CHAPTER 24 PRODUCTION AND GROWTH 533 puzzling. To explain why incomes are so much higher in some countries than in others, we must look at the many factors that determine a nation’s productivity. WHY PRODUCTIVITY IS SO IMPORTANT Let’s begin our study of productivity and economic growth by developing a sim-ple model based loosely on Daniel DeFoe’s famous novel Robinson Crusoe. Robin-son Crusoe, as you may recall, is a sailor stranded on a desert island. Because Crusoe lives alone, he catches his own fish, grows his own vegetables, and makes his own clothes. We can think of Crusoe’s activities—his production and con-sumption of fish, vegetables, and clothing—as being a simple economy. By exam-ining Crusoe’s economy, we can learn some lessons that also apply to more complex and realistic economies. What determines Crusoe’s standard of living? The answer is obvious. If Cru-soe is good at catching fish, growing vegetables, and making clothes, he lives well. If he is bad at doing these things, he lives poorly. Because Crusoe gets to consume
This is the end of the preview.
access the rest of the document.