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Can wealth be created, or are economics a zero-sum game?
In a reasonable time frame ie. a human lifetime, can wealth be created? Or are there a fixed amount of assets and resources? Does the passing back and forth of these fixed assets merely create the illusion of wealth generation?
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You put two elements into your question a) can wealth be created, and b) can this be done in a reasonable timeframe, such as a human lifetime?
Simple answer: I am in my forties, and most regions of the world have a substantially higher standard of living now than when I was a child. This is despite the world's population having risen more than 50% during that period.
You can see it in statistics, and you can see it in what people have in their homes, the clothes they wear, what they eat, and how they live their lives.
I see it in the quantity and quality of toys that my nieces have, compared to what kids had when I was that age.
I'm not sure how else you would interpret that other than that a lot of wealth has been created during that period.
When you talk about "fixed assets and resources being passed back and forth", what's missing is the idea of value being added as things are transformed.
In the stone age, they had all the geological resources we do today. Most of them were inaccessible, but they could take certain rocks and make a cutting tool out of them. Wealth creation: stone >>> knife.
Today we can take a whole bunch of different kind of rocks and minerals, put them through all kinds of technical processes, and make an iPod or a PC out of them. Are you better off because you have a PC rather than the minerals it was made out of? I'd guess you probably are!
You might feel that material wealth like that isn't that important, and doesn't make people very happy. There is case for that. But that's a whole different thing than saying wealth can't be created.
In summary, while there are zero-sum games within the economy, the economy as a whole is definitiely not a zero-sum game.
Simple answer: I am in my forties, and most regions of the world have a substantially higher standard of living now than when I was a child. This is despite the world's population having risen more than 50% during that period.
You can see it in statistics, and you can see it in what people have in their homes, the clothes they wear, what they eat, and how they live their lives.
I see it in the quantity and quality of toys that my nieces have, compared to what kids had when I was that age.
I'm not sure how else you would interpret that other than that a lot of wealth has been created during that period.
When you talk about "fixed assets and resources being passed back and forth", what's missing is the idea of value being added as things are transformed.
In the stone age, they had all the geological resources we do today. Most of them were inaccessible, but they could take certain rocks and make a cutting tool out of them. Wealth creation: stone >>> knife.
Today we can take a whole bunch of different kind of rocks and minerals, put them through all kinds of technical processes, and make an iPod or a PC out of them. Are you better off because you have a PC rather than the minerals it was made out of? I'd guess you probably are!
You might feel that material wealth like that isn't that important, and doesn't make people very happy. There is case for that. But that's a whole different thing than saying wealth can't be created.
In summary, while there are zero-sum games within the economy, the economy as a whole is definitiely not a zero-sum game.
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Well said.
Thank you.
Thank you.
voted helpful: roybott
can be created
One thing that can be created is work: the act of actually doing something, especially with something else. Converting clay to art or a kitchen bowl. Converting fibers grown anew every year to paper or fabric.
Think Survivor. Everything is stripped down to essentials. If everyone sat on their behinds and did nothing, they'd run out of supplies--previously-created wealth--and eventually no one would eat and there would be no shelter. Work is a basic requirement of life.
Every single thing you own is the result of someone's work. All along the way, it generated wealth for someone. A stalk of grain might not be worth much on its own, but planted, harvested, processed, and sold, it gains work at every step, and thus gains value.
I think that in the last 120 years or so, First World societies have gradually forgotten this fundamental aspect of life--that physical work adds value. When societies forget this, they tend to do one of two things: those at the top get grabby with those at the bottom; or the society experiments with a workless society through "redistribution of wealth" (perhaps as a reaction to the other extreme). Either extreme encourages disrespect of other individuals, denigrating their efforts, and is really a step backwards. And both pull the rug out from other motivation to create wealth: either you can't keep it, or you'll get some no matter what effort you put in.
I think our culture is really poised in the middle of these two extremes at this moment. On one hand we have the Wall Street robbers, and on the other we have those who want to redistribute wealth in reaction. It is going to be tough to keep the pendulum in the middle.
Think Survivor. Everything is stripped down to essentials. If everyone sat on their behinds and did nothing, they'd run out of supplies--previously-created wealth--and eventually no one would eat and there would be no shelter. Work is a basic requirement of life.
Every single thing you own is the result of someone's work. All along the way, it generated wealth for someone. A stalk of grain might not be worth much on its own, but planted, harvested, processed, and sold, it gains work at every step, and thus gains value.
I think that in the last 120 years or so, First World societies have gradually forgotten this fundamental aspect of life--that physical work adds value. When societies forget this, they tend to do one of two things: those at the top get grabby with those at the bottom; or the society experiments with a workless society through "redistribution of wealth" (perhaps as a reaction to the other extreme). Either extreme encourages disrespect of other individuals, denigrating their efforts, and is really a step backwards. And both pull the rug out from other motivation to create wealth: either you can't keep it, or you'll get some no matter what effort you put in.
I think our culture is really poised in the middle of these two extremes at this moment. On one hand we have the Wall Street robbers, and on the other we have those who want to redistribute wealth in reaction. It is going to be tough to keep the pendulum in the middle.
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Something I've been thinking for quite some time
Something I've been thinking for quite some time
voted helpful: pmacdon1, morriss003, jkmini14
Your point about work adding value to the process of converting resources to assets seems valid. I disagree with your editorial content though.
I am leaning towards selecting this as Best Answer, but I am going to have to think about morriss003's response about economic activity for a while. Also, I want to see if a better answer comes along in the next few hours.
Thank you for your answer.
I am leaning towards selecting this as Best Answer, but I am going to have to think about morriss003's response about economic activity for a while. Also, I want to see if a better answer comes along in the next few hours.
Thank you for your answer.
Wealth can not be created, but economic activity can be created and economic activity can lead to wealth.
voted unhelpful: jkmini14
Wealth cannot be created but economic activity can lead to (create) wealth?
This doesn't make sense to me? Can you explain it for a third grader?
This doesn't make sense to me? Can you explain it for a third grader?
Economic activity leads to the formation of capital pools. Capital pools tend toward investments that are carefully researched, are competitive in terms of interest rates and market share, and are usually managed by people with a positive track record. These types of investments create wealth.
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