We established a novel method to evaluate effective optical constants by terahertz (THz) time domain spectroscopy and suggested a strict definition of optical constants and an expression for electromagnetic energy loss following the second law of thermodynamics. We deduced the effective optical constants of phosphor bronze wire grids in the THz region experimentally and theoretically. The results depend strongly on the polarization of the THz waves. When the electric field is parallel to the wires, we observed Drude-like electric permittivities with a plasma frequency reduced by a factor of 10(-3), whereas when the field is perpendicular, the sample behaved as a simple dielectric film. We also observed unexpected magnetic permeabilities, which originate from the non-resonant real magnetic response of finite size-conductors.