If McDonald’s suddenly cuts the price of its French fries in half, would its store profits fall or rise? If the price cut caused more people to come to its stores and spend more on other items, such as Big Macs, revenues and profits might rise, provided that competitors do not cut their prices in response.

Any business person who does not understand the laws of supply and demand will soon go bankrupt. It is only the political class who fails to (or wishes not to) understand this basic economic concept.

Those who have not studied economics often rely on the press, who are often equally ignorant of economics and, hence, are unable to differentiate between sense and nonsense. While The Wall Street Journal (and particularly the editorial page) normally gets it right, The New York Times and many other newspapers too often let political bias get in the way of the facts.

It is particularly disappointing when a former great newsmagazine, The Economist, allows very sloppy reporting and analysis on serious economic topics.

Given that too many in the press (including the economic press) have forgotten basic lessons, as the New Year begins they are worth repeating. Beyond some point, increases in government spending and regulatory costs as a percentage of GDP reduce economic growth and the general welfare -because of the disincentives for productive work built into many government programs, and poor management due to the lack of competition and cronyism.

Many countries, particularly in Eastern Europe, have adopted low-rate, flat-tax systems, because, having experienced the misery of socialism, they understand that class warfare and big government are a formula for disaster. This lesson seems to have been lost on many in the political class in the West.