A Thought or 2 About Wealth

lostinrates

Alan_M wrote: »

The older I get the more I define my personal "wealth" in ways other than financial.

I'm not sure where this shift in thinking came from, I was quite happy being a capitalist pig:o

Yes, my dad had a similar turn around ...shortly after he'd paid his mortgage off. when you still have 25/30 years of mortgage debt ahead of you its more bearable if you remain capitalist pig.

Alan_M_2

lostinrates wrote: »

Yes, my dad had a similar turn around ...shortly after he'd paid his mortgage off. when you still have 25/30 years of mortgage debt ahead of you its more bearable if you remain capitalist pig.

Actually it's that frame of mind that would stop me becoming anyone like Branson. I'd reach a certain point and say "That's enough thanks very much, I'm going to enjoy it now not work myself into oblivion".

My aim is build my business and sell it, I'm not bothered about leaving a legacy or making history thanks, but I'd like a nice retirement with at least one round the world cruise:D

baileysbattlebus

Generali wrote: »

People on this board discuss in the most civil terms, whether or not increasing house prices make the people of the UK 'richer' or 'wealthier' or not.

As I see it, there are two ways to define the wealth of a country

- you can look at the market value of the productive assets owned by the citizens or subjects of that country

or

- you can look at the potential productive output of the country that can result from the assets that are available to support production (plus the stream of payments that result from foreign owned assets)

If house prices rise then the former definition of wealth increases so that makes the country as a whole wealthier, albeit in a way favouring those owning that asset class. However, the second definition doesn't change as the increase in the price of the house hasn't changed the potential of a country to produce.

FWIW, my belief is that the former measure of wealth is only really useful to individuals and companies whereas the latter version is best suited to nations and countries.

I had a think (probably not a good idea) about your 2nd definition - I came to the conclusion that potential productive output would be almost impossible to measure -

1. When you measure or predict output you need an input - one of the largest inputs is people - how do you measure them? Their ability, education, knowledge etc. They can be a priceless asset to a country.

2. You would be ignoring unpaid work, voluntary work, work in the home, cooperation in the community etc - all contribute to a nation's wealth.

3. The benefit of having a healthy workforce - the benefit of safe working practices and stuff like that.

4. The huge benefit that research and development can bring -

5. How do you value infrastructure - necessary for wealth in country

6. Original ideas - authors, artists and people like that - how do you value them? Can be big income generators but not linked to assets.

Or am I on the wrong track??

Generali

baileysbattlebus wrote: »

I had a think (probably not a good idea) about your 2nd definition - I came to the conclusion that potential productive output would be almost impossible to measure -

1. When you measure or predict output you need an input - one of the largest inputs is people - how do you measure them? Their ability, education, knowledge etc. They can be a priceless asset to a country.

2. You would be ignoring unpaid work, voluntary work, work in the home, cooperation in the community etc - all contribute to a nation's wealth.

3. The benefit of having a healthy workforce - the benefit of safe working practices and stuff like that.

4. The huge benefit that research and development can bring -

5. How do you value infrastructure - necessary for wealth in country

6. Original ideas - authors, artists and people like that - how do you value them? Can be big income generators but not linked to assets.

Or am I on the wrong track??

I think you're on exactly the right track TBH.

Some of the things you mention are already acknowledged by economists as missed (eg unpaid work is missing from GDP figures). Some is acknowledged (eg you borrow for R&D spending thus bringing spending backwards from tomorrow in the hope of increasing GDP (via higher profits) in the future).

Ideas are becoming more important to the economy. How to account for them is becoming harder at the same time.

tomterm8

Generali wrote: »

...As I see it, there are two ways to define the wealth of a country

- you can look at the market value of the productive assets owned by the citizens or subjects of that country

or

- you can look at the potential productive output of the country that can result from the assets that are available to support production (plus the stream of payments that result from foreign owned assets)
...

FWIW, my belief is that the former measure of wealth is only really useful to individuals and companies whereas the latter version is best suited to nations and countries.

Sounds like the start of an economics textbook.

What is 'productive output', 'assets that are available to support production' and 'stream of payments that result from foreign owned assets'.

What is a 'Country'.

I know you might quibble over such basic questions, but it seems like you are treating a 'Country' as a seperate accounting entity to the citizens of a country. So, lets give an hypothetical example:

Zimbabweland is a land of oil and honey, it has massive productive resources, and quite a number of 'payments of overseas assets'. These resources are in the hands of the Oligarchy, which is perhapse 1% of the population. Everyone else is barely able to feed themselves.

Australiaville is a land without much oil, but with reasonably developed manufacturing and commodities sectors. While it has less physical resources than Zimbabweland, it has invested its resources equitably, and developed an advanced technology, medical, educational and telecomunications infrastructure. People live for a long time, and are generally quite happy.

Zimbabweland has, at least potentially, more wealth than Australiaville, so which country is wealthier?

Generali

tomterm8 wrote: »

Sounds like the start of an economics textbook.

What is 'productive output', 'assets that are available to support production' and 'stream of payments that result from foreign owned assets'.

What is a 'Country'.

I know you might quibble over such basic questions, but it seems like you are treating a 'Country' as a seperate accounting entity to the citizens of a country. So, lets give an hypothetical example:

Zimbabweland is a land of oil and honey, it has massive productive resources, and quite a number of 'payments of overseas assets'. These resources are in the hands of the Oligarchy, which is perhapse 1% of the population. Everyone else is barely able to feed themselves.

Australiaville is a land without much oil, but with reasonably developed manufacturing and commodities sectors. While it has less physical resources than Zimbabweland, it has invested its resources equitably, and developed an advanced technology, medical, educational and telecomunications infrastructure. People live for a long time, and are generally quite happy.

Zimbabweland has, at least potentially, more wealth than Australiaville, so which country is wealthier?

On the face of it, Zimbabweland. As with anything like this, it depends on how you measure it and what you measure.

Wookster

tomterm8 wrote: »

Zimbabweland is a land of oil and honey, it has massive productive resources, and quite a number of 'payments of overseas assets'. These resources are in the hands of the Oligarchy, which is perhapse 1% of the population. Everyone else is barely able to feed themselves.

Make that 0.01%

Zimbabwe, though wealthy isn't wealthy on the same scale as Australia. The closest African country in terms of wealth would be the DRC.

What Zimbabwe has is potential, though almost all of its human capital has taken to flight.

ninky_2

Generali wrote: »

People on this board discuss in the most civil terms, whether or not increasing house prices make the people of the UK 'richer' or 'wealthier' or not.

after a certain point of people being able to meet their basic needs research suggests that happiness is not increased through money affluence but through time affluence. i fear that for too long we've focussed on buying bigger and better and ignored the very fact of our inevitable mortality and that time on this planet is something we can't buy.

increased property prices (relative to earnings) will only make more people time poor. it will mean longer hours and more years at work. less time with friends and family. less time to put into the community. less time for hobbies.

so i definitely think increasing property prices make the uk poorer.

i sort of agree with this guy that we need to reassess that is is time that is the ultimate unit of value. and it's a time-based economy we need to develop.

http://www.knox.edu/tkasser.xml

PasturesNew

MissDBoat wrote: »

This is a good thread. I made the mistake of starting posting on a house price thread and there were just slightly unsavoury idiots going round and round in a loop. I thought maybe the whole board was like it.

I don't know much about wealth. One day...

That'll be us then

Generali

MissDBoat wrote: »

I don't want to mess up this nice thread with yes it was, no it wasn't stuff, but no it wasn't. There were some people on there who were just picking holes in an argument, and it didn't seem to me it mattered. If someone likes the Halifax figures more than the Land Registry, or prefers Rightmove then hello.. whatever. Sorry, I seem to have let off steam a bit.

The board is meant to be about the economy as well as house prices but used just to be about house prices. As you can imagine, there's only so much you can say about the value of a single asset class so the arguments can tend towards the arcane on the subject.

Interesting bloke carolt linked to, I'll have to look at him. There is a lot of work going on right now about how psychology and economics link. They are starting to debunk the idea of the 'rational consumer' for example (which I always thought was a crock of poo TBH although my economics professor used to argue all day that consumers are rational it's clear they're not - just ask any gambler).

One thing that has come out of a lot of research, slightly depressingly TBH, is that increases in the overall levels of peoples' incomes don't make people happier once you get past the point of people being able to sustain life with relative ease. What does make people happier is being richer than those around them.

Most people would be happier to earn £10,000 and have the bloke next door on £5,000 than earn £100,000 and have the bloke next door on £150,000.

Nice eh!