1) Legal System
2) Competitive markets
3) Limits on Government regulation
4) An efficient capital (K) market
5) Monetary stability
6) Low Tax rates
7) Free Trade
1) Legal System: Foundation for economic progress is a legal system that protects privately owned property and enforces contracts in an evenhanded manner.
Provides protection of property rights and enforcement of contracts. This reduces the uncertainties accompanying trade. Provides the foundation for capital formation and gains from trade; which is the root of economic growth.
Private ownership of property has incentives, and 4 reasons why these incentives propel economics progress: a) Encourages wise stewardship: More likely to maintain well. Eg: Car owner takes good care of the car. If owned by government, incentive to take good care is weakened. Eg: council houses b) Encourages productive use of property: When able to keep the fruits of labor, strong incentive to improve, work harder and smarter. Eg: 1978 Communist Government of China: rice farmers c) Incentive to develop PP in ways that are beneficial to others: Gain from actions that enhance its value to others, i.e. when others find it attractive, market value rises. Eg: Apartments, students d) Promotes wise development and conservation of resources for the future: Owner has incentive to conserve current use to make property more valuable for future customers. Eg: Tree farmers. Wise development: When a resource becomes scarce, its price rises so higher incentive to conserve, find & develop a substitue. Eg: Whale oil as an energy source. [Conservation, substitution, new technology]
2) Competitive Markets
C methods: quality, style/design, service, location, advertising, price Producers cannot be complacent. Need to anticipate, identify and quickly adopt improved ideas. To succeed, need to have cost-effectiveness.
• Promotes efficient use of...