How We Live Since the birth of the our country, there have been many influences on its development. The economy has been one of the most important. The economy now is even more important than ever. However, there are few that really understand how the economy works and how a person can increase his or her material welfare.
The production of goods and services is the base of man's material welfare. The amount and quality of products controls how well man can live. There is a simple formula for man's material welfare. It reads as follows: "Man's material welfare equals his natural resources plus his muscular and mental human energy multiplied by the efficiency of his tools." The only one man has the power to increase is tools. The others, natural resources; muscular and mental energy are controlled by nature.
Man can use this formula to better his life.
He may use this formula to counteract temperature; either cold or heat. Man must use this formula to get food and shelter. Man can over come the dangers and displeasures by changing the form, condition, and place of natural resources. For example, if a man wants to live in a hot climate, he has to move himself and his resources to his desired place. The things that man makes, through changing the form, condition, and place of natural resources, are called goods and services.
The things that man uses to change the form, condition, and place of natural resources are tools. Man can exchange his labor for food, shelter, or for tools. Some tools are factory machines, buildings, land, tractors, barns, cars, trucks, trains, planes, and many other things. Tools are anything used by man to improve his material welfare.
If a group of people own tools for production and profits from its production, the group of people can be properly called a "corporation." The tools are furnished by people who want to make some or more profit. This is called investing. A person can invest in a business by buying corporation stocks and bonds of the business. If a person does this, the business has more resources to expand in their goods and services; therefor increasing its profit. The more a business increases in its profits, the more the stocks of the business are worth. If a business does not make profits, or goes into too much debt, the stocks will decrease in their value.
When a business starts falling down the mountain of value, it will start to lower or even stop its expenditures. It may lower its expenditures by cutting off its employees or by closing its doors. This is the cause of unemployment. There are two causes of unemployment. One, customers may be unwilling to purchase the business's products or services because they are not wanted. Or, the business's products may be too expensive and customers don't have enough resources to purchase the products. By producing products and services or by lowering prices so that customers are able to purchases the products, a business can end unemployment.
Many people are mistaken on the fact that managers are the employers. This mistake hides the fact that it is the customer who creates employment through his or her purchases. All workers are dependent on the customer to pay the cost of business through purchases. If a customer cannot or will not buy, there is no employment. Customers are the key to jobs.
Customers naturally want to know as much as possible about the goods for which they spend their own hard earn money. They also don't want to buy a product from a producer that they don't like because they know what producer produces; for example: a pen, the best. This is why it became customary for a business to carry it own name or trademark. The trademark also enables producers to advertise the reasons customers should buy their products. Through the trademark, businesses are able to increase the number of customers they have.
This book takes complicated subjects such as how "work" becomes "employment", the cause of unemployment, and others and explains them in an understandable way. How We Live has clarified many things that I was confused on, and it has taught me much more than the previous book.