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Famed economist Henry Hazlitt wrote the economics classic, Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics. The book is quite popular and has sold well over one million copies. While the content is brilliant, what makes it distinctive is the simple clarity he uses to explain complex economic concepts.

I strive to follow in Hazlitt’s footsteps and explain economics without the complexity and jargon so often used by trained economists. One technique is to bring an economic concept to its most basic level so that it’s easily understood by all readers. While at 720Global, we produced an animated video, The Animated Virtuous Cycle, which allows a 10-year-old to understand the complex economic topic of productivity.

This article provides a few instances where I have taken Hazlitt’s approach to better explain economic concepts. Following those excerpts, I use Gilligan’s Island as a means of illustrating productivity and its importance for the health of an economy and the prosperity of its people.

As a refinement of my recent article, Productivity: What it is and Why it Matters, I hope this approach allows more readers to grasp the importance of productivity growth. Falling productivity growth helps to explain the link between many of the mounting economic and social troubles we face. Equally important, from an investor’s perspective, productivity growth is the driver of current and future cash flows for almost every investment.

If you want to skip to my simple primer on productivity, go to the section entitled “Gilligan’s Island.”

Greetings from Stiltsville

The following excerpt is from my article, Greetings From Stiltsville: Deficit Spending is not a Free Lunch. I created the fictitious island of Stiltsville to demonstrate why GDP is a poor measure of economic growth.

Imagine an island called Stiltsville, where a person’s value is based solely on their height. In order to increase their value, people living on the island used to wear platform shoes. A person wearing six-inch platform shoes would suddenly be more valuable than a person of similar height who wore normal footwear. Eventually, platform shoes were replaced by stilts, three-foot stilts were be replaced by six-foot stilts, and so on. People eventually rose to be the height of giraffes. On an island where height is valued above all else, people will try to game the situation to their advantage by increasing their height by any means available.