As a result of Able's willingness, and ability, to make loans, Baker and Charlie now have nets that they didn't own before. With nets available to all, the island's collective fishing capacity has been raised from three fish per day to six. The economy has doubled in size, and the future looks brighter.
But this didn't happen just because the three guys were unsatisfied with their limited lifestyle. Their hunger, which is labeled "demand" in economic terms, was necessary to spur economic growth but not sufficient to achieve it.
Demand for more is natural to all humans. No matter what we have, we always want more. Maybe not more stuff, but certainly more time, more fun, and more choices, all of which requires more capital. Able, Baker, and Charlie likely had the same fish gripes for years. The difference is that they were finally able to expand productivity to meet those demands.
With their extra fish, the islanders can finally eat more than one first per day. But the economy didn't grow because they consumed more. <strong>They consumed more because the economy grew.</strong> This is a simple concept, but it's amazing what modern economists can do with a simple concept.
Most economists think that demand can be increased by giving people more money to spend. But that doesn't change real demand, just how much people can spend on items that have been produced. Only by increasing supply can people actually get more of what they demand.
— Peter Schiff; How an Economy Grows and Why It Crashes
