Impact of productivity improvement


There is a difference between “owning” and “consuming“. You can own 100 cell phone but you can use only one at a time. Same goes with most things in life.

Owning is proportional to the amount of money you have.

Consuming is proportional to the time you have.

Digital assets are easy to own but more difficult to consume. In the long run demand of will be limited by how much time we have – which anyway is limited.

Economic growth is directly proportional to demand. If demand cannot grow beyond a point, we will come to a stage when economy will not be able to grow.

If the overall demand does not grow and productivity keeps increasing – you will need less and less people to fulfill that demand.

So:

Finite Time -> Stagnant Consumption ->No growth in Demand

Increase in Productivity -> Less People required to product Goods and Services

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Comments
3 Responses to “Impact of productivity improvement”
  1. Relates more to economics but nice article, Sir! You are right that improvement in productivity (by industrialisation or by computerization/digitization) create recessions if DEMAND remains constant or weak.

    Developed nations will face it more as demand may remain weak there. Developing nations may not hit that hard.

    However, getting back to the point, one thing I feel that current digital age has created lot of ‘information overflow’. With the speed we get new information, we tend to forget this info quickly as well.

  2. Goutam Saha says:

    As long as Economic growth is strong function of “Owning” and weak of “Consuming”, We demand more and Own more than our limited Consumption. Hence production and overall demand are not going to diminish in our life time but yes gap between Owning and Consuming will grow widen. Do your simple refrigerator test, We cooked everyday but we eat yesterdays leftovers, today’s food for tomorrow. We demand more than we can chew, stuffed our fridge with things we want to eat but we can not eat. Although we are falling in our health index, economics is going to stay healthy.

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