s diagram for the Case II economy for the year 1999 that economy was using twice as much of its capacity as the Case I economy in 1999 to add capacity, and again as a result it has grown a lot more in those 10 years. (Recording) The standard of living has raised now so much so that the standard of living in the Case II economy is now higher than the standard of living in the Case I economy. You could say big deal of course you drew it that way. That’s right I did draw that way to illustrate this elemental truth about economic growth. “A country that uses more capacity to add capacity has a higher standard of living over the long run.” (Hazlitt 43) Attention should be paid to that difference because the more capacity that is used the shorter that long run would be. Japan is a stunning, unavoidable, and modern example of that truth. The cause and effect relationship for economic growth is you consume less than possible today by accepting a standard of living below – collectively now, the population, the people, the economy - what it could be will result in economic growth. As a result of that economic growth your able to consume more than would have been possible if you had not consumed less. That is the essence of economic growth. In summation the fundamental determinant of economic growth is the portion of an economies productive capacity that is used to add more capacity. Amidst an increasing mound of research the next question that came my mind is, what determines that portion. “In a free economy that’s determined by the decisions of the individuals” to consume and save thus it is a joint product of the decision of the millions and millions of people who live in the economy, and there decisions of how much to consume and how much to save. (Rand 782) According to Hazilitt savings for the individual is a decision of economic growth.(180) Assuming here an income of 100,000 if the individual makin...
