5 ms·

Wealth is most definitely not a conserved quantity. Think of the equity of a typical household. It includes some equity in their flat, which has a current mark

by qubex 8y ago

Wealth is most definitely not a conserved quantity. Think of the equity of a typical household. It includes some equity in their flat, which has a current market value. Down the street a developer buys a whole building block at a slight premium to rid itself of extant tenants and in so doing drives up the estimated value of local real-estate, including our household's equity. They've just gotten richer. They could even remortgage their house and monetise that increase in wealth. They could sell it and buy a bigger flat in another part of town. So no: wealth is not conserved. Quantified (maybe), but definitely not conserved.

SiempreViernes 8y ago
Well, the material basis of wealth is part of the physical world so how does this non-conservation work out? Is wealth coupled with some "valuation potential" that offsets the wealth down to some "inherent" material value, or is value just entirely fictional?
- qubex 8y ago
  The things that can be owned are not necessarily physical. Think of intellectual property, which is essentially information about the permutations into which that physical matter can be arranged, and you'll notice that there's a huge excess of potential ownership. Financial derivatives are similarly only very loosely related to the world of material, and yet they account for trillions of dollars’ worth.
  - SiempreViernes 8y ago
    Ok, so basically you're saying that one can own arbitrary bits of phase space? But does this really give you non-conservation? Doesn't your remark just clarify that non-conservation comes from ignoring most of the space of possible ownership until someone bothers to go there? I mean, there is clearly a difference between the value of (sensible) financial derivatives and the value of the death star to the imperial court in the Star wars universe. So the connection to physical reality clearly matters somehow.
    - qubex 8y ago
      I'm arguing a bit more, actually: that the phase-space itself can form the basis for higher-abstraction phase-spaces, and so on almost ad infinitum, and thus provide an almost inexhaustible supply of potential ownership. A meta-fund that owns equity in a fund that invests in securities issued by owners of multiple pop-culture IP franchises? No problem.
      - SiempreViernes 8y ago
        What is a higher-abstraction phase space? For me the natural interpretation would be something that encodes phase space in a smaller representation, but that is clearly not what you have in mind... In any case, I don't see why positions and correlations between different particles shouldn't be considered "real", so that's arbitrary stacking of ownership brought down to earth. In fact, wasn't subprime to a large degree about falsely claimed correlations? That is to say the derivatives implicitly assumed things that weren't true, or in other words secretly left reality behind.
- xyzzy123 8y ago
  Suppose you find an old painting in the basement. You put it out in your garage sale. A stranger comes along and offers $20 for it. Another person arrives and tells you it’s actually a valuable piece and would pay $200 for it. A third person comes along and explains that it was made by their great grandmother and it was the last piece she made and she will pay $2000 for it. For sentimental reasons. This third person has made a powerful enemy who then comes along and offers $20000 for the item, just to spite them. They intend to set the painting on fire. How much “wealth” was stored in the painting? Art is silly but really all value is subjective and situational. Crayfish can be cheap poor people food or a delicacy of the rich, depending on culture. You could die in a desert, weighed down with “valuable” gold because the traveller you met would not trade it for their last canteen of water.
  - SiempreViernes 8y ago
    This is a nice example showing how people don't really know what is going on, wealth seems to behave in very mysterious ways. But, in each step you are clearly adding more and more context along with the physical item itself, context that must itself have some physical encoding. My point is mainly that I insist that physical reality is all there is, and if some events are hard to assign to any one physical thing that just means we are looking for subtle correlations.
    - AnimalMuppet 8y ago
      I'm pretty sure that in economics, physical reality is not all there is. Economics is about people assigning value to things. The things, by themselves, have no economic value.
      - dragonwriter 8y ago
        > I'm pretty sure that in economics, physical reality is not all there is. Yes, it is. > Economics is about people assigning value to things. People are not outside of physical reality, nor is their experience of utility.
Jun8 8y ago
The following essay by pg's explains how wealth is not conserved in simple terms: http://www.paulgraham.com/wealth.html http://www.paulgraham.com/wealth.html

by qubex 8y ago

SiempreViernes 8y ago

Well, the material basis of wealth is part of the physical world so how does this non-conservation work out? Is wealth coupled with some "valuation potential" that offsets the wealth down to some "inherent" material value, or is value just entirely fictional?

qubex 8y ago
The things that can be owned are not necessarily physical. Think of intellectual property, which is essentially information about the permutations into which that physical matter can be arranged, and you'll notice that there's a huge excess of potential ownership. Financial derivatives are similarly only very loosely related to the world of material, and yet they account for trillions of dollars’ worth.
- SiempreViernes 8y ago
  Ok, so basically you're saying that one can own arbitrary bits of phase space? But does this really give you non-conservation? Doesn't your remark just clarify that non-conservation comes from ignoring most of the space of possible ownership until someone bothers to go there? I mean, there is clearly a difference between the value of (sensible) financial derivatives and the value of the death star to the imperial court in the Star wars universe. So the connection to physical reality clearly matters somehow.
  - qubex 8y ago
    I'm arguing a bit more, actually: that the phase-space itself can form the basis for higher-abstraction phase-spaces, and so on almost ad infinitum, and thus provide an almost inexhaustible supply of potential ownership. A meta-fund that owns equity in a fund that invests in securities issued by owners of multiple pop-culture IP franchises? No problem.
    - SiempreViernes 8y ago
      What is a higher-abstraction phase space? For me the natural interpretation would be something that encodes phase space in a smaller representation, but that is clearly not what you have in mind... In any case, I don't see why positions and correlations between different particles shouldn't be considered "real", so that's arbitrary stacking of ownership brought down to earth. In fact, wasn't subprime to a large degree about falsely claimed correlations? That is to say the derivatives implicitly assumed things that weren't true, or in other words secretly left reality behind.
xyzzy123 8y ago
Suppose you find an old painting in the basement. You put it out in your garage sale. A stranger comes along and offers $20 for it. Another person arrives and tells you it’s actually a valuable piece and would pay $200 for it. A third person comes along and explains that it was made by their great grandmother and it was the last piece she made and she will pay $2000 for it. For sentimental reasons. This third person has made a powerful enemy who then comes along and offers $20000 for the item, just to spite them. They intend to set the painting on fire. How much “wealth” was stored in the painting? Art is silly but really all value is subjective and situational. Crayfish can be cheap poor people food or a delicacy of the rich, depending on culture. You could die in a desert, weighed down with “valuable” gold because the traveller you met would not trade it for their last canteen of water.
- SiempreViernes 8y ago
  This is a nice example showing how people don't really know what is going on, wealth seems to behave in very mysterious ways. But, in each step you are clearly adding more and more context along with the physical item itself, context that must itself have some physical encoding. My point is mainly that I insist that physical reality is all there is, and if some events are hard to assign to any one physical thing that just means we are looking for subtle correlations.
  - AnimalMuppet 8y ago
    I'm pretty sure that in economics, physical reality is not all there is. Economics is about people assigning value to things. The things, by themselves, have no economic value.
    - dragonwriter 8y ago
      > I'm pretty sure that in economics, physical reality is not all there is. Yes, it is. > Economics is about people assigning value to things. People are not outside of physical reality, nor is their experience of utility.

Jun8 8y ago

The following essay by pg's explains how wealth is not conserved in simple terms: http://www.paulgraham.com/wealth.html http://www.paulgraham.com/wealth.html