Sunday, September 11, 2011

It is all about production

Here is a theory. Everything that is produced will be sold and consumed. Too broad? Try it this way - Everything that is produced that people need will be sold and consumed.

Another theory: A nation's net worth and standard of living is the product of the sum of its production. The more meals served in restaurants. The more cars produced. The more clothes tailored and mended. The more goods and services produced in a society, the higher the standard of living in that society.

Objections based on the argument that wide disparities of income will result in some people having a lot and others very little have to explain how the rich will consume all the products the economy produces. People only need, at most,  a few washing machines. And there is a limit to how much dental work they need done. As long as theory #1 is true, that all the goods and services an economy produces will be sold and consumed, then no matter the income level of the consumers, the more goods and services an economy produces, the more everyone will have to consume.

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