Question

Why can passing some laws be harmful to the growth of an economy?

Answer 1

There should be a speedy growth of an economy if it is free. But, laws create obstacles since each law has some favoring attitude which deprives some other. If we take price ceiling or price floor law, the first one favors consumers and deprives suppliers since the price is smaller than the market equilibrium price; the second one favors suppliers and deprives consumers because the price is too high. In both these cases there would be increasing amount of deadweight loss.

A growth could only be sustained if the market is in equilibrium and there is social surplus (= consumer surplus + Producer surplus). Government interference by imposition of laws (like import restriction, tax, etc) actually creates an inefficient market where suppliers may leave the market and/or consumers may have wrong perception.