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I see your point, but then isn't wealth always relative? If scarcity isn't used as a yard stick for money creation how can inflation be avoided?
by lwhi 15y ago
I see your point, but then isn't wealth always relative? If scarcity isn't used as a yard stick for money creation how can inflation be avoided?
- davidw 15y agoHaving enough to eat is having enough to eat: it doesn't matter if someone else eats in a fancy restaurant. Edit: status is relative - if everyone else has a Ferrari, and I only have a Fiat, I probably feel poorer. However, I still have a car that is better, faster, and safer than anything that existed 100 years ago. Edit#2: the above is one reason that worrying about what you have in an objective sense is a lot healthier than worrying about status/relative wealth.
- nickik 15y agoNo wealth is not relative. If you have nothing you have nothing thats the baseline. I think what you mean is that it is hard to measure how healthy somebody is, thats why we use money to meausre wealth, with money you get choise and if you can choose you can take what makes you the happiest. This line of reasoning is flawed but its the best weath got. If you we find out that choise make you unhappy then we have a problem and I don't know how to solve it.
- roel_v 15y agoI don't understand your question? No, wealth isn't always relative (it's debatable but not so interesting if it's ever relative) - an 'average' farmer in the 1800's (in Europe) had a vastly worse lifestyle than an 'average' farmer today. Today, he is more wealthy in absolute terms. If you and I can each grow 100kg of wheat and 2 pigs per year when we work solitary, but if you can grow 400 kg and I can grow 4 pigs if we specialize and trade wheat for pigs, then we are both objectively more wealthy in the second scenario. Why would you want to avoid inflation? Money is only a measure for wealth at one point in time, for the rest it's just a tool to provide liquidity and efficiency to markets. What do you mean by 'scarcity being used as a yard stick for money creation'?
- lwhi 15y agoI mean the wealth of one person in 1800, is relative to the wealth of another person in 1800. Likewise for today. So perhaps comparing the wealth of people in 1800 to today isn't actually that productive, because the baseline has increased? I think maybe my view of economics is flawed. My basic premise was that traditionally cost has traditionally been defined by scarcity of an item / service and consumer demand. In which case there's no limit to scarcity (say through sale of IP) how can the system work without bubbles developing / the economic system breaking down? Likewise how can everyone be wealthy when wealth is measured relatively? (i.e. how wealthy you are is defined by how wealthy your neighbour is). I think I need to read a bit about economics in general. EDIT: prosperity -> wealth.
- roel_v 15y agoThat's why I included the example of the wheat and the pig - there is no time component there. It shows that there can be various levels of wealth even at the same point in time, and that wealth is not zero sum, i.e. it's not necessarily true that for person A to get more wealthy, person B has to become less wealthy. They can both become more (or less) wealthy). How do you conclude that a good with unlimited supply (which is I suppose what you mean by 'no limit to scarcity') would lead to bubbles or economic breakdown? It just means that in theory in a system with perfect substitutes for these goods, the cost would gravitate towards production cost. The whole point is that prosperity isn't measured relatively. (well you could, but it doesn't make much sense in most cases). Prosperity is quality of life. Would my life be better if my neighbor doesn't have money to take his daughter to a doctor but I do? Only if I was a sociopath, which the majority of us aren't. When the tide rises, all boats go up. And yes there is evidence that in the margin, our feeling of well-being increases when we are higher on the social ladder, but that's a separate issue; "prosperity" and "feeling of well-being" are related but not the same.