What 19th-century German immigrants to the US tell us about economic growth

On 26 September 2023, before being interviewed by Adept Economics Director Gene Tunny, leading US economist John Cochrane of the Hoover Institution told the Centre for Independent Studies (CIS) a great story illustrating the importance of free markets unconstrained by stifling regulations:

“I have an ancestor who came from Germany to the US. They hated Germans at the time. He went to New York, and he didn’t speak English. He wrote back “Come to America, the streets are paved with gold.” Why? They were in a business that made furniture, and they wanted to move into pianos. But the guilds in Germany didn’t like this. There’s no damn guilds here [in the US] stopping us from doing what we want to do. That’s what it needs.” 

Professor Cochrane argued that government regulation hinders innovation and economic growth in his talk on economic stagnation at the CIS. He suggested that many regulations protect existing businesses and prevent competition rather than promote growth and progress. He argued that economic regulation often results in inefficiencies and inequitable wealth transfers, ultimately stifling growth and preventing new businesses from disrupting the existing order. 

Gene Tunny, Professor John Cochrane, and CIS Executive Director Tom Switzer.

You can find a recording and transcript of Professor Cochrane’s speech via this link:

John Cochrane on Free Markets & Economic Growth and the Fiscal Theory of the Price Level 

Cochrane highlighted the need to fix the “sand in the gears” that hinder growth and innovation. He acknowledged that there may be a school of thought suggesting that we have run out of ideas for growth but argued that we can still do much to improve the growth rate by fixing regulations and improving institutions.

Adept Economics Director Gene Tunny has previously written about the adverse effects of various federal, state, and local regulations on innovation and economic growth in Australia:

Rationalising Regulation: Helping the economy recover from the corona crisis – Adept Economics | Decision Defining Insights 

Obviously, some regulations are necessary and desirable, but we must be careful not to impose unnecessary burdens that constrain innovation and growth.

Published on 30 November 2023. For further information, don’t hesitate to contact us via contact@adepteconomics.com.au or 1300 169 870.

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