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Only available in English.
Here are some thoughts and replies from the comments section of this post by Willis Eschenbach:
MY INITIAL COMMENT:
I have two philosophical points to make that do not necessarily affect your main argument, but still may be of interest:
1) There is a fourth way of creating wealth: trade / exchange. Say,
you have a pack of chocolate but you hate chocolate, while you
absolutely love gummy bears. You meet somebody with the inverse set of
likes and dislikes. So, you exchange your sweets, and each one has
created wealth, where it had not been available to him before.
This leads me to the definition of wealth: The essence of wealth is
the ability to satisfy a desire (at one’s discretion). The successful
fulfilment of a desire may be classified as a gain, a benefit or an
advantage vis-à-vis a state of affairs, when no such fulfilment has been
accomplished.
By extension then “creating wealth” refers to an act that provides
one with “a gain, a benefit, an advantage” ( i. e. results of the
fulfilment at one’s discretion of a desire/desires).
2) On these grounds, I would challenge your thesis:
“Everything [except the above three ways of creating wealth] else is
services—bankers, barbers, bookkeepers, surgeons, stylists, singers.
They are important, some are life-and-death important … but they don’t
create any wealth.”
Services like cutting somebody’s hair do create wealth. For instance,
assuming a “normal” human being, if I [or a doctor] manage[s] to heal
my broken little finger, I have been provided “with a gain, a benefit,
or an advantage” that I have strongly desired and whose immediate
provision at my urgent discretion represents a capacity that we call
wealthiness. I suspect, most wealth creating services may be classified
with other forms of manufacturing.
THE REPLY
Georg Thomas says:
I have two philosophical points to make that do not necessarily affect your main argument, but still may be of interest:
1) There is a fourth way of creating wealth: trade / exchange. Say, you have a pack of chocolate but you hate chocolate, while you absolutely love gummy bears. You meet somebody with the inverse set of likes and dislikes. So, you exchange your sweets, and each one has created wealth, where it had not been available to him before.
Clearly you are not an accountant. Since I am one, I can assure you
that trading assets does NOT create wealth. If I give you $100 worth of
coffee and you give me $100 worth of tea, there is no wealth created.
Ask your accountant, or the IRS, if you don’t believe me.
You also say:
Services like cutting somebody’s hair do create wealth. For instance, assuming a “normal” human being, if I [or a doctor] manage[s] to heal my broken little finger, I have been provided “with a gain, a benefit, or an advantage” that I have strongly desired and whose immediate provision at my urgent discretion represents a capacity that we call wealthiness. I suspect, most wealth creating services may be classified with other forms of manufacturing.
I’m sorry, but that is not true. To understand this, suppose there
are two couples on a tropical island. One person fishes, one has a
garden, one gathers food and building materials from the forest, one
makes clothes from local fiber. They could go on for a long time that
way, they are creating real wealth. They will live in comfortable
houses, and eat and dress well.
But suppose on the next tropical island there are two couples, and
one person is a barber, one is a doctor, one is a journalist, and one is
a musician, noble occupations all but services all …
that society will have nothing to eat, nothing to wear, nothing to keep
them from the rain. They will starve to death naked outdoors. None of
those occupations create wealth, while all of the activities on the
first island all do create wealth.
Best regards,
w.
MY REPLY
Thank you for your answer.
I am puzzled.
First you argue wealth is what your accountant or the IRS tells you
what it is. Then, you arbitrarily and needlessly impoverish the term
“wealth” by equating it with “indispensable requirements for basic
survival”. Even your accountant has a broader notion of wealth than you
do.
What do you not like about my wider definition of wealth?
Different people have different notions, different classifications of
wealth. While the accounting classification may or may not overlap with
other classifications (such as mine), it does not invalidate the logic
of my reasoning: chocolate does not represent a (wealth-establishing)
benefit to me, but gummy bears do (see above). So being able to trade
makes the difference between enhancing my wealth and not-enhancing my
wealth.
THE REPLY TO MY REPLY:
I said that both the IRS and an accountant will tell you that trading an asset for another asset doesn’t create wealth.
Best regards,
w.
MY REPLY:
You write: “Georg, I didn’t say that “wealth is what your accountant or the IRS tells you what it is”. I said nothing of the sort.” You are right. I apologise for misrepresenting your statement.
REPLY TO MY REPLY:
Georg, you are a gentleman indeed. My thanks.
w.
THE REPLY TO MY REPLY:
Thank you for your answer.
I am puzzled.
First you argue wealth is what your accountant or the IRS tells you what it is. Then, you arbitrarily and needlessly impoverish the term “wealth” by equating it with “indispensable requirements for basic survival”. Even your accountant has a broader notion of wealth than you do.Georg, I didn’t say that “wealth is what your accountant or the IRS tells you what it is”. I said nothing of the sort.
I said that both the IRS and an accountant will tell you that trading an asset for another asset doesn’t create wealth.
Best regards,
w.
MY REPLY:
You write: “Georg, I didn’t say that “wealth is what your accountant or the IRS tells you what it is”. I said nothing of the sort.” You are right. I apologise for misrepresenting your statement.
REPLY TO MY REPLY:
Georg, you are a gentleman indeed. My thanks.
w.
MORE THOUGHTS OF MINE EXPRESSED IN THAT TREAD:
By way of supplement:
(1) By equating subsistence level production with wealth — and limiting the term "wealth" to that meaning — we would not be able to recognise a difference between US-citizens (who survive) and citizens of Sudan (those, who survive) — they're both wealthy by virtue of being able to survive. It is not trivial to claim that the wealth difference is in actual fact gigantic, and matters tremendously from the point of view of humanism.
(2) Erik Reinert explains in his excellent book how less developed countries can get trapped as eternal low-value-added producers in a comparative advantage world of free trade, requiring protectionist measures to develop and shore up high-value-added domestic industry. I tend to agree with this position. The matter is different with highly developed countries.
However, if we are committed to free trade, we have got to be honest about it. The US-administration is right to call us — hypocritical Europeans — on being the more egregious protectionists.
MORE THOUGHTS OF MINE:
By way of supplement: whether we grow wealth, extract it, manufacture it or realise it by trade/exchange or theft, every form of wealth depends on preconditions antecedent to growth, extraction, manufacture, trade/exchange or theft. Growing wealth, for instance, presupposes a host of physical, biological etc. preconditions. So, the fact that most wealth realised by exchange or theft has further necessary prior conditions (such as the earlier production of the wealth to be realised by exchange or theft) is not unique to trade as a wealth creator. In fact, in a society with a high degree of division of labour growth, extraction or manufacturing will not suffice to ensure the realisation of wealth. Trade will have to do the trick.
To put it differently: capitalism runs on sales.
REPLY BY WILLIS:
First, when I was a kid, our foreign trade was about zero … and the country was flourishing. So the idea that we must have trade doesn’t pass the historical test.
Second, I have no problem with foreign trade … as long as we sell manufactured goods and import raw materials. Doing it the other way around, as we are doing with China, is hugely damaging to our economy by moving our manufacturing, the main way to create wealth, offshore …
That’s just foolish.
w.
MY REPLY TO WILLIS' REPLY:
You may produce as much goods and services that potentially represent wealth, if you do not act to realise that wealth, there will be no wealth available. In modern societies like the USA, wealth is mostly realised via exchange. Not even (most of) the few who produce our food and clothes (and other basic needs) are autonomous producers, having instead to realise whatever wealth will be available to them eventually via trade/exchange. The quality of our basic and non-basic goods and services would be considerably lower and we could sustain only a fraction of today's populations, if we abandoned trading with one another and regressed to forming communities of autarkic households. Trade is an indispensable condition of wealth in our society. This holds true irrespective of how one assesses the US' current account, the US' terms of trade with other countries or which kind of foreign trade policy one favours.
(1) By equating subsistence level production with wealth — and limiting the term "wealth" to that meaning — we would not be able to recognise a difference between US-citizens (who survive) and citizens of Sudan (those, who survive) — they're both wealthy by virtue of being able to survive. It is not trivial to claim that the wealth difference is in actual fact gigantic, and matters tremendously from the point of view of humanism.
(2) Erik Reinert explains in his excellent book how less developed countries can get trapped as eternal low-value-added producers in a comparative advantage world of free trade, requiring protectionist measures to develop and shore up high-value-added domestic industry. I tend to agree with this position. The matter is different with highly developed countries.
However, if we are committed to free trade, we have got to be honest about it. The US-administration is right to call us — hypocritical Europeans — on being the more egregious protectionists.
MORE THOUGHTS OF MINE:
By way of supplement: whether we grow wealth, extract it, manufacture it or realise it by trade/exchange or theft, every form of wealth depends on preconditions antecedent to growth, extraction, manufacture, trade/exchange or theft. Growing wealth, for instance, presupposes a host of physical, biological etc. preconditions. So, the fact that most wealth realised by exchange or theft has further necessary prior conditions (such as the earlier production of the wealth to be realised by exchange or theft) is not unique to trade as a wealth creator. In fact, in a society with a high degree of division of labour growth, extraction or manufacturing will not suffice to ensure the realisation of wealth. Trade will have to do the trick.
To put it differently: capitalism runs on sales.
REPLY BY WILLIS:
In fact, in a society with a high degree of division of labour growth, extraction or manufacturing will not suffice to ensure the realisation of wealth. Trade will have to do the trick.Two points:
First, when I was a kid, our foreign trade was about zero … and the country was flourishing. So the idea that we must have trade doesn’t pass the historical test.
Second, I have no problem with foreign trade … as long as we sell manufactured goods and import raw materials. Doing it the other way around, as we are doing with China, is hugely damaging to our economy by moving our manufacturing, the main way to create wealth, offshore …
That’s just foolish.
w.
MY REPLY TO WILLIS' REPLY:
You may produce as much goods and services that potentially represent wealth, if you do not act to realise that wealth, there will be no wealth available. In modern societies like the USA, wealth is mostly realised via exchange. Not even (most of) the few who produce our food and clothes (and other basic needs) are autonomous producers, having instead to realise whatever wealth will be available to them eventually via trade/exchange. The quality of our basic and non-basic goods and services would be considerably lower and we could sustain only a fraction of today's populations, if we abandoned trading with one another and regressed to forming communities of autarkic households. Trade is an indispensable condition of wealth in our society. This holds true irrespective of how one assesses the US' current account, the US' terms of trade with other countries or which kind of foreign trade policy one favours.
FURTHER THOUGHTS OF MINE:
My definition of wealth, (see above):
“The essence of wealth is the ability to satisfy a desire (at one’s
discretion). The successful fulfilment of a desire may be classified as a
gain, a benefit or an advantage vis-à-vis a state of affairs, when no
such fulfilment has been accomplished.
By extension then “creating wealth” refers to an act that provides
one with “a gain, a benefit, an advantage” ( i. e. results of the
fulfilment at one’s discretion of a desire/desires).”
If my definition of wealth is acceptable, then you are factually
wrong in claiming that only products derived from activities ensuring
basic survival may count as wealth. (Also, you are needlessly burdened
with the obligation to list – if called upon to do so – what
activities/products count as being able to ensure basic survival ( =
wealth)).
Further, there is no practicable or indeed sensible way to
disentangle wealth-as-subsistence from wealth-in-non-subsistence-form in
a modern economy with a very intricate and deep division of labour and
roundabout ways of production (even on the subsistence level).
Wealth in modern society is precisely characterised by the fact that
very few people engage in ensuring subsistence, with the majority
involved in non-subsistence activities whose provision is key to their
being able to survive at the level of basic needs. Also, these
non-subsistence activities keep improving, even revolutionising the way
in which we ensure basic survival (engineers don’t grow potatoes but
they greatly improve the products quality and level of output).
We fare better acknowledging wealth creation in all its forms and
ramifications, instead of privileging some activities as being capable
of producing wealth while leaving others out of the picture.
STILL FURTHER THOUGHTS OF MINE:
The most important and most fundamental reason why I prefer a fairly
broad definition of wealth has to do with the anthropology that I
espouse.
My core hypothesis is: man differs from other animals in that he
adapts to his environment, survives and thrives by constantly
inventing/discovering new desires/needs and constantly trying to fulfil
these desires. He never ceases to invent or discover, he never stops
attempting to attain a newly conceived benefit (a new element within the
arsenal that we call “wealth”). Constitutively, man is a wealth
creator— a universal wealth creator, he applies this natural reflex to
all aspects of life, not just the part required to ensure basic
survival.
That is also why I believe economic growth is a natural extension of
the human condition. Man lives and prevails in his environment by
permanently going for new solutions, new benefits, new needs. To deny
man his universal drive to create wealth — subject to reasonable moral
provisos — is to curtail his humanity. Sir Karl Popper puts is well in
his phrase: “all life is problem-solving”. And all this problem-solving
is driven by the conception of new needs while being directed toward
fulfilment of new human desires.
This shows even in trivial events, such as when you have just toppled
your tea-pot. Looking carefully at the way you try to improve the
situation, you will find that you are developing desires you have never
been pursuing before (you try a new place to keep the pot safely or you
do something about the working surface in your kitchen or you discover
an uneven part at the bottom of the pot and try to repair it etc.) We
are constantly working toward gains, benefits, advantages — and that is
how we accumulate and maintain wealth.
FURTHER THOUGHTS OF MINE:
(1) You write: “To understand this, suppose there are two couples on a tropical island. One person fishes, one has a garden, one gathers food and building materials from the forest, one makes clothes from local fiber. They could go on for a long time that way, they are creating real wealth.
But suppose on the next tropical island there are two couples, and one person is a barber, one is a surgeon, one is a librarian, and one is a musician—noble occupations all but services all … that society will have nothing to eat, nothing to wear, nothing to keep them from the rain. Those occupations don’t create wealth, while the activities on the first island all do.”
Link them via trade and the problem is solved. And all are wealthier.
(2) Once again: You may produce as much goods and services that potentially represent wealth as you like, if you do not act to realise that wealth, there will be no wealth available. In modern societies like the USA, wealth is mostly realised via exchange. Not even (most of) the few who produce our food and clothes (and other basic needs) are autonomous producers, having instead to realise whatever wealth will be available to them eventually via trade/exchange. The quality of our basic and non-basic goods and services would be considerably lower and we could sustain only a fraction of today’s populations, if we abandoned trading with one another and regressed to forming communities of autarkic households. Trade is an indispensable condition of wealth in our society. This holds true irrespective of how one assesses the US’ current account, the US’ terms of trade with other countries or which kind of foreign trade policy one favours.
(3) I don’t think you are right in reducing “real wealth” to activities and goods that ensure basic survival (see my explanations in earlier comments). If wealth of the basic-need-fulfilling-type can be shown to have the same features as wealth of the more-than-just-basic-needs-fulfilling-type, it is factually wrong to equate wealth = subsistence, as you do. Wealth is our ability to fulfil human desires at our discretion. And it is patently wrong to claim that human desires are confined to basic needs and that wealth creation (= the ability to fulfill human desires at our discretion) is confined to fulfilling basic needs.
As I have written above, human beings differ from other animals in that they are wealth-creating machines, they survive, adapt to their environment and thrive by creating and enhancing wealth constantly, far beyond basic needs. This fundamental human trait does not suddenly evaporate when basic needs have been fulfilled. Restricting (the ability to create) wealth to (the ability to fulfill) basic needs is to truncate human nature, denying its true richness.
Wealth in modern society is precisely characterised by the fact that very few people engage in ensuring subsistence, with the majority involved in non-subsistence activities whose provision is key to their being able to survive at the level of basic needs. Also, these non-subsistence activities keep improving, even revolutionising the way in which we ensure basic survival.
REPLY:
Next, YMMV, at the start of your story, we have two healthy people and one fish.
At the end of the story, we have two healthy people and one fish.
Explain to me again about all the wealth that the surgeon has created …
w.
MY REPLY:
You write: “YMMV, at the start of your story, we have two healthy people and one fish [sic].
At the end of the story, we have two healthy people and one fish [sic].
[YMMV did not say there was “one fish” involved but “some fish”]
Explain to me again about all the wealth that the surgeon has created …”
Well, the fisherman got sick and required a cure to get better. Remember: I define wealth as “the fulfillment of a human desire at one’s discretion”. The human desire was to get well. And the surgeon fulfilled that desire enriching his client or adding to his client’s wealth, as opposed to lacking that instance of wealth, and remaining ill.
A REPLY TO MY REPLY:
In the context of economics, or pretty much any context for that matter, that definition makes no sense at all. My last job was the Chief Financial Officer for a company with $40 million dollars in sales per year … if you try to run that definition of “wealth” past your accountant he’ll just laugh.
w.
MY REPLY:
You write: “If I desire to punch someone in the nose, and I fulfill that desire at my discretion, I’m creating wealth?”
Of course, I am. Bouncers or policemen create wealth that way. It is another matter, if I can get this sort of wealth-seeking socially recognised. Wealth creation is subject to numerous (social etc.) provisos — which is true with respect to any wealth-creating activities including those relating to basic needs —, but this does not invalidate my broad definition as such. Or can you show me that it does?
You write: “… if you try to run that definition of “wealth” past your accountant he’ll just laugh.”
Well, if you try to convince your accountant — or the IRS, for that matter — that wealth creating activities are restricted to the provision of basic needs … let’s see what reaction you get.
REPLY TO MY REPLY:
Georg, I didn’t ask about bouncers or policemen. If I desire to punch you in the nose, and I fulfill that desire at my discretion, have I created wealth? Because that is what you are claiming …
In addition, you seem to be confusing making money with creating wealth … they are far from the same. I can make money cutting hair, but that does not create wealth.
w.
MY REPLY:
You write: ” … you seem to be confusing making money with creating wealth … they are far from the same. I can make money cutting hair, but that does not create wealth.”
(1) From my definition of wealth, which you quote, it is indubitable that I do not confuse (equate) creating wealth with making money — my definition is capable of covering both wealth that is accounted for in monetary terms as well as wealth not so documented.
Of wealth, we may speak, in my classification, when we have been able to attain a gain, a benefit, an advantage, having reached a higher level of satisfaction compared to a situation when the desired gain, benefit or advantage is absent/unachieved.
So if the service of a barber fulfills that condition, lifting you to a comparatively higher level of satisfaction, he is capable of providing you with wealth.
(2) When a bouncer legitimately punches someone’s nose he creates wealth in at least two ways: he achieves a benefit to himself in being able to do the job he is being paid for (here violently but legally fending off an intruder or attacker). And he creates wealth for the person who provides him with income, in that the bouncer ensures the protection from intruders or attackers that his employer seeks.
Incidentally, the bouncer’s wealth creation by punching noses can be in fulfillment of a basic need (not to get killed) — which provides us with one more example of why confining wealth to basic needs (which bouncing may not appear to be) involves a needlessly and absurdly truncated definition of wealth. Handling basic needs may be significantly improved by activities that may not be classified as serving basic needs ( — is curiosity relating to aerodynamics a basic need?). Another case: your wealth creating islanders may get into a situation where the only basic, survival ensuring need is to be treated by a supposedly non-wealth-creating medical professional, the surgeon.
Human needs are an intricate and highly dynamic realm with complex interconnections. People constantly find out about what they need or don’t and in what hierarchy these things are to be fitted. Attempts at wealth creation, understood as the search for new and higher levels of satisfaction, are the epitome of human resourcefulness.
To come up with a finite list of wealth-creating (excluding all non-wealth-creating) activities reminds me of the conceit and narrow-mindedness of a command economy where people are directed to engage in “production for use”, based on a central canon that determines which are legitimate and worthy activities and which are not.
And once again: by equating subsistence level production (fulfillment of basic needs) with wealth — and limiting the term “wealth” to that meaning — we would not be able to recognise a difference between US-citizens (who survive) and citizens of Sudan (those, who survive) — they are both wealthy by virtue of being able to survive.
It is not a trivial matter that the wealth difference is in actual fact gigantic and that difference matters tremendously from the point of view of humanism.
A THOUGHT BY WILLIS:
Look, suppose I start one of those “send a dollar to every person on this list, cross out the top name, and write your name at the bottom” deals. I will definitely make money, Ponzi proved that … but no wealth is created in the process. For everyone who gained a dollar, someone lost a dollar. All I’ve done is move the money around.
It’s the difference between the baker and the bread store. The baker creates wealth by manufacturing it out of flour and yeast. The bread store does not create wealth.
MY REPLY:
(1) Assuming that a vastly expanded personal budget lifts Ponzi to a higher level of satisfaction (greater gain, the attainment of desired benefits), he clearly realises wealth for himself.
We may look at attempts at realising wealth from a hundred different perspectives — legal, moral, social etc. And thus we may condemn or prohibit certain attempts at realising wealth, but this does not affect my basic definition of wealth, rather it affects the admissibility/assessment of attempts at realising wealth in legal, moral, social etc. terms.
When we talk about realised wealth, we will see in each case that the criteria laid down in my definition are satisfied.
Hence:
(2) The bread store is not likely to remain a viable proposition for long unless it realises wealth for itself and helps other people realise wealth, say by optimising and expanding distribution (creating greater convenience to its customers, positive price effects thanks to economies of scale etc.), thereby helping bakers to survive or sell more bread than they would otherwise/or force bakers to cut out inefficiencies, and so on. There are thousands of ways in which a bread store can promote the realisation of wealth for itself and others, for instance by adding a cosy café to the sales counter, a place people love to go to socialise (lifting themselves to a higher level of satisfaction).
(3) It is not you, Willis, who decides whether your buyer realises wealth for herself. It is the person that is paying you twice as much as you did at the flea market, who decides whether the purchase is wealth-enhancing to her.
I have a friend who always buys very expensive coats. He tells me he feels better to wear the expensive designer ones, it safes him the pain of studying hundreds of different coats, and the difference in money terms just does not matter to him, he is rich enough. He realises wealth for himself (assurance to be dressed socially correct, time saving) notwithstanding the fact that he might have been able to fetch a perfectly acceptable coat at half the price.
FURTHER THOUGHTS OF MINE:
(1) You write: “To understand this, suppose there are two couples on a tropical island. One person fishes, one has a garden, one gathers food and building materials from the forest, one makes clothes from local fiber. They could go on for a long time that way, they are creating real wealth.
But suppose on the next tropical island there are two couples, and one person is a barber, one is a surgeon, one is a librarian, and one is a musician—noble occupations all but services all … that society will have nothing to eat, nothing to wear, nothing to keep them from the rain. Those occupations don’t create wealth, while the activities on the first island all do.”
Link them via trade and the problem is solved. And all are wealthier.
(2) Once again: You may produce as much goods and services that potentially represent wealth as you like, if you do not act to realise that wealth, there will be no wealth available. In modern societies like the USA, wealth is mostly realised via exchange. Not even (most of) the few who produce our food and clothes (and other basic needs) are autonomous producers, having instead to realise whatever wealth will be available to them eventually via trade/exchange. The quality of our basic and non-basic goods and services would be considerably lower and we could sustain only a fraction of today’s populations, if we abandoned trading with one another and regressed to forming communities of autarkic households. Trade is an indispensable condition of wealth in our society. This holds true irrespective of how one assesses the US’ current account, the US’ terms of trade with other countries or which kind of foreign trade policy one favours.
(3) I don’t think you are right in reducing “real wealth” to activities and goods that ensure basic survival (see my explanations in earlier comments). If wealth of the basic-need-fulfilling-type can be shown to have the same features as wealth of the more-than-just-basic-needs-fulfilling-type, it is factually wrong to equate wealth = subsistence, as you do. Wealth is our ability to fulfil human desires at our discretion. And it is patently wrong to claim that human desires are confined to basic needs and that wealth creation (= the ability to fulfill human desires at our discretion) is confined to fulfilling basic needs.
As I have written above, human beings differ from other animals in that they are wealth-creating machines, they survive, adapt to their environment and thrive by creating and enhancing wealth constantly, far beyond basic needs. This fundamental human trait does not suddenly evaporate when basic needs have been fulfilled. Restricting (the ability to create) wealth to (the ability to fulfill) basic needs is to truncate human nature, denying its true richness.
Wealth in modern society is precisely characterised by the fact that very few people engage in ensuring subsistence, with the majority involved in non-subsistence activities whose provision is key to their being able to survive at the level of basic needs. Also, these non-subsistence activities keep improving, even revolutionising the way in which we ensure basic survival.
REPLY:
Let me attempt to reconcile these two apparently different views. Wish me luck. And I won’t mention the island where everybody survives by taking in each other’s laundry.
On one island lives a surgeon, all alone. His “wealth” doesn’t make him rich.
On the other island lives a fisherman, all alone. He gets by until he gets sick.
The fisherman agrees to trade some fish for some health service.First, YMMV and Bear and all, thanks for your comments.
Next, YMMV, at the start of your story, we have two healthy people and one fish.
At the end of the story, we have two healthy people and one fish.
Explain to me again about all the wealth that the surgeon has created …
w.
MY REPLY:
You write: “YMMV, at the start of your story, we have two healthy people and one fish [sic].
At the end of the story, we have two healthy people and one fish [sic].
[YMMV did not say there was “one fish” involved but “some fish”]
Explain to me again about all the wealth that the surgeon has created …”
Well, the fisherman got sick and required a cure to get better. Remember: I define wealth as “the fulfillment of a human desire at one’s discretion”. The human desire was to get well. And the surgeon fulfilled that desire enriching his client or adding to his client’s wealth, as opposed to lacking that instance of wealth, and remaining ill.
A REPLY TO MY REPLY:
Remember: I define wealth as “the fulfillment of a human desire at one’s discretion”Say what? So if I desire to breathe, and I do breathe, I’m creating wealth? If I desire to punch someone in the nose, and I fulfill that desire at my discretion, I’m creating wealth?
In the context of economics, or pretty much any context for that matter, that definition makes no sense at all. My last job was the Chief Financial Officer for a company with $40 million dollars in sales per year … if you try to run that definition of “wealth” past your accountant he’ll just laugh.
w.
MY REPLY:
You write: “If I desire to punch someone in the nose, and I fulfill that desire at my discretion, I’m creating wealth?”
Of course, I am. Bouncers or policemen create wealth that way. It is another matter, if I can get this sort of wealth-seeking socially recognised. Wealth creation is subject to numerous (social etc.) provisos — which is true with respect to any wealth-creating activities including those relating to basic needs —, but this does not invalidate my broad definition as such. Or can you show me that it does?
You write: “… if you try to run that definition of “wealth” past your accountant he’ll just laugh.”
Well, if you try to convince your accountant — or the IRS, for that matter — that wealth creating activities are restricted to the provision of basic needs … let’s see what reaction you get.
REPLY TO MY REPLY:
Georg, I didn’t ask about bouncers or policemen. If I desire to punch you in the nose, and I fulfill that desire at my discretion, have I created wealth? Because that is what you are claiming …
In addition, you seem to be confusing making money with creating wealth … they are far from the same. I can make money cutting hair, but that does not create wealth.
w.
MY REPLY:
You write: ” … you seem to be confusing making money with creating wealth … they are far from the same. I can make money cutting hair, but that does not create wealth.”
(1) From my definition of wealth, which you quote, it is indubitable that I do not confuse (equate) creating wealth with making money — my definition is capable of covering both wealth that is accounted for in monetary terms as well as wealth not so documented.
Of wealth, we may speak, in my classification, when we have been able to attain a gain, a benefit, an advantage, having reached a higher level of satisfaction compared to a situation when the desired gain, benefit or advantage is absent/unachieved.
So if the service of a barber fulfills that condition, lifting you to a comparatively higher level of satisfaction, he is capable of providing you with wealth.
(2) When a bouncer legitimately punches someone’s nose he creates wealth in at least two ways: he achieves a benefit to himself in being able to do the job he is being paid for (here violently but legally fending off an intruder or attacker). And he creates wealth for the person who provides him with income, in that the bouncer ensures the protection from intruders or attackers that his employer seeks.
Incidentally, the bouncer’s wealth creation by punching noses can be in fulfillment of a basic need (not to get killed) — which provides us with one more example of why confining wealth to basic needs (which bouncing may not appear to be) involves a needlessly and absurdly truncated definition of wealth. Handling basic needs may be significantly improved by activities that may not be classified as serving basic needs ( — is curiosity relating to aerodynamics a basic need?). Another case: your wealth creating islanders may get into a situation where the only basic, survival ensuring need is to be treated by a supposedly non-wealth-creating medical professional, the surgeon.
Human needs are an intricate and highly dynamic realm with complex interconnections. People constantly find out about what they need or don’t and in what hierarchy these things are to be fitted. Attempts at wealth creation, understood as the search for new and higher levels of satisfaction, are the epitome of human resourcefulness.
To come up with a finite list of wealth-creating (excluding all non-wealth-creating) activities reminds me of the conceit and narrow-mindedness of a command economy where people are directed to engage in “production for use”, based on a central canon that determines which are legitimate and worthy activities and which are not.
And once again: by equating subsistence level production (fulfillment of basic needs) with wealth — and limiting the term “wealth” to that meaning — we would not be able to recognise a difference between US-citizens (who survive) and citizens of Sudan (those, who survive) — they are both wealthy by virtue of being able to survive.
It is not a trivial matter that the wealth difference is in actual fact gigantic and that difference matters tremendously from the point of view of humanism.
A THOUGHT BY WILLIS:
Look, suppose I start one of those “send a dollar to every person on this list, cross out the top name, and write your name at the bottom” deals. I will definitely make money, Ponzi proved that … but no wealth is created in the process. For everyone who gained a dollar, someone lost a dollar. All I’ve done is move the money around.
It’s the difference between the baker and the bread store. The baker creates wealth by manufacturing it out of flour and yeast. The bread store does not create wealth.
MY REPLY:
(1) Assuming that a vastly expanded personal budget lifts Ponzi to a higher level of satisfaction (greater gain, the attainment of desired benefits), he clearly realises wealth for himself.
We may look at attempts at realising wealth from a hundred different perspectives — legal, moral, social etc. And thus we may condemn or prohibit certain attempts at realising wealth, but this does not affect my basic definition of wealth, rather it affects the admissibility/assessment of attempts at realising wealth in legal, moral, social etc. terms.
When we talk about realised wealth, we will see in each case that the criteria laid down in my definition are satisfied.
Hence:
(2) The bread store is not likely to remain a viable proposition for long unless it realises wealth for itself and helps other people realise wealth, say by optimising and expanding distribution (creating greater convenience to its customers, positive price effects thanks to economies of scale etc.), thereby helping bakers to survive or sell more bread than they would otherwise/or force bakers to cut out inefficiencies, and so on. There are thousands of ways in which a bread store can promote the realisation of wealth for itself and others, for instance by adding a cosy café to the sales counter, a place people love to go to socialise (lifting themselves to a higher level of satisfaction).
(3) It is not you, Willis, who decides whether your buyer realises wealth for herself. It is the person that is paying you twice as much as you did at the flea market, who decides whether the purchase is wealth-enhancing to her.
I have a friend who always buys very expensive coats. He tells me he feels better to wear the expensive designer ones, it safes him the pain of studying hundreds of different coats, and the difference in money terms just does not matter to him, he is rich enough. He realises wealth for himself (assurance to be dressed socially correct, time saving) notwithstanding the fact that he might have been able to fetch a perfectly acceptable coat at half the price.
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