> Why did Henry Ford pay his workers enough to buy Ford vehicles?
Well, the theory was that if his workers could buy his cars he'd make more money.
But that is the same type of logic as selling items at marginal loss and trying to make a profit by moving huge volumes. The fact that it worked so well suggests there was something else going on that I don't know about.
> Why is paying higher wages while keeping the money in the community/country a "disadvantage" exactly? Aren't you looking only at consumption without considering production?
So obviously the absolute number doesn't matter - otherwise we could multiply all dollar figures by 10 at the end of each year and call ourselves wealthy! :D
The relative distribution is everything. The game is to split people up into the nearly-everyone camp who take resources and consume them, and the rare talent camp that can turn resources into more resources. I'll call our rare and talented individuals group 2.
Take a silly example, wood. Give most people wood, and most people can burn it for heat. The more productive individuals can build something out of it, like a house (which is a better long-term investment in terms of conserving heat). Maybe the most productive would turn it into an axe shaft and cut down a few trees, liberating more wood.
The aim of the game is to move as much of societies resources to group 2 as we can reasonably manage, because then we will have massive resource surpluses that we can all enjoy.
"Keeping [resources] in a community" is a fine if your community has a couple of people in group 2 that you can divert them to. Otherwise, you'll find that all your resources get consumed and mysteriously there is no surplus any more. If you give all your resources to productive foreigners, they can give you back the same amount, plus a little extra, and themselves be wealthy. Discovering this little dynamic is the heart of economics.
The downside is that true group 2-ers are rare, and usually busy enough that they aren't very visible. People forget about them and try to divert resources to the deserving but chronically unproductive instead. If it gets extreme, communism happens and everyone starves.
Well, the theory was that if his workers could buy his cars he'd make more money.
But that is the same type of logic as selling items at marginal loss and trying to make a profit by moving huge volumes. The fact that it worked so well suggests there was something else going on that I don't know about.
> Why is paying higher wages while keeping the money in the community/country a "disadvantage" exactly? Aren't you looking only at consumption without considering production?
So obviously the absolute number doesn't matter - otherwise we could multiply all dollar figures by 10 at the end of each year and call ourselves wealthy! :D
The relative distribution is everything. The game is to split people up into the nearly-everyone camp who take resources and consume them, and the rare talent camp that can turn resources into more resources. I'll call our rare and talented individuals group 2.
Take a silly example, wood. Give most people wood, and most people can burn it for heat. The more productive individuals can build something out of it, like a house (which is a better long-term investment in terms of conserving heat). Maybe the most productive would turn it into an axe shaft and cut down a few trees, liberating more wood.
The aim of the game is to move as much of societies resources to group 2 as we can reasonably manage, because then we will have massive resource surpluses that we can all enjoy.
"Keeping [resources] in a community" is a fine if your community has a couple of people in group 2 that you can divert them to. Otherwise, you'll find that all your resources get consumed and mysteriously there is no surplus any more. If you give all your resources to productive foreigners, they can give you back the same amount, plus a little extra, and themselves be wealthy. Discovering this little dynamic is the heart of economics.
The downside is that true group 2-ers are rare, and usually busy enough that they aren't very visible. People forget about them and try to divert resources to the deserving but chronically unproductive instead. If it gets extreme, communism happens and everyone starves.