To generate wealth means to create something that someone else values, that’s pretty much it.
Wealth, as far as US politics is concerned, has a measurement, that includes things like your house, car, and savings. But of those three things, each is only worth what other people will value it at. The house you paid $200k for might now only be worth $50k, your car might break down, your stock portfolio might crash, and your currency might hyper-inflate.
But to put it simply, if you do something that others value, you have created wealth. You can take that wealth, and exchange it for things you value.
On this message board? Not possible. Just pick a side you’d like to be a part of and regurgitate their talking points.
The problem in terms of politics is that what people value changes over time. Writing computer code used to be a highly specialized skill that was valued, now it’s not. Making cars used to be a noble profession earning a high salary, now it’s not.
Beanie Babies used to be valued, people went nuts, now they’re worthless. Houses all over the US shot up in price, but their value eventually evaporated.
If I create a painting and you buy it have I created wealth?
I’d say no. I have created wealth for myself but that really is a transfer of something of value from me to you. No wealth has been “created”. Merely it is a transfer of something from one to another. I give you an apple and you give me a pear in return.
“Creation” of wealth, to me and in a macroeconomic sense, means something else. If an economy could build a car for $5000/unit and then, through some innovation, can make the same car at $1000/unit they have created wealth. Same resources go in (metal and such), same engineering but now it can be done more efficiently. Wealth is created there.
But he took canvas and paint and transformed it into something that was worth much more. It’s more like that he *grew *an apple and you gave him a pear in return. The growing of the apple was the creation of wealth.
That definition could be confusing in the sense that it could be confused with is “wealth” in the sense of being rich; “Jim is a person with great wealth” meaning Jim is rich, is the definition you found. “Wealth” in the sense I think you’re driving at is “things that are valued by human beings.”
Wealth is created by moving resources from lower value uses to higher value uses.
To use an example, rocks buried underground have no value. You can’t do anything with them. But I I do work, I can dig up iron, chromium, and nickel, and with more work, combine them to make stainless steel, which is quite valuable. Provided that the value of my time, a shovel, and my steel mill is worth less than the value of stainless steel (and since they make a lot of stainless steel, apparently that’s true) then the creation of stainless steel creates wealth. Otherwise useless ores are converted into a very useful metal.
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If I create a painting and you buy it have I created wealth?
I’d say no.
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With due respect, you are wrong. You have obviously created wealth. Both of us are ahead because of your work. You now have $500, which presumably is quite a lot more than the cost of materials and your time or else you wouldn’t have painted it. I havea painting, which I obviously value more than the $500 or I would not have paid $500 for it. You have taken tubes of paint and a canvas worth a few bucks and converted them into a painting I value for at least $500.01. Now you have five hundred bucks you did not have before. I have a painting that I did not have before that I think is worth more than my money was. We are both wealthier.
In order to have wealth, is it sufficient just for me to think the thing I have has value?
I’d have thought that that’s not sufficient–I’d think the thing has to actually have value.
It seems like having wealth isn’t a matter of having things I value, but rather, is a matter of having things that are valuable.
What’s “valuable” mean? I think it means “inducing desirable patterns of human behavior.” Something is valuable for me (not just “to” me or “in my opinion,” but actually valuable for me) to the extent that, by having it, I acquire a disposition to induce desirable (to me) patterns of human behavior in others.
If I buy something because I value it, but it’s not actually valuable for me (i.e. because no one else values it) then I’d say I haven’t gained any wealth. I have something I like, but that’s not wealth, right?
If I grab the napkin next to me and draw a stick figure on it (and a misshapen one at that) have I created wealth?
Even if (pretend “if”) someone thought it was valuable how have I added to the economy? I am taking their money. I have not created new money. There used to be $10 in their pocket and now that same $10 is in my pocket.
Does someone else really want it and is willing to pay for it? Probably not. So no.
Money isn’t the same thing as wealth. The economy’s money supply and wealth don’t have to match up perfectly. Your painting does not have to be accompanied by $500 in money to represent new wealth.
My view right now is that while you’re still in posession of the drawing, there is more wealth in the economy than there was before you drew it–because there is now, existing in the economic system, something capable of inducing human behavior desirable to you, where before no such thing existed.
Once you’ve sold it, it is possible that added wealth has disappeared–if no one else values it, then the ability to use the drawing to induce desirable behavior has disappeared.
On the other hand, if he’s going to be able to sell it to others (for more than 10 dollars) then the additional wealth remains in the economy. There’s the ten dollars he gave you, which always existed, and there’s the ability to induce desired patterns of human behavior which inheres in the drawing. (The desired behavior here being the act of giving money to people.) Only one of those things (both of which have value) existed before you drew the thing.
It does have value, because you want it and enjoy having it. When you stop enjoying it, it loses it’s value.
In that case, it’s what other people consider valuable. Your measure of wealth in simplest terms could be the cash in your hand. If people want US currency it will have value, if they don’t it’s just crappy green paper (well cotton and linen).
If you consider investing, that happens all the time. People buy stock that is only has valuable as other people say it is. If you can’t sell it, the price goes to zero. It’s this phenomenon that causes wealth to be both created and destroyed.
The housing bubble convinced people that they were wealthy because their house value went up. It went up because people wanted to buy houses. After the bubble burst, the houses were the same, but no one valued them any more, and household wealth went down. Wouldn’t have been a problem if so many people hadn’t spent like drunken sailors using the value of their home as collateral.
So there are always two aspects to what you are describing, which ultimately comes down to supply and demand. Value in one aspect is how much you want something, which drives the price up when you buy it. But when it’s time to sell, the price falls. You don’t want it, so it’s value is lower.
Sort of. Remember what you consider wealth, so what if that stick figure drawing represents a new way to do something?
Art is used as an example in these discussions because it’s probably the fastest way to turn a few cents into thousands of dollars. But like I said, when Apple combines a few pieces of electronics into an iPod, they create wealth.
Consider instead how that person got $10 in their pocket. They did something someone else valued. In the purest sense, imagine you trade that drawing for the meal you just ate. You enjoyed a meal, the cook enjoys your art, you are both wealthier for the experience.
A lot of people around the world grow cash crops. Things like cotton, tobacco (weed), feed corn. Things that aren’t really useful to the farmer. But they can all be sold, making the farmer richer for his efforts. Someone will then take that cotton and make clothes that they can sell making them richer. Someone else will take those clothes and put on a play, that will make them richer. And it might be the farmer that goes and enjoys the play, making him richer.
You grow wheat. Frylock grows apples. I draw stick figures on leaves.
Frylock trades some of his apples for your wheat.
Frylock decides he really likes my stick figures so gives me some apples and wheat.
Where was wealth created?
There are still X-number of apples and X-number of bushels of wheat in existence.
If you decide my stick figures are even more valuable than Frylock paid then Frylock will make a profit. Still, only the same amount of apples and wheat are out there.
If you add in the government taxing transactions it makes the economy smaller still.
By economic definition, wealth is any possession which can be traded to someone else. If you’ve turned something which can be traded into something which can be traded for even more, then the total wealth of the world has increased.
To add I would say wealth is “created” when Frylock figures a way to save some of his apples from worms or you learn to harness an ox to plow your field. Now, for the same effort and time and land you work you produce more product.
Then luxuries like my stick figures become more attractive. If you have more than you can use you may well decide to decorate your hovel with my stick-figure leaves rather than let the extra rot.
The addition of time and skill. Instead of doodling, you could have washed dishes or cooked eggs.
You can’t eat stick figures, and you’re not able to grow wheat or apples.
Me and Frylock are good at growing, so much so that we have an excess beyond what we need. So I don’t consider wheat valuable, I’ve got tons of it. Frylock has too many apples such that he doesn’t value them. And neither of us are very good at drawing.
So, when we all trade, we are all happier, hence we are all wealthier as a result. That’s all there is too it. Each person has something they value more.
The alternative would be for us each to try to be self sufficient. So Frylock burns down a bunch of his trees to plant wheat. But he’s not as good at it. So instead of growing 100 bushels of apples that he can trade for a 100 bushels of of wheat, he only gets 50 apples, and 25 bushels of wheat. The land and growing season was wasted, wealth is essentially lost.
Right, but each person values each number of apples and wheat differently. To me apples are worthless because I have too many, Frylock feels the same about wheat.
There is a funny game call Settlers of Catan, try it out and this will make a lot of sense. For want of a nail the battle was lost…
If Frylock can find and recognize desirable art, he deserves compensation, wealth is created. A person that owns a gallery can get a commission for each sale.
But based on what you’ve said previously in your post, if I bought stock in Apple because I like things that start with the letter A, with no intention ever to trade it away, and Apple goes bust and the stock is valued at zero on the stock market, nevertheless I still have the same wealth as I did when I bought the stock.
That’s an implication of what you said, but do you agree with it?
We can contain it to a perfect economy that we see in Econ-101. But why not a system where I try to rip you off? That is hardly a new thing.
If the going rate is one bushel of apples to one bushel of wheat but I manage (by hook or crook) to get a 2:1 deal have I created that much more wealth?
It is not a dodge I do not think. Seems a fair question in this discussion.
Yes. As long as you enjoy owning it, more than you enjoy owning something else. There was a guy that bought Enron stock and wallpapered his bathroom with it–that made him happy.
As long as you perceive value, you have wealth. There are a lot of guys right now driving around on giant sparkly rims. I don’t get it, to me they have no value, in fact a car with them is worth less to me than a car without them. But they paid for them, and they feel they have value. More to the point, within their culture those rims carry status giving the owner a sense of wealth.
I also don’t value iPads at $600, but others do, and what you’ll notice is that in a year they’ll release an iPad 3 and the iPad 1 will be worth even less. But as long as you like it, and enjoy using it, that object will have value to you.