A Simple Economy?Submitted by Dave Glason on Tue, 2011-09-27 19:43 |
Is it possible that the size of an economy could be limited by only 2 factors?
a) The population involved in the economy
b) The technological level of the economy
That would mean that once the economy is running efficiently i.e. no more growth due to economies of scale, and all natural demand is being supplied, there are only two ways to grow an economy:
a) Increase the size of the population
b) Technological advancements e.g. development of new tools, products etc.
I suspect that for a given population size, at a given technological level, over a given time period there is a maximum (natural) demand and that by encouraging borrowing to boost spending and thus increase the "size" of the economy only brings the spending forward. This means a "bigger" economy now but a "smaller" one later as the debt is repaid.
I think this is what we are experiencing now (2008+) globally and that this won't change until new, more efficient technologies come online (which are ok to borrow for as they return more demand than the initial borrowing cost).
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