How is wealth created?

HAMISH_MCTAVISH

Orpheo wrote: »

You accurately describe the money-go-round, but you don't define 'productive endeavour' - they are effective words though.

Because the definition of what constitutes productive endeavour is what everyone tends to disagree about.

But everyone can agree that it is in fact productive endeavour that creates wealth.

STing

Wealth Creation at its very best.

Cleaver

HAMISH_MCTAVISH wrote: »

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

nearlynew wrote: »

How f*cking stupid can anyone be?

Why is Hamish "f*cking stupid" for suggesting that wealth creation isn't limited to natural resources? I think he's correct.

Let's say that Hamish has a company that is amazing and at the top of its game at mining a resource out of the ground (doesn't matter what) but then has a lot of trouble articulating how effective it is at mining and loses a lot of sales because of poor communication and marketing etc. I run a fantastic sales and marketing company, I approach Hamish and offer my business. Lo and behold, Hamish's company sells 50% more of their resources and wealth is created, both for Hamish's comapny and for mine.

My company doesn't produce anything. Maybe we just look at the strategies and processes of Hamish's company and we advise on how to change. No physcial product required, but we've created wealth. You can apply this model to loads of service industries: no traditional physical product, but they create wealth.

Mr_Max

You can create wealth by adding value. Let me try an analogy:

Person A has £20 worth of scrap metal.
Person B has £20 cash
Person C has £80 cash.

Person B (who is an artist, for the sake of the analogy) buys the scrap metal from Person A. Result: nobody has lost any wealth, nobody has gained any either. Person A has changed his £20 asset into £20 cash, and person B vice-versa.

Person B crafts the scrap metal into a sculpture (he's an artist, after all). Because he's well known and his work is desirable, his sulpture is valued at £80.

Person C is an art collector who wants to buy something for £80. Taking a fancy to the new sculpture by person B, he buys it for £80. Result: Person C has not lost anything. He's changed £80 cash into £80 asset. However, person B has added value to the asset he bought. He has therefore made £60.

It's a very simplistic illustration, granted, but it shows how wealth can be created.

HAMISH_MCTAVISH

Cleaver wrote: »

Why is Hamish "f*cking stupid" for suggesting that wealth creation isn't limited to natural resources? I think he's correct..

Because naerlynew is one of those manufacturing luddites.

He doesn't understand it's entirely possible to create wealth without making anything physical at all or breaking a sweat with manual labour.

chewmylegoff

Wealth is what is created when hamish fights geneer using internet links.

HAMISH_MCTAVISH

chewmylegoff wrote: »

Wealth is what is created when hamish fights geneer using internet links.

Well, for Martin anyway......:money:

ninky_2

If labour really was the source of wealth creation then we would expect to see those who put in the most hours creating the most wealth. However we don't see this at all. Past and present throws up plenty of examples of people working very hard and long for very little wealth creation and others doing a lot less but employing superior ingenuity to create more. We don't value the man hours that have gone into something but rather what it is worth to us. Knowledge is also wealth and the only thing that frequently does not depreciate in value over time.

Btw loughton monkey it's she not he.

princeofpounds

Loughton_Monkey wrote: »

Thanks for the link. A huge number of videos.

But just to get into it, I watched one on buying versus renting. This guy spends almost 10 minutes explaining why it is better to rent.

......................................

All he 'proved' (but actually didn't) was that cash flow in year 1 may be better by renting.

I have to say I've never watched that video. I will do so when I get a moment. I only use it for the 'academic' stuff and it's generally very good on all sorts of topics, esp maths and finance.

It's possible that it's just a badly-planned lesson (after all, they guy is just one person teaching). Or it's possible that it only makes sense as part of the series (many of the videos use hypothetical examples to demonstrate points).

I'd suggest you do give the site another chance and look at something less 'political'. I'll take a look at this particular video and get you a response ASAP

ninky_2

Loughton_Monkey wrote: »

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.

So where has the £10 pound to pay for the mousetrap come from?

Without the ingenious idea for the mousetrap you just have some raw materials and some untapped labour. You didn't created either the raw materials or the untapped labour (unless it's your offspring!) so the only thing we can really consider to have been created (from nothing) is the idea for the mousetrap.

Which person is likely to be wealthier? The one with lots of wood and metal and labourers (assuming they can't sell these on to people as resources) or the one with less wood and metal and labourers but an idea for a mousetrap? We can compare between civilisations to know the answer. For example let's compare the aboriginals of Australia ten thousand years ago in a land full of natural resources and potential labour with the ancient Greeks in a land of fewer resources but plenty of ingenuity. Which one created more wealth?