The Investment U e-Letter
Tuesday, October 4, 2005 Dr. Mark Skousen On Economics and Free Markets: Special Supplement to Investment U
by Dr. Steve Sjuggerud, Advisory Panelist, Investment U
An Interview with Dr. Mark Skousen: Part 2 Investment U: How does being an economist help you as an investor? Mark: There are a lot of ways… I'm an applied financial economist who has been trained in the principles of economics, whether it's marginal analysis or growth theory - what determines a country's growth, what motivates investors to move in one area or another, or getting an understanding of the business side… There's this whole body of economic principles on growth theory: micro-analysis, what determines prices, the relationships between costs, profits and prices, the role of interest rates and government monetary policy, debt policy, the importance of globalization… and all of this affects the fundamentals in the economic analysis of investor psychology, if you will. In fact, there's a whole new area of economics called behavioral economics, which is something I'm also drawing upon to help investors save more and put their savings to more productive use. Investment U: If there was one economist that has influenced you the most, who would that be? Mark: It's probably a couple of economists - I have no one single favorite. I certainly have respect for Adam Smith, the founder of modern economics, and what he called the system of natural liberty… The freedom to decide what job you wanted, what prices, wages, and rents to charge - and that it would all lead to the social good… It's the Invisible Hand doctrine - that if people act in their own interest, it will benefit everyone. Those concepts are very important applications to today's world. I also like Milton Friedman. He has done a great service in countering the notion that the free market causes instability in the economy. It's Friedman who demonstrated that the Great Depression was not caused by capitalism, but by the government intervening, especially with monetary policy, acting ineptly, and causing the economy to collapse. Investment U: Speaking of free markets, what country right now has the freest market on the planet? Mark: Well, certainly in the economic freedom indexes by the Fraser Institute and the Heritage Foundation, Hong Kong is the number one freest country in the world. It has a flat corporate and individual tax of less than 20 percent, and they have no tax on dividends or capital gains… They also have a free trade zone, so you can import or export with no duties. That's pretty unusual. And then, of course, they're right next to China, which is booming right now, and so the Hong Kong stock market is doing very well. The Asian markets in general are definitely freer and growing very rapidly right now. Editor's Note: Thanks to Mark for sharing his thoughts and wisdom with us. If you'd like to learn more about Mark Skousen, visit his biography. Return to Part 1 of Investment U's interview with Dr. Mark Skousen
| 
