James d. Gwartney

ELEMENT 1.10
Economic progress comes primarily through trade, investment, better ways of doing things,
and sound economic institutions.

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haul more with a truck than with a mule and wagon.
Second, improvements in technology (the use of brain power to discover new products
and less costly methods of production) spur economic progress. Since 1750, the steam engine,
followed by the internal combustion engine, electricity, and nuclear power replaced human and
animal power as the major source of energy. Automobiles, buses, trains, and airplanes replaced
the horse and buggy (and walking) as the chief methods of transportation. Technological
improvements continue to change our lifestyles. Consider the impact of personal computers,
microwave ovens, cell phones, streaming programs on TV, heart by-pass surgery, hip
replacements, automobile air conditioners, and even garage door openers. The introduction and
development of these products during the last fifty years have vastly changed the way that we
work, play, and entertain ourselves. They have improved our well-being.
Third, improvements in economic organization can promote growth. By economic
organization we mean the ways that human activities are organized and the rules under which
they operate—factors often taken for granted or overlooked. How easy is it for people to
engage in trade or to organize a business? The legal system of a country, to a large extent,
determines the level of trade, investment, and economic cooperation undertaken by the
residents of a nation. A legal system that protects individuals and their property, enforces
contracts fairly, and settles disputes is an essential ingredient for economic progress. Without
it, investment will be lacking, trade will be stifled, and the spread of innovative ideas will be
impeded. Part 2 of this book will examine in more detail the importance of the legal structure
and other elements of economic organization.