Reply To: Structure of Production


Lengthening the structure of production means adding stages so that it takes more time from the extraction of raw materials to the sale of consumer goods.

Murray Rothbard gave the example of whaling. The primitive production structure of building a canoe and making a spears and killing a whale has a certain number of stages and takes a certain amount of time. Through saving and investing, it can be supplanted with a longer production structure of mining iron, producing steel, building each component part of a whaling boat outfitted with harpoon launchers, building the production processes to produce complementary producer goods (like fuel), assembling the boat, manning the boat and then killing a whale.

The longer production structure is physically more productive. Therefore, even though a smaller portion of income is spend on consumption, standards of living rise through saving and investing.

The process of lengthening the production structure for the entire economy results in thoroughly reconstituting it. Just compare production processes of 1950 to those of 2000 or of 1850 to 1900.