- 27 Nov 2023 05:59
#15296758
These are a few thoughts I've been having, and decided to put out there.
It has commonly been said that adding more people to an economy will add more jobs, because there are more people, a larger number of people needing goods and services. Well, that's basically true, except that these jobs will be lower paying jobs. That's not surprising, because you can add more people but where is the additional money going to come from?
What I have discovered in life is that it takes a lot of extra money to "lubricate" things. Let's face it, trying to carry on economic activity is not 100% efficient. People need to be compensated for their time, effort, and risk, or they might decide trying to engage in an economic pursuit is just not worth it. Even if something theoretically makes economic sense (both Party A and Party B will accrue a net benefit), those people are just not going to do it if the gains are barely worth it. So in a society composed of poverty, people often just decide it's easier to do something themselves. Engaging in economic exchange takes extra work and resources and that's a luxury they do not have. If I'm trying to run a business and my customers can't afford to pay high prices to pad the profit margins, all the time (and fixed costs) of running a business (or offering things for sale) just don't make sense, not unless there is a huge economy of scale. When a society starts becoming poorer, all of a sudden there is not that extra money to keep transactions lubricated. Normally we don't tend to think of specialization of labor as bearing a cost, but this cost becomes more manifest when people are living on slimmer margins. To summarize what I'm saying, more people will not just automatically mean more jobs in proportion to the number of people. As profits and wages go down, a sizeable portion of the economic exchange that existed before will cease. It's not some simple theoretical economic relationship where you can pack as many people as you want and all the economic activity will continue to go on just with different amounts of money.
In older times, they might have described this as "grease the wheels of industry". It takes a certain amount of added wealth and money to make transactions happen.
It has commonly been said that adding more people to an economy will add more jobs, because there are more people, a larger number of people needing goods and services. Well, that's basically true, except that these jobs will be lower paying jobs. That's not surprising, because you can add more people but where is the additional money going to come from?
What I have discovered in life is that it takes a lot of extra money to "lubricate" things. Let's face it, trying to carry on economic activity is not 100% efficient. People need to be compensated for their time, effort, and risk, or they might decide trying to engage in an economic pursuit is just not worth it. Even if something theoretically makes economic sense (both Party A and Party B will accrue a net benefit), those people are just not going to do it if the gains are barely worth it. So in a society composed of poverty, people often just decide it's easier to do something themselves. Engaging in economic exchange takes extra work and resources and that's a luxury they do not have. If I'm trying to run a business and my customers can't afford to pay high prices to pad the profit margins, all the time (and fixed costs) of running a business (or offering things for sale) just don't make sense, not unless there is a huge economy of scale. When a society starts becoming poorer, all of a sudden there is not that extra money to keep transactions lubricated. Normally we don't tend to think of specialization of labor as bearing a cost, but this cost becomes more manifest when people are living on slimmer margins. To summarize what I'm saying, more people will not just automatically mean more jobs in proportion to the number of people. As profits and wages go down, a sizeable portion of the economic exchange that existed before will cease. It's not some simple theoretical economic relationship where you can pack as many people as you want and all the economic activity will continue to go on just with different amounts of money.
In older times, they might have described this as "grease the wheels of industry". It takes a certain amount of added wealth and money to make transactions happen.