James d. Gwartney

Read:
I, Pencil, My Family Tree by Leonard Read
Video:
Exchange Wealth Creation

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Such examples of “good capitalists” can also be found throughout transition
economies. Perhaps not as well known as Bill Gates, the Czech Pavel Baudiš built Avast into a
major force in cybersecurity and a fortune of many billions of dollars. The Polish mechanic
Zbigniew Sosnowski turned a failing state bicycle company into Kross, a major European
maker producing over 1 million bicycles a year. Google “Talking Tom Cat” and you will find a
very popular set of children’s videos developed by a young Slovenian couple, Izo and Samo
Login, and sold to a Chinese buyer for over a billion dollars.

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Value Creates Income and Wealth
Consumption is the sole end and purpose of all production; and the
interest of the producer ought to be attended to, only so far as it may
be necessary for promoting that of the consumer.
— Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, Volume
II Glasgow Edition (Indianapolis: Liberty Fund, Inc., [1776] 1981): 660. Also available
at: 
http://www.econlib.org/library/Smith/smWN.html
As Adam Smith noted more than 240 years ago, consumption is the objective of all production.
But, consumption comes before production only in the dictionary. Income and living standards
cannot increase without an increase in the production of goods and services that people value.
Video:
The Broken Window Fallacy
Clearly, destroying commonly traded goods that people value will make a society
worse off. This proposition is so intuitively obvious that it almost seems silly to highlight it.
But policies based on the fallacious idea that destroying goods will benefit society have
sometimes been adopted. In 1933, the United States Congress passed the Agricultural
Adjustment Act (AAA) in an effort to reduce supply and thus prevent the prices of agricultural
products from falling. Under this New Deal legislation, the federal government paid farmers to