Most economic commentators are likely to agree that in relation to the period prior to the Great Depression, the present world is many times more sophisticated in terms of advanced technological knowledge. It is then tempted to suggest that with the present advanced technology we are in a position to generate enough real wealth to prevent a severe economic slump.
On this way of thinking, ideas are not themselves scarce unlike material inputs. Consequently, new ideas for more efficient processes and new products can make continuous growth possible.
It follows then that because of the limited amounts of capital and labour, without the technological progress the opportunities for growth will eventually run out.
We suggest that one could have argued along similar lines about the period prior to the Great Depression i.e. prior to the 1929 when comparing it with the end of the nineteenth century. During the first 30 years of the twentieth century, important technological break-throughs occurred, and individuals’ wellbeing had risen significantly in the western world. Yet despite all the sophistication, the world still experienced the Great Depression. A severe economic slump took place in spite of technological progress.
We suggest that regardless of how many ideas people have what always limits the implementation of various new ideas is the availability of real savings.
Real savings the key for economic growth
While new ideas can result in a better use of scarce resources, they can however, do very little for real economic growth without the expanding pool of real savings.
In his “Man Economy and State” 2nd edition page 542 Rothbard says, that technology, while important, must always work through the investment of capital in order to generate economic growth. On this issue Rothbard quotes Mises who says,
…click on the above link to read the rest of the article…
