Sunday, June 8, 2014

Supply Side Economics

Rummaging around the web for the Solow Growth Model, I came upon this PDF. I dropped everything when I found the following paragraph, which deserves the title I gave it above.
Imagine very hard working people, but very hungry, planting a corn crop, and harvesting the corn. Instead of eating a lot they plant 80% of the kernels. The result is an enormous crop the next season. They again eat very little, invest 80% of the output toward production, and so on. The total level of output per capital sky-rockets, but is welfare truly higher? If we measure welfare by consumption clearly it is not.

// related post: Supply-Side Economics

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