Perhaps it could or perhaps it couldn't since the revenues for enforcing such a law are techincally a type of consumption anyways.
Also, how does savings grow an economy? For instance, imagine that output is one homogenous sum of things. A part of this thing is then saved. Later it is reapplied to the sum to form the old total. But this is contrary to the idea that savings grows an economy.
So what is it about savings that specifies it as something that can increase productivity?
I guess all these questions come down to, why is there no possible scenario where the gov. could profitably enforce a law to keep people from spending and then use these savings to profitably invest and thereby create more output? Perhaps there is something about the people doing the savings (public vs private) that causes different effects? Perhaps the things being saved are different? Perhaps gov. by nature doesn't save, or perhaps the way in which private persons use savings is different from how the gov. does?
what allows an economy to manufacture more stuff in period 2 than in period 1?"
If it has more or better tools in the second period.
why is this increase in productivity related to savings?
how else can you afford those tools?
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It's easy to refute an argument if you first misrepresent it. William Keizer
fakename:Perhaps it could or perhaps it couldn't since the revenues for enforcing such a law are techincally a type of consumption anyways.
No, it really couldn't.
Well sure. You can disprove anything when you premise it in a fictitious framework. I mean, what you just said is basically comparable to:
"How does an engine make a car move? For instance, imagine that a car is one homogenous sum of things. Gasoline is then put into a part of this thing and set on fire. Later, the whole car moves instead of catching on fire. But this is contrary to the idea that fire spreads and burns things."
To answer your question, I highly recommend:
preview:
The ultimate answer to your question is the basis of the real fallacy of socialism. Hayek called it "The Pretence of Knowledge" in his Nobel lecture, and spoke of it in a book titled The Fatal Conceit. Sowell spoke of it in his book, and explained it here in this interview. It is the notion that a small group of people could possible hold even a fraction of the consequential knowledge necessary to dictate an economy.
I definitely recommend Schiff's book linked above. I think you'll get a LOT out of it.
Yes. It can. Imagine a town with 5 people who can't leave its jurisdiction. The mayor forces them to buy more capital goods through regulation. Tada!
I might offer a more Misesian take...
The government cannot successfully increase capital per worker via mandate. The reason is that government cannot succeed in making the necessary calculations to pull this off.
What I mean is that the government may increase a certain kind of capital per worker via mandate, say, by requiring a particular percentage of corporate profits to go toward R&D, or machinery updates, or etc...
But the government cannot by mandate increase the total amount of *all kinds* of capital *simultaneously* via mandate. For that to occur, the government would have to be able to "mandate" the exact quantity of capital in existence at any given point of time. Even statists don't believe that government is a god in THAT sense of the word! ;)
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"[A]ll collectivist doctrines are harbingers of irreconcilable hatred and war to the death." -- LvM
Sure it could, that's missing the point though. The point is the market is a bottom up order, the government is a top down imposition. The market rules via marginal decisions, the government rules through categorical impositions. The problem is not what the government can or can't do, like any group of thieves it can do whatever it pleases. The problem is when they try to impose categorical standards from the top down on a system that works the complete opposite way, and the resulting distortions. So while the government may be able to find some way to increase 'capital' invested per head of labor, if people in the end don't really want to make that investment, you will have problems.
Yes it can, at least at you only look at the phyiscal aspect of capital. But would that really make sense? Imagine it would mandate using a part of the workers income to purchase machines. Would this machines really be needed to produece something people want? I doubt it.
Savings is like money in reserve, it is not increasing productivity currently, but it might help create future productivity when it is spent. Of course one might argue that just the mere knowledge of savings influences productivity... I mean if I owned a business, knowing that peole have money saved up would influence my decisions. Maybe I might produce more hoping consumption occurs.
But if the government was smart enough, it could force that savings to be spend immediately on consumption, thus forcing productivity (to replace supplies consumed by the induced demand). However, this depends on the govt policy being effective, which we know often isn't the case, but is sometimes.
But the cost of this is current consumption/productivity vs future consumption/productivity. It is hard to say which is better in the long run. But if an economy is in a slump, increasing current consumption and productivity will help end the slump, so to speak.
Thanks for the answers.
I think that they helped me clarify what I'm wondering about. I guess I'm asking "what allows an economy to manufacture more stuff in period 2 than in period 1?" and "why is this increase in productivity related to savings?" But when I see this I realize that the question is not strictly praxeological since it asks about physical production and not about subjective value.
I suppose that indeed, there can be less physical output than before if people so desire it.
So I guess I should look somewhere else for the answer to my question, unless of course anyone should happen to have the answer?
can the govt decide what tools to buy?
Long experience shows it takes someone who has skin in the game to make the right decision. I give you Solyndra.