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Comment by drwh0 | Hacker News Reader

If everyone woke up tomorrow and started working twice as hard, what would limit their output?

demand and supply, as always

it is trivial for some hypothetical foobar corp to spit out twice as many widgets as they do now. but why would they? without viable demand, they indeed show a loss for their effort-spurt. as you heard the CEO of ford say today, oversupply was a major problem for the automakers. working twice as hard will kill you if you don't have twice the demand

the better question is how currency growth can be employed to stimulate demand over a period of time. growth comes from healthy inflation (3-5%). inflation is always a monetary phenomenon. this is why you will often hear opponents of "secured" currencies (gold etc) tell you that you can't get growth in an economy in the mid term unless you have a fiat currency.

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What limits demand for cars is that people can't afford them, not that they don't want them. But since by my assumption everyone is working twice as hard, including the buyers, there should be demand to match the supply.

no, the demand does not manifest itself spontaneously. people just don't decide to wake up and work twice as hard, there has to be legit economic growth. there is a monetary role. its no coincidence that "healthy" economic growth conforms to healthy monetary growth. this directly addresses your point of people wanting cars but not being able to afford them. this demand could be trivially induced artificially by monetary means, but it would lead to unhealthy inflation

monetary cycles typically manifest over an eighteen month period. i.e. the increase or decrease in Fed policy would impact demand directly likely no less than a year. the only way to dramatically alter this...i.e. to actually get people to wake up and work twice as hard takes drastic currency action.

this is all undergrad economics

"What limits demand for cars is that people can't afford them, not that they don't want them."

Or that they already have them? In the U.S., isn't the ratio of eligible driving population to drivable autos approaching 1? So, twice as many cars would likely not find buyers and drive down prices a lot.

Sorry if I'm missing the bigger picture stuck on this specific detail.

Maybe try the idea that everyone works twice as hard, but instead of building twice as much stuff, everyone just builds the same products better.

(Of course, if you think about this carefully enough, the distinction between "more" stuff and "better" stuff falls apart.)

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