Mitch McConnell tried to put $1 trillion into perspective when he told a crowd that if you spent $1 million a day every day starting on the day that Jesus was born, you would not reach $1 trillion. That seems like a lot, doesn't it? However, if you invested just $1 on the day that Jesus was born and received only 1.4% per year (less than what I earn on my certificate of deposit even in these low-inflation/low-interest times), you would reach, are you ready for this? $1.368 trillion.
That is the miracle of compounding interest. However, reduce the interest rate by only 0.4% down to a mere 1% per year and your total take would drop to -- are you ready for this? $485 million. Still not a bad take but notice that a difference of only 0.4% compounded over 2,010 years and you end up more than an order of magnitude away.
That is the miracle of compounding interest. However, reduce the interest rate by only 0.4% down to a mere 1% per year and your total take would drop to -- are you ready for this? $485 million. Still not a bad take but notice that a difference of only 0.4% compounded over 2,010 years and you end up more than an order of magnitude away.
This insight has important implications for economic growth. Notice that if we increase our growth rate by a mere 0.4% (or reduce it by the same), over two millenium we reach of level that is over 2800 TIMES greater. To put that in perspective, it is the difference between someone making $84.6 million a year and someone making $30,000. Since no economic system, even capitalism, has such large disparaties in wealth for more than a few outliers in society, any economic system that can increase economic growth by even an infintessimal amount is automatically superior to all others regardless of the wealth disparaties within it.
Yet, the only way to do this is to protect and extend private property rights. Why would I produce if I did not gain (most of) the fruits of my labors? Everyone understands this and yet too many are tempted by the evils of those who would take these rights away. Communism seems easy: from each according to their ability, to each according to their need. But it fails in practice. It really becomes: from each according to their ability to do as little as possible, to each according to their ability to convince the powers that be that they have "need".
I teach at a university. If I graded by the Communist mantra, everyone would automatically pass even if they did not deserve to do so. Each would work to their ability without being motivated by grades. How realistic is that?
No, people act not out of kindness but out of regard to their own self-interest -- and we have a better society because of it. From Adam Smith: "It is not from the benevolence of the butcher, the brewer or the baker, that we expect our dinner, but from their regard to their own self interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages."
And that, boys and girls, is why even small inefficiencies must be excised from our economy and why proposals for abolishing private property, such as those made by Communists, are nothing more than the purest form of evil.
Yet, the only way to do this is to protect and extend private property rights. Why would I produce if I did not gain (most of) the fruits of my labors? Everyone understands this and yet too many are tempted by the evils of those who would take these rights away. Communism seems easy: from each according to their ability, to each according to their need. But it fails in practice. It really becomes: from each according to their ability to do as little as possible, to each according to their ability to convince the powers that be that they have "need".
I teach at a university. If I graded by the Communist mantra, everyone would automatically pass even if they did not deserve to do so. Each would work to their ability without being motivated by grades. How realistic is that?
No, people act not out of kindness but out of regard to their own self-interest -- and we have a better society because of it. From Adam Smith: "It is not from the benevolence of the butcher, the brewer or the baker, that we expect our dinner, but from their regard to their own self interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages."
And that, boys and girls, is why even small inefficiencies must be excised from our economy and why proposals for abolishing private property, such as those made by Communists, are nothing more than the purest form of evil.
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