What sustains an Economy?

1. A FIRM is a legal medium that enables various contracts to interact, create value and share among the contract holders.
2. Shareholders initiate the interaction by investing their capital instead of saving, in expectation of a higher return than they would get on savings.
3. The firm then employs Employees. Their employment contracts states their skills, responsibilities and their share of the value created (their pay) which varies according to the scarcity of their skills and their bargaining power.
4. Suppliers gain a customer and are paid for their supplies according to their supply contracts.
5. Customers gain useful products and their purchasing contracts enable the Firm to remain in production and earn revenues.
6. The Government takes a little from each contract holder as tax, which pays for providing public goods such as clean air, education, etc.
7. But all the above is initiated and made possible primarily by ensuring that Shareholders are encouraged and comfortable to invest instead of saving so that we can all earn a living!