ECONOMIC DEVELOPMENT AND THE BALANCE OF PAYMENTS *

CONOMIC development is a function of saving and investment. It is the degree of capital formation which determines the level of economic development in a progressive economy. In a Robinson Crusoe economy fishing is the only occupation and this is done through most primitive methods. Because the average productivity is very low, therefore, the ratio between work and leisure is at a very low margin. Now if within this choice of so many hours of work and so many hours of leisure it is possible to produce more than the need of consumption, and thus create a margin of saving in order to spend it on the improvements in the methods of fishing, then the introduction of this new element of capital in the shape of ‘boat’ and ‘net’ will result in a higher ratio between work and leisure and a better standard of living.