Tuesday, April 8, 2008

Resources are more efficiently used when a population is geographically concentrated

As we have been discussing, economic freedom is central because the raw ingredients for economic development exist in India. It has a large population and considerable natural resources. Given economic freedom, people would naturally produce wealth. Liberalization—the notion that people should be economically free—is the key concept. Free people grow and realize their potential naturally...

Urbanization is a cause and consequence of economic growth and development. If you recall, I had pointed out that specialization and the division of labor increases productivity and therefore greater production. Cities allow what we call economies of scale, scope and agglomeration to occur. In other words, resources are more efficiently used when a population is geographically concentrated. Most significantly, infrastructure is cheaper to provide per capita if the population were concentrated compared to if they were dispersed. People need infrastructural services – such as power, water, telecommunications, transportation, sanitation, security, medical, entertainment, etc. – to live productive and enjoyable lives. Cities are the natural outcome of the need to provide infrastructure as efficiently as possible...

What India needs the most is for its citizens to achieve economic freedom. The people are entrepreneurial and inventive enough that they will figure out most of the problems by themselves. Education has to be freed from the control of the government.

The role of the government has to change from being a meddlesome overlord to one of facilitating development. The government has to become an institution that the people use for the provision of public goods. It has to stop attempting to control the economy because control is inimical to the creation of wealth.

India needs energy for development. The primary public good that the government has to facilitate is that of funding research and development of technologies for energy... Atanu Dey has a fantastic conversation with the spirit of Adam Smith

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