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I think it is missing something foundational. People have preferences over both production and consumption. Perhaps Mr A likes to consume X, but hates the work

I think it is missing something foundational. People have preferences over both production and consumption. Perhaps Mr A likes to consume X, but hates the work involved in producing X. Meanwhile Mr B likes to consume Y but hates the work involved in producing Y. Rather that A doing without X and B doing without Y, they could team up, swapping chores. Mr A makes Y for Mr B and Mr B makes X for Mr A. That clearly makes them better off, and needs to be on the list of wealth-creation mechanisms. But it sits awkwardly with the materialistic focus of the catalog. There are two people, producing the same things and consuming the same things, but with two scenarios with different levels of wealth. Ron's catalogue aggregates preferences; no difference in what work gets done? No difference in wealth. That raises an awkward question about language. Do we say that wealth comes from diversity of preferences? Or do we say that wealth comes from specialization and trade? Sometimes the two mechanisms operate conjunctively. A diversity of preferences does not, in itself, generate wealth. The wealth only comes if, in addition, one does the trading to exploit the diversity of preferences. But that specific kind of trading only generates wealth if there is a suitable diversity of preferences to exploit. That makes me doubt the value of a catalogue written as linear list. One needs to catalogue the package deals (for example: preference diversity AND trade).

lumost 5y ago
I think the challenge here is that when people think about wealth creation they directly associate it with a net productive activity. In theory A & B can satisfy their own needs in the above scheme. Or we could have a village where everyone satisfies exactly one other persons material needs. These activities do not result in net wealth creation. On the other hand if A makes X and X is consumed by B through Z then A has freed up B through Z to do something other than making X. Even then there is an argument to be made that some forms of production are self-limiting in that society as a whole cannot continue to be more productive if everyone is involved in specific kinds of high labor, low scalability activities which do not lend themselves to improvements over time.
awillen 5y ago
This seems like it's covered under 3 and 9a. Mr. A has a demand for X and Mr. B has a demand for Y. Wealth can be created by a combination of 3 (making whatever it is they have a demand for) and 9a (creating a marketplace that matches their demands with whoever can supply them).
- alan-crowe 5y ago
  Number 3 exhibits the over simplification that I claim misses something important. Number 3 leads you down the path of thinking that society can only get more wealth by more transformation. Nothing in 3 allows for creating wealth by swapping jobs round to make workers happier. 9a does not, in itself, go beyond the Marginal Revolution. In the basic version of marginalism, the demand curve slopes down because every-one, uniformly, has less appetite for extra when they are already well supplied. And the supply curve slopes up as production is pushed to include less fertile land or to refine from less concentrated ore. Diverse preferences over production and consumption are an extra twist to the story.
jkhdigital 5y ago
From what I recall, this distinction was the subject of vigorous debate among early economists formulating theories of value, especially among the Austrians. The “textbook” undergraduate explanation is that diversity of productive endowments leads to gains from specialization and trade, but the subjective theory of value perhaps enriches this notion: the “cost” of using up a scarce productive resource may be subjectively determined, which means that two humans who appear to have the same productive endowment nonetheless may have different preferences of what to produce. Also, your comment about package deals strongly reminds me of stuff I recently read in Thomas Sowell’s *Knowledge and Decisions.

lumost 5y ago

I think the challenge here is that when people think about wealth creation they directly associate it with a net productive activity. In theory A & B can satisfy their own needs in the above scheme. Or we could have a village where everyone satisfies exactly one other persons material needs. These activities do not result in net wealth creation. On the other hand if A makes X and X is consumed by B through Z then A has freed up B through Z to do something other than making X. Even then there is an argument to be made that some forms of production are self-limiting in that society as a whole cannot continue to be more productive if everyone is involved in specific kinds of high labor, low scalability activities which do not lend themselves to improvements over time.

awillen 5y ago

This seems like it's covered under 3 and 9a. Mr. A has a demand for X and Mr. B has a demand for Y. Wealth can be created by a combination of 3 (making whatever it is they have a demand for) and 9a (creating a marketplace that matches their demands with whoever can supply them).

alan-crowe 5y ago
Number 3 exhibits the over simplification that I claim misses something important. Number 3 leads you down the path of thinking that society can only get more wealth by more transformation. Nothing in 3 allows for creating wealth by swapping jobs round to make workers happier. 9a does not, in itself, go beyond the Marginal Revolution. In the basic version of marginalism, the demand curve slopes down because every-one, uniformly, has less appetite for extra when they are already well supplied. And the supply curve slopes up as production is pushed to include less fertile land or to refine from less concentrated ore. Diverse preferences over production and consumption are an extra twist to the story.

jkhdigital 5y ago

From what I recall, this distinction was the subject of vigorous debate among early economists formulating theories of value, especially among the Austrians. The “textbook” undergraduate explanation is that diversity of productive endowments leads to gains from specialization and trade, but the subjective theory of value perhaps enriches this notion: the “cost” of using up a scarce productive resource may be subjectively determined, which means that two humans who appear to have the same productive endowment nonetheless may have different preferences of what to produce. Also, your comment about package deals strongly reminds me of stuff I recently read in Thomas Sowell’s *Knowledge and Decisions.