Economic illiteracy - 1

Is this bordering on a political opinion piece... maybe

Here is a quote the maiden speech from a certain new Aussie senator.

"The purpose of the economy is not to produce the lowest price product for the end consumer. That may be a consequence of a good economy but it is not the purpose. The purpose of the economy is to create the greater nexus between the wealth of the nation and its people, and it generally does this through small business."

Drop the NOT and that is THE purpose of an free market/capitalist economy.

"The purpose of the (free market/capitalist) economy is to produce the lowest price product for the end consumer."

The senator's belief is that the economy exists to increase the connections (greater nexus) between the wealth of the nation and its people. It portrays the wealth as being static, and does not mention how this wealth is created. If you believe wealth is static, redistribution of that said wealth is just around the corner.

Why build a mine, run a farm or business if it is not to offer (produce) the most product at the cheapest price to every other producer/consumer.
This more product at a cheaper price is the driver, the purpose of the economy which creates the wealth the senator speaks connecting to everyone.
Every producer will want to connect to as many consumers as possible, and every consumer wants to connect to as many producers (of the same product) as possible. Anything which gets in the way means the market is less free than it could be.
If the senator wants more connectivity between producers and consumers, get rid of excessive government regulation and subsidies.

The senator needs to read some real economics. Bastiat is a good start.

The other underlining issue for the senator is the lack of investment and migration to regional areas. He is trying to answer and provide solutions to the question: why do people move and live in the city?

The answer is labour specialisation. In a city you can become more specialised at what you do, making yourself more productive and earn higher wages to boot.
Regional areas due to lower populations don't allow specialisation to occur to the same degree. This is why there are few if any brain surgeons and DBAs in regional areas.

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