Drivers of Living Standards
Which of the following factors is NOT a primary driver of living standards?
As documented by a diverse array of economists, the primary driver of living standards is productivity, or the amount of goods and services that people produce in an hour of work. Another major driver of living standards is work hours, and economist Ana Maria Santacreu of the St. Louis Fed documents that countries can have "positive growth in their living standards driven mainly by an increase in the number of [work] hours per capita" even if productivity temporarily falls. In contrast, Ph.D. economist Mark Skousen explains that "consumer spending is the effect, not the cause, of a productive healthy economy." The notion that consumer spending causes prosperity is based on a misunderstanding of Keynesian economics, which posits that governments can stimulate the economy by borrowing money and giving it to people to spend. However, even economists who adhere to this theory admit the boost is temporary and comes at a long-term cost.