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What makes an economy grow?
It seems most people have the notion that the inner-workings of an economy
are impossibly complicated, too difficult for the average person to understand.
Well, while it is true that an economy is complex in terms of how many different
things are simultaneously interacting in it, the economic principles that apply
to those interactions are actually pretty easy to understand.
Let's start with a simple economy.
Suppose there's a village of five people:
A butcher,
a cutler,
a stone mason,
a blacksmith,
and a miner.
And suppose the butcher starts with $100, and the other four are flat broke.
Well, one day, as he's trimming some meat, the butcher notices his knives are starting
to dull and wear out,
and he asks the cutler to make him a new set for his $100.
The cutler agrees and starts working.
As the cutler's sharpening the blades, he notices his grindstone is starting
to crack, and so he asks the stone mason to make him a new one
for the $100.
Well, he gives the $100 to the stone mason, and the stone mason agrees and gets to work.
Now as he's chiseling away, he realizes he could use a new chisel.
So, the blacksmith offers to make him one for $100.
Now, before the blacksmith can get to work on the chisel, he has to refill his supply
of iron ore,
so he asks the miner to get him another ton, for the $100.
Now the miner works all day, and in the evening he decides he could use a good meal
after his long day of hard work.
So, he drops the iron ore off at the blacksmith's, and then swings by the butcher, where he buys
$100 worth of steak.
where he buys $100 worth of steak. Well, the blacksmith then makes the chisel for the mason,
and the mason then finishes making the stone for the cutler,
who finishes making the knives for the butcher.
Now, notice the $100 is back in the hands of the butcher,
and everyone else again has no cash.
Now on the surface, it would appear that the economy is exactly the size that it was.
After all, there's still only $100 cash in it.
But the butcher has a new set of knives,
the cutler a new grindstone,
the mason a new chisel,
the blacksmith has the remainder of the ore,
and the miner has some delicious steaks.
so while the total number of physical dollars has remained the same
the economy is growing what u
see true economic growth only comes when value is added to the economy growth
does not come from simply putting more money into it
suppose for example the everyone family received a big pile of money
pretty soon own would want money is much because everyone has plenty of it
inevitably people would have to offer more money to trade
and at that point prices and wages have both the reason together only the
numbers
the actual value outside
see the only reason we use the money is supports convenience
you may not want with the other guy offers so he pays you and money
and we use that money is sort of an i_o_u_ passed from person to person
you'll pass it onto the next guy whenever you find something you do want
to
in fact you can feasibly envision an economy where there is no actual
currency or people simply trade product for product
boom boom
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just for the chickens queen greed
in poultry or
where
bennett comics that justice will still be able to grow specter email the
receipt
because it's the value from the trade roseanne
after all this economy didn't grow from the money being passed around a group of
the products that people created
he grew in the cutler made the nights with butcher
degree when the mason made the stone for the tyler
degree when the blacksmith mated chisel for the mesa
degree when a minor died of the or for the blacksmith and finally he grew when
the butcher made a delicious thanks for the minor
because this trading milk products and services is what grows an economy the
way to improve the economy is to have more avenues of trade opened up
rather than to be restricted to what politicians and bureaucrats belief is
best for you
it's not complicated
the easier it is to employ someone the more important there's going to be
against the more economic growth is going to be
it's important to note that
even though all politicians sincerely clinging to know what's best for us and
to have our best interests at heart
many of them thinking cells