Why cost cutting is good for the economy If a company trims costs in order to make a profit, what is wrong with this?
By making the transition from a loss to a profit, the company in fact makes more efficient use of its resources. In short, the use of its resources now generates a positive return; i.e., the company has created real wealth. According to Mises, “The only goal of all production activities is to employ the factors of production in such a way that they render the highest possible output. The smaller the input required for the production of an article becomes, the more of the scarce factors of production is left for the production of other articles.”[3] Consider a farmer who plants 10 seeds and harvests only five seeds. Obviously, he cannot continue with this practice for long before he eventually runs out of seeds. Consequently, he will be faced with the threat of starvation. Hence, the farmer is forced to alter his conduct, i.e., to find better land or acquire a better way of planting his seeds. So why would this change that generates a surplus be bad? With a greater crop, the farmer coul
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