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In their book, Economic Sense Economics: What Everyone should know About Wealth and Prosperity, Gwartney, Stroup, Lee and Ferrarini (2010) shed light on economic principles that are critical to the national and individual economic progress.
They provide a lucid and concrete overview of the need for a better understanding of simple macro-economic and individual economic principles which are an essential ingredient in economic prosperity. The bottom-line of this book is essentially the creation of a financial and economic literacy among nations and their citizens.
In particular, this book provides an in-depth analysis and enlightened discussion on clear thoughts about economic prosperity. This essay provides a personal understanding of the basic principles of micro and macro-economic aspects as discussed by Gwartney, Stroup, Lee and Ferrarini (2010).
The aim of this essay is to enable the individual to become a responsible citizen who actively participates in revenue generating activities to ensure wealth creation and economic prosperity is attained.
Economic principles and responsible citizenship
Individuals have an obligation of participating in different actions that ensure the betterment of their own lives, and the entire society at large. To achieve this, they should participate in activities which promote the personal and societal well-being.
In many developing and developed nations across the world, individuals are demonstrating their citizenship responsibilities through democratic processes with a view of guaranteeing their personal and societal rights. According to Logan and Molotch (2007), a responsible citizen takes part in a democratic process as a civic duty.
This is to ensure a better understanding of political, economic, and other environmental systems that have a direct impact on the improvement of individual, communal welfare, and prosperity of the nation.
Responsible citizens should be able to understand how their exercising of political and democratic rights has an impact on resource allocation, which determines their personal prosperity and welfare. A responsible citizen cares about the creation of wealth at an individual, firm, or national level.
This can only be achieved through a clear conceptualization of how the government and political processes protect both individual and property rights. At this point, Gwartney, Stroup, Lee and Ferrarini (2010) urge individuals to understand that political processes will not always ensure consistent allocation of resources, but market allocation of economic resources will ensure economic progress.
Individuals should realize that politics is merely a social structure alternative, but not a remedy that provides solutions to challenges affecting the individual or society. In their argument based on the market allocation of resources;
Gwartney, Stroup, Lee and Ferrarini (2010) opine that free markets allow individuals to engage voluntarily in mutual agreements, acquire more information about varied market choices, and allow them to have diverse representations. These factors empower them to create wealth rather than relying on political choices.
A thoughtful consideration of government economic policies such as subsidies, trade, taxes, and government expenditure should be evaluated critically by all citizens (Gwartney, Stroup, Lee & Ferrarini, 2010). Responsible individuals should be alert and vigil about these policies taking note of their impact on social and private life.
These policies have a far reaching consequence on citizens who are taxpayers; hence under-scores the significance of acquiring the right knowledge about these policies. For instance, an economically responsible citizen should be able to know that government costs are not only limited to taxes, but rather the consequences of such economic policies on the private sector, use of resources, and price distortions.
Gwartney, Stroup, Lee and Ferrarini (2010) illustrate the consequences of increased federal expenditure since the 1960s, which has resulted in budget deficits and has increased the national debt.
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Gwartney, Stroup, Lee and Ferrarini (2010) argue that governments to a large extent slow down the rate of economic progress when they seek to reward some individuals at the expense of the nation for political reasons. The efficient acquisition of wealth by individuals and economic progress relies on the production and exchange of goods and services at a value, to generate income.
This enhances the wealth of the society at large rather than plundering, which benefits a few individuals at the expense of the majority. The promotion of productive activities through the protection offered by the government on property rights and elimination of favors is believed to positively trigger economic prosperity.
The primary objective of responsible citizenship should be to bring benefits to the society at large as opposed to targeting specific interest groups. The economy and money are important tools that require the right knowledge and understanding in order to eliminate poverty, as well as create sustainable development. One of the major impediments to wealth creation and economic prosperity is poverty.
Gwartney, Stroup, Lee and Ferrarini (2010) note that over-reliance on transfer payments and subsidies from the government has not had a positive impact on the reduction of poverty levels in the last seven decades they have been in existence, in the United States. They hold that transfers are a burden to taxpayers, and long-term objectives are eroded due to competition for the transfers.
To reduce poverty and ensure economic prosperity, as well as the creation of wealth; Gwartney, Stroup, Lee and Ferrarini (2010) propose that the youth should obtain a minimum education qualification (high school), avoid child-bearing before marriage, and continue working before they secure a full-time job.
Gwartney, Stroup, Lee and Ferrarini (2010) criticize the central planning of resources by the federal government as being retrogressive to economic progress. Central planning is prone to political lobbying that eventually wastes resources hence prohibiting economic development. They argue that this is a disincentive to private investors wishing to engage in productive activities.
Responsible citizenship calls for the devolvement of central planning and allocation of resources so as to encourage individuals to exploit their property rights productively hence creating wealth. Additionally, decentralization of the government planning and encouraging a competitive free economy, allows the market channels to discipline producers, and consumer to be more accountable to ensure future efficiency.
Only productive projects that generate income thrive in such an economic situation. In a nut-shell, the introduction of competition in the public sector will go a long way in ensuring that private firms play on an equal platform with government agencies. This will definitely guarantee economic progress.
According to Gwartney, Stroup, Lee and Ferrarini (2010), there is a greater need to synchronize political processes and sound economic policies. They suggest that new rules should be in place to bring together and ensure that interest groups, politicians, and bureaucrats work in harmony to ensure economic prosperity.
Going back to the constitutional beginnings which enshrined the protection of property rights, limited government involvement, equality, and federalism are cited as major milestones in ensuring economic prosperity of all individuals in the United States.
The authors of this book provide an informative guide to understanding the basics of economic principles at the national level, and how they affect personal finances. The significance of economic literacy is brought out clearly in the book to help individuals make decisions on economic issues such as savings, consumption, and investment among many other personal economic issues.
Democracy, politics, and government to a large extent are cited as some of the factors derailing economic progress and wealth creation. The elimination of these inefficiencies created by government and political systems, as well as knowledge and understanding of simple economic principles by individuals will go a long way in ensuring economic prosperity.
Gwartney, J. D., Stroup, R. L., Lee, D. R., & Ferrarini, T. H. (2010). Common sense economics: what everyone should know about wealth and prosperity. New York: Macmillan.
Logan, J. R., & Molotch, H. L. (2007). Urban fortunes: The political economy of place. Berkeley, CA: University of California Press.