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Page 7 of 10 Why would he give up this consumption? For only one reason: the anticipation that he could, as a result of creating this tool, have a greater amount of consumption in the future. How? Well, with the stick, he can now have a greater quantity of berries to eat, or since it takes less time to gather the same quantity of berries, he will have more time available to him for resting in the sun. This is something that in the study of economics is known as the "allocation cycle". An allocation cycle involves the production of those goods and services which each of us wants in order to satisfy our desires. Because of the fact that we all want more and better goods and services, tools must be created in order to provide for this increased and improved production. Once we have the tool, the good or service is then produced with it. After production, the good or service is then distributed in the market through a series of exchanges, until it is obtained by the ultimate consumer. This process, the allocation cycle, is represented thus: Investment ---> Production ---> Distribution ---> Consumption | | ^<-----------------------------<--------------------------<v From this we can readily see that if we want to increase our standard of living by increasing the quantities of goods and services that are available to us, we must not tamper with the allocation cycle, but must seek to encourage it.
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