ABSTRACT
At first glance it might appear that the subject of this paper is of no great practical significance. Although both basic principles and careful accounting show that distortion of incentives, through unsound government intervention in the economy, exerts a drag on growth, the effect looks small. Except for some disastrously misgoverned third-world countries, perhaps, this drag is measured in fractions of a percentage point of annual growth. It would be all too easy to conclude that the effect is negligible. However, one decisive fact leads to the opposite conclusion: small effects that persist eventually add up to big effects.
