requires a government to borrow funds, which by definition means that consumers and businesses can’t borrow as much.

vi. The current account surplus/deficit i.e. whether a country is exporting more to the rest of the world or importing more.

vii. The national savings rate. If citizens of a country do not save more then they must forego important investments or borrow from abroad.

viii. Demographics. Older retirees draw on government insurance plans for at least part of their incomes. Without enough younger workers supplying them with this income problems may arise.

9. A central bank controls the money supply and therefore determines the interest rates and growth rate of that economy.

a. The Federal Reserve (the U.S. Central bank) controls the money supply and therefore the credit tap for the economy.

i. The “Fed” can use monetary policy to counteract economic downturns.

ii. The Fed regulates commercial banks, supports the banking infrastructure and does whatever is necessary to keep the financial system working.

b. The Fed can keep the economy growing faster by lowering interest rates, but must be wary of causing inflation.

i. The natural “speed limit” of the American economy is about 3% per year.

ii. Growing too fast causes inflation, which in turn forces the Fed to tighten credit.

c. Where does a central bank derive this extraordinary power over interest rates?

i. The central bank moves interest rates by making changes in the quantity of funds available to commercial banks.

ii. A central bank has two tools at its disposal for accomplishing this: the discount rate and the (in the U.S.) federal funds rate.

iii. The discount rate is the interest rate at which commercial banks borrow from the central bank.

iv. The federal funds rate is the rate that banks charge each other for short-term loans, which is indirectly controlled by the Central Bank’s actions.

v. The Central bank creates new money by purchasing government bonds from commercial banks, which are held by commercial banks as safe investments. The process also works in reverse.

vi. The Federal Reserve mandate is to facilitate a sustainable pace of economic growth.

d. Money is a tiny subset of wealth. Money is a medium of exchange, something that facilitates trade and commerce.

i. In nearly every society some kind of money has evolved to facilitate trade.

ii. Since paper currency has no inherent worth, its value depends on its purchasing power.

iii. Inflation means that average prices are rising i.e. the purchasing power of money is falling.

e. Inflation has many characteristics.

i. Massive inflation (hyperinflation) distorts the economy massively.

ii. Moderate inflation has the potential to eat away at our wealth if we do not manage our assets properly.

iii. Inflation also redistributes wealth arbitrarily. Unexpected bouts of inflation are good for debtors and bad for lenders.

iv. Inflation is neither constant nor predictable; the aura of uncertainty is one of its most insidious costs.

vii. Governments frequently “cut their own debts by pulling the inflation rip cord.”

vi. Governments also generate an “inflation tax.” By printing more money it has taxed its own people indirectly—by devaluing the currency.

f. Political independence is crucial if monetary authorities are to do their jobs responsibly.

i. Countries with truly independent central banks have lower average inflation rates over time.

ii. It is ironic that in democratic America the most important economic post is appointed not elected.

g. Inflation is bad but deflation is worse.

i. Falling prices cause consumers to postpone purchases and thereby weaken the economy.

ii. Monetary policy may not be able to help in this circumstance, e.g. the Great Depression in America and 1980s Japan.

h. Monetary policy requires the “Goldilocks” touch!

 

10. The exchange rate, or the “price” of one currency relative to another, is determined by supply relative to demand—no different from any other good.

a. International economics shouldn’t be any different from economics within countries.

i. Capital flows across international borders for the same reason it flows anywhere else: investors are seeking the highest possible return (for any given level of risk).

ii. However, different countries have different currencies, and different institutions for creating and managing those currencies.

b. The rate at which one currency trades for another is the exchange rate.

i. It is roughly based on its “purchasing power parity” (PPP).

ii. The rate is affected by inflation i.e. there is a difference between its “nominal” rate and its “real” rate.

iii. Rather strangely, official exchange rates deviate widely and for long periods from what the PPP would predict.

iv. Why? Goods and services traded across borders differ from non-tradable services that are immovable, and more than 75% of a modern economy is non-tradable.

c. PPP is the most accurate mechanism for comparing incomes across countries.

i. Salaries across countries may seem too low or high, but because many non-tradable goods and services are included in PPP, a seemingly low salary may buy a much higher standard of living than the official exchange rate would suggest.

ii. The Economist magazine created the “Big Mac Index” which more or less accurately weighs both tradable and non-tradable goods and services in each of the 120 nations in which it is sold!

d. But why and what is the effect of sharp exchange rate deviations from what the PPP would predict?

i. If the U.S. dollar is “weak” then foreign goods become more expensive, and simultaneously American goods become less expensive for the rest of the world.

ii. A government that deliberately keeps its currency undervalued is essentially taxing consumers of imports and subsidizing producers of exports and vice versa.

iii. A country with a booming economy will often have a currency that is appreciating because of great demand for its currency and vice versa.

e. How do governments affect the strength of their currencies?

i. Higher interest rates make a currency more valuable.

ii. Nations can also enter the foreign exchange market directly, buying or selling their own currencies.

f. An array of mechanisms can be used to value currencies against one another.

i. The gold standard provides predictable exchange ranges, and protects against inflation, but can have serious drawbacks.

ii. Floating exchange rates that allow currencies to fluctuate as economic conditions dictate.

iii. Fixed exchange rates (currency bands) where countries pledge to maintain their exchange rates at some predetermined rate to another currency.

iv. A currency is pegged 1-to-1 with another stronger currency.

v. “Funny money” where some currencies are intrinsically worthless, i.e. “soft money” and trades very limitedly and never internationally; exchange rates are completely arbitrary. This occasionally leads to currency crises.

g. Currency crises usually come in three “acts.”

i. A country attracts significant foreign capital.

ii. Something bad happens: e.g. a government borrows too heavily and stands at risk of defaulting, or a property bubble bursts, a nation with a pegged exchange rate faces devaluation, a banking system is exposed as rife with bad loans, or a combination of all of these.

iii. Foreign investors try to move their capital somewhere else, asset prices fall as they do so, and the local currency plunges in a vicious cycle.

h. What really matters is the underlying flow of goods and services.

i. Each country expects that the value of what it sends to another is “more or less equal” to what it receives and currencies are merely a tool for facilitating this. Countries measure this via the “current account balance.”

ii. Of late, the U.S. has been violating this principle: it gets back more than it gives up i.e. it is running a deficit in its current account balance.

iii. What happens then? A nation can sell its assets to its trading partners—stocks, bonds, real estate etc., or it can buy merchandise on credit.

i. The connection between the current account balance and the nation’s savings rate is crucial; if a nation continues “dissaving” negative consequences result.

i. The currency of a nation with a large current account deficit will usually begin to depreciate.

ii. A nation can recklessly print money and its currency would thereby lose value, and so would its debt to foreigners denominated in that currency.

j. The World Bank and the International Monetary Fund (IMF) supervise much of the international economy/world finances.

i. The World Bank is at the center of many international development issues.

ii. The IMF is the “fire department responsible for dousing international financial crises.”

iii. Both institutions have attracted much criticism from the extreme right and left.

iv. International economics is not a zero-sum game! All countries can become richer over time, even as individual firms within those countries compete for profits and resources. The better we do it, the richer and more secure we will all be.                                

11. Global Trade benefits Everyone!

a. The easiest way to appreciate the gains from trade is to imagine life without it!

i. Having to make everything ourselves would leave us with a lower standard of living.

ii. Importing goods and services allows us to be more productive and consume more.

b. “Globalization” is the term that represents the increase in the international flow of goods and services.

i. The world has grown more economically interdependent.

ii. Nearly all evidence indicates that the benefits of international trade “far exceeds” the costs.

c. Trade makes us richer.

i. We trade with others because it frees up time and resources to do things that we are better at doing.

ii. An “absolute advantage” exists when one country can out produce something than another country and trades it for what it cannot produce efficiently.

iii. Comparative advantage exists when a country chooses to pursue the production of what it can produce relatively better than another country; A country then specializes in producing that something where the opportunity cost is least.

iv. Productivity is what makes us rich. Specialization is what makes us productive and trade allows us to specialize. Trade makes the most efficient use of the world’s scarce resources.

d. Trade creates losers.

i. “Creative destruction” spreads wherever trade proceeds.

ii. Trade, like technology, can destroy jobs, particularly low-skilled jobs.

iii. However, in the long-run trade facilitates in the growing of an economy, which in turn can absorb displaced workers. Markets create a new, more efficient order by destroying the old one.

e. Protectionism saves jobs in the short-run and slows economic growth in the long-run.

i. Protectionism’s benefit in the short-run is a job saved nationally.

ii. However, the costs of protectionism are that workers are forced into jobs that they are inherently less efficient at performing.

iii. Remember that economic sanctions (a form of protectionism) is used as a means of punishing a nation!

f. Trade lowers the cost of goods for consumers, which is tantamount to raising their incomes.

i. Trade barriers are a tax—albeit a hidden tax.

ii. Lowering trade barriers has the same impact on consumers as lowering taxes.

g. Trade is good for poor countries, too.

i. Trade in not a zero sum game

ii. Trade gives poor countries access to markets in the developed world, and thereby paves the way for poor countries to get richer.

iii. Examples include the birth of the Bangladeshi textile exporting industry, and the more famous Asian “tigers” i.e. Singapore, South Korea, Hong Kong and Taiwan not to mention China and the earlier example of Japan.

iv. A study indicated that the fastest globalizing countries had rates of growth that were 30-50% higher over a period of time than those less integrated into the world economy.

h. Trade is based on voluntary exchange.

i. Why would anyone want to work in a “sweatshop”? Because it is better than any other option open to them.

ii. According to a study the average wage paid by foreign companies in low-income countries is twice the average domestic manufacturing wage.

iii. If a foreign company was not making money or if the employees felt that they were not being paid enough than the enterprise would close. However, since it remains open voluntarily, no one must feel that they are exploited.

i. Comparative advantage of workers in poor countries is cheap labor.

i. They are paid very little by Western standards because they accomplish very little by Western standards.

ii. “Sweatshops do not cause low wages in poor countries; rather they pay low wages because those countries offer workers so few other alternatives.”

iii. However, industrialization of any kind “sets in motion a process that can make poor countries richer”!

j. Preferences change with income, particularly with regard to the environment.

i. The notion that economic development is inherently bad for the environment may be wrong.

ii. Environmental quality is a “luxury good” which means that as people get richer they place greater value on attaining it.

k. Economics teaches us that trade is an important way to enrich any nation.

12. There are several ways to economically develop a poor country.

a. Install effective government institutions.

i. “To grow and prosper, a country needs laws, law enforcement, courts, basic infrastructure, a government capable of collecting taxes—and a healthy respect among the citizenship for each of these. These kinds of institutions are the tracks on which capitalism runs.”

ii. Government must be reasonably honest; corruption misallocates resources, stifles innovation and discourages foreign investment.

iii. Good governance matters. There is a clear and causal relationship between better governance and better development outcomes according to studies.

b. Protect private property rights.

i. Informal property rights are fine for a bartering agrarian economy—they are woefully inadequate for a more complex economy.

ii. The most valuable/productive asset in a poor country is the private property of its citizens who nevertheless do not have clear title to it.

c. Eliminate excessive regulations.

i. Excessive regulations go hand in glove with corruption.

ii. A study found that a government that “stuck to the basics” was more likely to grow faster; total government spending excluding education and defense was negatively correlated with per capita GDP.

d. Invest in human capital.

i. Human capital is what makes individuals productive and productivity is what determines our standards of living.

ii. Human capital also has non-monetary benefits to an economy.

iii. However, skilled workers need other skilled workers if they are to benefit fully.

iv. A “brain drain” may result from just educating a few.

e. Geography plays a role in economic development but countries in the tropics, that battle harsh environments, can pursue avenues to overcome it.

i. Encourage others to pursue more technological development aimed at their unique ecology.

ii. Encourage its own citizens to step out of the subsistence agriculture mode by encouraging more global trade.

f. Open up to global trade.

i. Open economies grow faster than closed ones.

ii. Even when a previously closed economy opens up to global trade it can dramatically increase its rate of growth.

g. Institute responsible fiscal and monetary policies.

i. Large government deficits require the government to borrow heavily, which takes capital out of the hands of private borrowers, who are likely to use it more efficiently.

ii. Governments should spend on things that will raise future production.

iii. Governments should stabilize their currency's exchange rate, and eschew overvaluing their own currency.

h. Natural resources matter less in the development process than is commonly believed.

i. Economists now believe that a rich endowment of resources may actually be a detriment to development!

ii. Mineral riches change an economy: they divert resources away from other industries such as manufacturing and trade, and they make an economy susceptible to wild swings in the price of the commodity.

iii. Too often countries that could have made themselves better off from abundant natural resources e.g. investing in education, public health, sanitation, immunizations, infrastructure—squander the money instead.

i. Practice democracy.

i. Democracy is a check against the most egregious economic policies, such as outright expropriation of wealth and property.

ii. A study found that democracy is associated with higher economic growth rates.

j. Other factors count, too.

i. Save more income and invest more.

ii. Lower fertility rates.

iii. End ethnic strife.

iv. Modify the indigenous culture.

v. Lastly, much of the world is poor because the rich countries have not tried hard to make it otherwise.