00:01
So here we're talking about adam smith, right, who's famous primarily, well, for many things, but primarily is 1776, the wealth of nations, which is often viewed as the beginning of the formal study of economics, right? and so we have three things here, peace, easy taxes, and tolerable administration to create economic growth, right? and economic growth refers to output and production.
00:28
Why are each of these things sort of ingredient for production, right, for a living standard? so, you know, peace is maybe the easiest one, right? war is going to destroy factors of production, right? we're not going to be able to produce much if we're destroying our country, right? people are going to die and people are going to get forced into the army or the navy.
00:58
And they're going to be unable to produce.
01:02
The movements of rampaging armies are going to destroy crops and destroy fields, destroy capital, right? a lot of the public wealth is going to be taken and used to fuel the war machine, right? so there's this immediate destruction of goods and services that happens in the war.
01:23
But it also perhaps more more, you know, know formally it inhibits planning right it makes it very difficult to build for the future to plan for the future right it's very difficult to do that under conditions of war when the outcome is uncertain right do you want to start a new factory if you think your country is going to lose and you know a different set of laws or a different administration will come in right maybe you're worried that after the war the rules will change and you're not going to be able to operate your business like you think you're going to be able to do, right? so or it's just, you know, it's bad for business.
02:11
It destroys businesses.
02:13
It destroys goods and services and people.
02:16
But it also makes planning for the future very, very difficult, right? easy taxes are more of an incentive story, right? right? easy taxes, classically in economics, promote investment, right? because investment, for starters, is risky.
02:38
And so in a default state of the world, not many people want to do investment, right? investment is limited.
02:45
You know, when you're doing investment, you're saying, i'm going to sacrifice my money.
02:48
I'm going to sacrifice my consumption.
02:50
I'm going to put it into a factory or some sort of commercial enterprise.
02:53
And then i hope over many years, my investment will be repaid, right? but high taxes means that the government, the state, is taking most of the return of your investment.
03:07
And so you're already putting your money up to risk.
03:11
Why would you risk your money in a long -term investment if the government is going to take all the rewards of your investment, right? it's just going to confiscate what you're making, right? so the rational response is if that the government takes everything, never invest in the first place, right? it's just not worth the risk.
03:29
So easy taxes are a prerequisite for investment because if the government seizes all the fruits of investment, you're not going to have any investment in the first place, right? so you need investment to create factories, to create capital machines and commercial enterprises, and people will never create these things if they don't have the incentives to do so, right? justice, right? the primary form of justice and economics is contract law, right? contracts are important for running a business, right? someone says that if you produce all these things for me, i'll pay you 4 ,000 pounds of silver as it was back in the day...