How is wealth created?

Orpheo

1984ReturnsForReal wrote: »

Ah. Thanks for clarifying.

I will have to write to the Dyslexia Association & tell them they are wrong and it is not a possible sign.

You are clearly a prize berk.

If you read the entire [STRIKE]OP[/STRIKE] there are no other "signs" apart from a single grammatical error in the entire post. To anyone with a clue, yourself obviously excepted, there is no evidence of dyslexia. Instead what we have is someone who is skilled at writing, has good spelling and grammar but is confused over who's and whose. This is a mistake that they will not make again. Similarly, I recently had a vocabulary error pointed out to me, I did not cry dyslexia, ADHD or anything else, I noted the vocabulary error and will never make it again.

It is my job to assess writing, it would not be helpful for me to look at an ink blot and diagnose parkinson's disease.

Apologies for the thread derail.

Edit: Sorry, not the OP, but loughton's first post.

Some cursory research reveals that confusing possessives with contraction by omission is not a sign of dyslexia. You are wrong.

ninky_2

to my mind a lot of people get the definition of wealth wrong. it's not about money, it's about 'progress'. that's why most of us today live far wealthier lives than kings of the past. we have access to scientific and technological advances that they couldn't even dream about. it's human ingenuity that drives this - combined with the necessary passage of time. capitalism (the profit motive) can sometimes and help and sometimes hinder it. in our system it certainly shapes the way it manifests. however it's not necessary to it. science and technology don't need capitalism.

distribution of wealth of course is again something different.

my economic sum is ingenuity+time=increased overall wealth.

ninky_2

Loughton_Monkey wrote: »

When you move up to the 'Global' economy, then wealth is ultimately created by labour, and by digging things out of the ground. Food. Iron. Copper. Gold. Diamonds. Wood. All produced by labour and converted to hard currency (which we call 'wealth'). Further amounts of labour add value by converting to steel, cars, houses, jewellery etc.....

.

i think this is becoming an old fashioned view. we are seeing a seismic shift into a virtual economy. 'there's an app for that' culture where wealth is created more or less from ideas and the technology that enables them to be transported. of course the technology requires some raw materials but that is becoming a shrinking part of the market.

it's probably the only hope for places like the uk that have little to offer in the way of raw natural resources. the government should be investing heavily in computer technology training and business startups.

chucky

Orpheo wrote: »

• Growing
• Mining
• Manufacturing
• Fishing
• Animal husbandry

Everything else is leeching.

Or theft.

and this is one of the very good reasons that this part of the forum is hidden...

PasturesNew

orpheo wrote: »

it is my job to assess writing, it would not be helpful for me to look at an ink blot and diagnose parkinson's disease.

gud skillz m8

lazer

Loughton_Monkey wrote: »

That's the point, you see.

I steal your wallet. I am £100 richer. You are £100 poorer. No wealth has been created. All we have done is changed who owns and controls it.

You get your £100 back from the Insurance company, who is thus £100 poorer. Premiums go up and so policyholders collectively are £100 poorer. You are neutral.

Now I spend the £100 buying wine in France, out of which they make £30 profit, then UK is £30 poorer. France is £30 richer.

Economics is not difficult!

Thats overly simplistic and also not right, as the UK is £100 poorer, depending on if you bring the wine back to the UK, if you bring back the wine and resell it for £150 in the UK, then is the UK £50 richer?

Also is france not £100 richer - you have put £100 of UK money into the french economy? - The £70 it cost to make the wine is irrelevant in this case. The wine could just as easily have been bought by a french person.

ninky_2

if you define wealth creation as the mining of natural resources then that's clearly not right. all you've done is move the resources around. you've not created wealth because you've not created the resource. like energy and matter, wealth according to this definition of it, cannot actually be created - since like energy and matter natural resources are finite.

that's why i say ideas and ingenuity are the only real wealth creation. useful ideas and their cumulative effect through time are the only thing we humans can really make more of.

princeofpounds

Returned to give you a more specific set of answers to your scenario.

May sound a stupid question but how is wealth created?

For example if my house is a country. There are four people in my house and each have £100 each. Then the value in my house (country) is £400 yes?

No. The problem is that there are no goods and services in this house. All they have are pieces of paper. There is nothing to spend them on... yet. So there is no wealth in the house at all.

There are however factors of production. Labour. Capital. Just no land and raw materials explicitly mentioned. If there are factors of production then you could put them together to generate some kind of wealth.

So if I create a sweet shop and each person buys £5 worth of sweets then I can now say I have £115. I have made £15 profit right?

No. You have sweets, which you didn't have before. Trying to measure them in monetary terms isn't really possible in your example because the value of the money you have is really only definable in terms of the goods and services it can buy. So £400 = sweets. That's about all you can say in this example.

Profit is not really the right term in this circumstance, although you could say your gross house product (~GDP) has gone from zero to sweets (or £400 in your arbitrary currency). Although by your magical intervention.

Let's say that you made (and ate) 10 sweets. And the next year you make 20.

The amount of money per sweet fall from £40 to £20. You experience 50% deflation.

Your nominal GDP does not change as all the goods in the economy are worth £400 still - it could not be otherwise.

However, your REAL GDP (Which is what matters) has an inflation/deflation adjustment. In this case you would divide by the 50% deflation and your Real GDP doubles to £800. Or the previous year is rebased to £200, it's the same thing mathematically as it's just a way of saying you have double the stuff in your economy as you did before.

But I haven't really made any money because there is still £400 within my house (country). All that has happened is there has been a transfer of cash for goods.

Previously you had no goods, now you have some. You made wealth, but the amount of money stayed the same.

So in real life, is money actually gained or just transfered/exchanged?

Money is a method of transaction (not the only one).

An individual can gain more money and get wealthier by increasing their share of the claim on goods and services in the economy. (This is more where profit comes in)

An economy as a whole can't get wealthier by printing more money, as it doesn't change the amounts of goods and services.

Loughton_Monkey

ninky wrote: »

if you define wealth creation as the mining of natural resources then that's clearly not right. all you've done is move the resources around. you've not created wealth because you've not created the resource. like energy and matter, wealth according to this definition of it, cannot actually be created - since like energy and matter natural resources are finite.

that's why i say ideas and ingenuity are the only real wealth creation. useful ideas and their cumulative effect through time are the only thing we humans can really make more of.

You really do have a weird idea of "wealth".

Just because I have ingenuity, and a great idea for a better mousetrap, I still have no wealth whatsoever. All I have is the idea. Unless I now use the idea, and labour away at physically making the mousetraps, and selling them, I am no wealthier than I was before.

Once I have successfully made and sold them, then I presonally become wealthy. They cost me £8 to make and I sell them for £10. But where has my wealth come from? From other people. You bought one of them, so you actually have £8 of true 'value' and additionally gave me £2 profit. I am £2 wealthier. You are £2 poorer.

By all means sit there with idealistic views. Consider yourself 'wealthy' because you have no money, but hundreds of true friends, a load of ideas, tons of ingenuity, a bag of memories etc. But that's not the correct definition of wealth in this context.

HAMISH_MCTAVISH

Loughton_Monkey wrote: »

Just because I have ingenuity, and a great idea for a better mousetrap, I still have no wealth whatsoever. All I have is the idea. Unless I now use the idea, and labour away at physically making the mousetraps, and selling them, I am no wealthier than I was before..

That's correct, in that the idea has not yet been put to productive use.

Although I see where ninky is coming from though....

Too many posters here assume that only things like manufacturing, mining or agriculture create wealth. Just to be clear, there is no need to physically manufacture something to be productive.

The creation of wealth is not restricted to the extraction, exploitation or transformation of natural resources.....