In fact, if our capital depreciates over time, then the amount we consume actually falls. If we use all of our inputs to produce consumption goods then we can consume a lot, but the amount we consume doesn't go up over time. We spend 70-75% of our national product on these nowadays. People want medical services, lawyers, restaurants, hotels, aeroplanes, trains, cars, houses, and much much more. ![]() This economic planner basically arranges these economic inputs to produce two types of outputs: ![]() Third it has capital-in the past we've invested, producing stuff that did not service any of our demands directly, but made us better at serving them in the future, stuff like machinery, buildings, training, skills, and so on. Second it has labour-humans are even now the crucial input for making most things through their dexterity, endurance, strength, and most of all brainpower. First it has land-because economy activity has to take place somewhere, and some places can sustain more valuable economic activity, perhaps because there is oil buried there, the climate makes human habitation cheap or pleasant, or because it is near other areas of dense population. It faces itself with a number of inputs at its disposal. Imagine for a second that it can easily compel people to do what it wants, and that there are no information problems, it can see inside people's minds to understand their preferences exactly. Instead, a government plans the entire economy. Without money, the issue is much clearer. ![]() I think this confusion comes partly from half-digested media economics, partly from the fact that the individual claims sound very intuitive, and partly from the fact that money is clouding our judgement. One genre of claim I hear a lot on Twitter goes something like this: "more pounds spent in the economy means firms have more money so they invest more", or "more stuff consumed means more confidence for investors".
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