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Money more important then productivity

Updated on October 4, 2012


In improving the standard of living the productivity is more important then money because productivity determines the output while money measures the value of the output. In essence money is a way to keep score for organization individuals. Look back at the castaway example. Suppose, the cast away landed on the Iceland with dollar one billion each in US currency or, if u prefer gold. The money does not create a single glass of water not one bit of food. It is only through specialization of labor automation, and technology that productivity can be improved and the wealth of the society can b increased.



Initially, the economy would probably use the barter system in which the cast away gathering water would trade water for food. As the economies grow in complexity, a currency may be used to set the values of goods and servicing becomes bartering can be cumbersome. Suppose a currency is in place, and it is based on the gold that brought with them. Now, the cast away find more gold on the ice land. So, each cast away now has twice much gold and want to buy more goods and services.


The immediate impact is to increase the price for items because the quantity of goods and services has not changed. There would be no increase in the goods and services available unless productivity is improved or productivity is held constant and the cast away work more hours. The key point is weather or not more gold is found, the cast away could do either of these activities, increase productivity or increase the number of hors worked. If the Iceland economy develops into a capitalistic economy, income for each individual would be determined by the value of the work they do, as well as the balance  between supply and demand., so , if medical care is jugged to be more valuable then education , and supply and demand are in balanced, then doctors would make more then teachers.


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