What is the mechanism by which consumerism causes economic growth?

If lots of money is spent buying valentines cards and golf clubs, that is measured as growth in GDP. Furthermore, this spending will likely be invested in writing cuter cards and designing more powerful golf clubs.





However, I don't see any value in this. Ie. on a desert island with two people, if you provide shelter and water and I catch fish ... and then i shift to making greeting cards and you shift to making golf clubs ... we'll starve.





Today, buying a computer may a) help a person work more efficiently; b) help fund research into IT -- which, 5 years from now may result in more productive supply chains ... buying a delivery van lets you a) deliver stuff; b) support designers of safer, more efficient vehicles.





I read that 70% of the U.S. economy is comprised of consumer goods. If half of those are more like valentines cards and golf clubs than like computers and vans ... how the heck does the economy grow?

What is the mechanism by which consumerism causes economic growth?
Consumer goods like greeting cards are only purchased when the economy is relatively well-off. On the desert island, you'd be too busy tryng to catch fish to think of greeting cards. More conumerism is a sign of an economy that has more resources tahn required for pure survival.





The basic thing is that money is spent. And while the profits of the greeting card company might be ploughed back into making niftier greeting cards (nicer mucis, more light, bells and whistles) you muct nor forget that the company is employing people, from designers to printers, cleaners... These people have to buy essential products (on top of consumer goods). Hence by spending on a greeting card, you allow the cleaner at the greeting card company to buy his/her bread. The baker might put soem of his money into his kids' education fund, then use the rest to pay the flour mill, and buy some pasta for himself... ...





The above si called the multiplier effect. Any dollar spent goes round the economy a few times. So spending on greeting cards isn;t that bad. Plus it generally makes the recipeint happy, that counts for something too , no?
Reply:Supply and Demand
Reply:It is all an illusion, a trick of smoke and mirrors. What really is economic growth? The reporting of a contrived metric used for political purposes. Always consider the source and follow the money. This country used to make more durable goods, we had more manufacturing jobs. Enter outsourcing, the buying of cheap labor and the selling of American jobs overseas. Exit manufacturing jobs, Enter service industry jobs. I can't swing a dead cat in my neighboorhood without hitting a hotel or restaurant. The economy is growing and so is pinochio's nose. I have always thought it utterly ridiculously obscene the amount of useless garbage that we created buy and sell in this country. We are all about quantity, and profit, quality and purpose a second thought at best.
Reply:it grows coz of the people, they wont stop buying valentine cards n golf clubs........ so the money goes n gets invested into more cards n etc....... plus they pay taxes n other stuff n thus the economy grows coz more n more people r buying these cards n golf clubs...........
Reply:The faster a dollar can circulate, the more items or services can be made or developed. That is why saving is bad. It takes dollars out of circulation and slows down the economy. By taking money (taxes) from the working people the government makes it harder for people to save money. And therefore a higher % of their earnings are recirculated faster. So then more items can be bought and sold. It is called the 'rat race'.
Reply:You don't need to see any value in greeting cards or golf clubs, as long as someone else does.


How about legal services adding to the GDP numbers, like we really need a lot of growth in that.


But the point is that someone wants it, or they wouldn't be paying for it. So if someone makes the decision that they would rather spend thier hard earned income on greeting cards than computers, then to them greeting cards are more important. And the idea of economics is to provide what people want, not what you think they should want. What good would making more computers and delivery vans be if no one wanted to use them, they really wanted some golf clubs. So instead, they drive around in a van to get to the golf course, instead of a more economical car, and play with old *** golf clubs. The experience is less enjoyable and less economically efficient. By your trying to plan the economy you have only added to ineffienct allocation of resources (unused computers and people wasting gas driving around in vans when a civic would have been sufficient), and made people's lives less enjoyable (not enough greeting cards to go around, and everyone having to play golf with old crappy clubs).
Reply:People !.