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How an Economy Grows and Why it Crashes by Andrew J. Schiff, Peter D. Schiff

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Chapter 5. PROSPERITY LOVES COMPANY

PROSPERITY LOVES COMPANY

The same economic rules that operate in a simple economic society also apply to a more complicated one....

Able's initial willingness to create capital through his own personal sacrifice benefited the other islanders. As a result of his prudent lending program, the islanders built many hand nets, and then capitalized on the increased productivity to fund much more efficient fishcatching machines. In addition to allowing a better diet, more flattering attire, and easier transport, the increased productivity gave rise to leisure time and a burgeoning surfing scene.

PROSPERITY LOVES COMPANY

Tales of this unprecedented luxury soon spread to other islands, where fishing was still done by hand and no one had time to surf. In search of a better life, immigrants soon arrived.

PROSPERITY LOVES COMPANY

The greater productivity of the island meant that it could support a greater population, which in turn led to greater economic diversity. Some new immigrants went to work servicing the mega fish catchers, while others borrowed the extra fish to clear the land for farming—at last a balanced diet! Others took out loans to go into other trades.

The diversified island economy soon gave rise to hut builders, canoe builders, ...

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