We Depend on Two "I"s

     Few people claim we don't have more today than our
ancestors had in 1900.  Some may argue that we are no better
off.  That is a value judgment that most people reject.  That we
have more, much more, is an observable fact beyond serious
dispute.

     We have more of all goods -- more cars, more carrots,
more housing, more entertainment, more everything.  We have
more per capita than most of our ancestors even dreamed
possible.

     Why do we have more?  The answer is so simple and
obvious that it is almost embarrassing to even ask the question. 
We have more because we produce more.  The first law of
consumption is, we can't consume that which wasn't produced.

     If we had the same jobs and produced in the same ways
people did in 1900, we would have the same things our
ancestors had in 1900.  The average person wouldn't be able to
consume more than did the average person in 1900.   Also, we
would have none of the new things invented and discovered
since 1900 -- no airplanes, no micro waves, no televisions, no
computers.

     The key to understanding our prosperity is to understand
why the average worker today produces more than the average
worker did in 1900.  We can immediately eliminate working
harder and longer.  Most work today is less strenuous than in
1900 and we work far fewer hours.

     We can also quickly and easily dismiss the claim that
somehow unions brought us prosperity.  Unions don't increase
productivity.  It should be obvious that strikes and union work
rules decrease productivity per worker.

     If the only change since 1900 was the rise of unions, the
average person today would have to settle for consuming less
than the average person did in 1900.  With lowered production,
lower consumption would be the only option.

     Unions might cause a redistribution of production.  One
worker's gain would be someone else's loss.   It is as impossible
for unions to increase average consumption as it is for a pie
cutter to cut the pie in a way that will give everyone a bigger
piece.

     Why then do we produce more today?  This answer is
also simple though under appreciated.  Two "I"s are the
foundation of our prosperity -- innovation and investment. 
Without new ways of producing and more and better machines
and tools, we would still produce and consume as our ancestors
did in 1900.  We would be no better off.

     Invention and innovation require imagination and the
opportunity to pursue a dream.  Stifling regulations that require
bureaucratic approval for every action kill creativity and
innovation.  We are well down the road to strangling the
innovators with red tape.

     If today's bureaucracy had been in place in 1900 we
would have a small fraction of what we have today.  Still, the
politicians and bureaucrats would demand thanks for what little
progress we made in spite of them.

     Without investment new ideas mean nothing.  It takes
investment to put ideas to work.  Inventing a great new way to
make tires means nothing without the resources to build facilities
to put the idea to work.

     Investment requires savings.  To build for future
production someone must work now without producing anything
for immediate consumption.  It doesn't matter who saves. 
Someone must save and invest in future production, if we are to
avoid returning to hand to mouth existence.

     A dollar saved and invested by a  poor person is just as
useful as a dollar saved and invested by a rich person.  On the
other hand, a dollar reduction in savings by a rich person is just
as detrimental as a dollar reduction in savings by a poor person.

     In either case the saver isn't the big loser.  Everyone
loses when net savings decrease.  Everyone wins when net
savings increase.  The pool of savings is what fuels our
prosperity.

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Copyright 2012
Albert D. McCallum
18440 29-1/2 Mile Road
Springport, Michigan 49284