James d. Gwartney

Certification
(?)
provides an attractive alternative to licensing. With certification, the
government could require suppliers to provide information about their education, training, and
other qualifications to consumers, without prohibiting anyone from working in his or her
chosen field. In essence, certification makes information about the suppliers’ qualifications
readily available to consumers, without restricting their choices. Further, it would make it
possible for practitioners to develop and demonstrate their competence, while still providing
consumers with the information needed to make informed choices.
Regulations often appear to be an easy way to solve problems. Want higher wages?
Increase the minimum wage. Want a lower unemployment rate? Pass laws making dismissal of
workers more difficult. Want higher earnings in an occupation? Restrict the entry of price-
cutters. But there is a problem here: These simplistic policies do not enhance production and

---

88
they ignore the secondary effects. Our living standard is directly linked to the production of
goods and services that people value. Mutually advantageous trade and competitive markets
encourage efficient use of resources and discovery of better ways of doing things. They help us
get more value from our resources. Thus, regulatory policies that impose roadblocks against
trade and entry into markets will almost always be counterproductive. If a country is going to
grow and prosper, it should minimize regulations that restrict trade and the competitiveness of
markets.
Read:
Censoring Pleas for Help by Dwight Lee

---

89
Efficient Capital Markets
While consumption is the goal of all production, it will often be necessary first to use resources
to build machines, heavy equipment, and buildings, which can then be used to produce the
desired consumer goods. In other words, investment increases future consumption, but it
requires forgoing some present consumption. Capital investment
(?)
—the construction and
development of long-lasting resources designed to help produce more consumer goods and
services in the future—is an important potential source of economic growth. For example, the
purchase of an investment good such as an oven by a local pizzeria will help enlarge its future
output.
Resources (such as labor, land, and entrepreneurship) used to produce these investment
goods
(?)
will be unavailable for the production of consumer goods. If we consume all that we
produce, no resources will be available for investment. Therefore, investment requires
saving
(?)
—a reduction in current consumption in order to make the funds available for other
uses. Someone, either the investor or someone willing to supply funds to the investor, must
save in order to finance investment. Saving is an integral part of the investment process.