HIConsider two island economies, A and B. Both islands are similar in terms of population, climate and natural resources, but they are not connected by any way. The only difference between them is Island A's population lives a life of frugality and simplicity. On the other hand, Island B is a consumer society. 1. I feel that in the long run Island B would have a larger economy and a higher GDP/capita than that of Island A. Is that correct? 2. What can be done to increase the domestic consumption of Island A?Thanks.

1. Bring the movies, TV shows, books, magazines of Island B to Island A to show them what they are missing.2. Instill a sense of competition on Island A.3. Create laws, tax policies, and investment policies that create positive future returns conditional on positive historical returns.4. Glorify wealth (implicit in actions 1, 2, and 3)or5. Let Island B invade Island A so that the underutilized resources of Island A are put to good use.NOTE: Actions 1 to 4 will lead to disaster unless one also changes Island A to improve productivity, efficiency, and innovation. Merely boosting demand (domestic consumption) won't help unless one also boosts supply. And boosting demand and supply will lead to resource depletion unless one also boosts productivity and efficiency.

In the formulation of your hypothetical exercise you omitted something very important that is only beginning to receive long overdue attention within the dismal science , namely, which island has the happier people?

QuoteOriginally posted by: DavidJNIn the formulation of your hypothetical exercise you omitted something very important that is only beginning to receive long overdue attention within the dismal science , namely, which island has the happier people?Indeed! In addition to measuring hedonic variables, one might also wonder which Island has the social and technological resources to survive events such as climate change, epidemic diseases, an asteroid strike, or an invasion from Island C?

Quote1. I feel that in the long run Island B would have a larger economy and a higher GDP/capita than that of Island A. Is that correct? What could be the rationale behind?

QuoteOriginally posted by: edouardQuote1. I feel that in the long run Island B would have a larger economy and a higher GDP/capita than that of Island A. Is that correct? What could be the rationale behind?This is what I think will happen, assuming the right socio-political conditions are in place: Higher demand for products and services should result in innovation, and productivity improvements. The more the society wants to consume, the more they would have work/innovate to satisfy the consumption. This higher economic activity should result in a higher GDP.

QuoteOriginally posted by: musicgold1QuoteOriginally posted by: edouardQuote1. I feel that in the long run Island B would have a larger economy and a higher GDP/capita than that of Island A. Is that correct? What could be the rationale behind?This is what I think will happen, assuming the right socio-political conditions are in place: Higher demand for products and services should result in innovation, and productivity improvements. The more the society wants to consume, the more they would have work/innovate to satisfy the consumption. This higher economic activity should result in a higher GDP.It is easy to counter argue. Maybe people from the B country pollute the air and are overweighted because of all that greasy food consumed. Even if the population size of country B remained stable, average productivity would lower and some people may be obliged to stop working (creating value) due to health problems. Less productivity and less total hour worked at the national level implies reduced wealth creation.Anyway, I'm not sure comparing that country A with B makes sense. I mean the societies described bear different values. Maybe apples worth millions in country B. Frugal is not penniless.

Show them what they don't have. For example, there may be people riding around on Ninja ZX12's. Explain how if they work an extra 15 minutes a day, they can have the Ducati 1199. The Ducati 1199 is frugal in its lines, and moral in its composition. By comparison, The bulky ZX12, with exhaust pipes sticking out at awkward angles, or even the MV Agusta F4 with its bulky back seat area, top-heavy tank cover, and rectangular exhaust pipes, or even the latest CBR with headlights larger than some "smart" cars, is an affront to God.