Two days ago I wrote a blog about simple living and the way modern life and the Internet are going to make simple living a much easier choice for millions more people.
As an investor, this raises the question in my mind of the effect this will have on GDP.
The answer is far from obvious. Initially people will be buying fewer new goods and have more money to spend on other services. That change in consumption will not impact the GDP directly although large-scale corporate investment will be restrained. That will have an effect on GDP. A slight reduction.
The greatest effect will occur over time as fewer people see the need to earn significant amounts of money. Since earnings are a key component of GDP, we will see simple living reduce earnings and reduce the GDP growth.
On the positive side, more simple livers will mean more small businesses and far more productivity for the society. For the same reason we will see far more exports as the genius of simple living is translated into new products and innovative services.
I cannot predict the net outcome of these intermingling forces. It is my guess that a smaller workforce will provide the necessary revenue for a larger non-working population. In the hippie era one person working could support 20 others living communally.