4 ms·

I 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 18

by roel_v 15y ago

I 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 ago
I 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 ago
  That'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.
  - lwhi 15y ago
    > 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? If I can take an item of IP (a music download) and sell it indefinitely at fixed rate, and distribution costs are very low; what is the basis for pricing that item when it isn't linked to anything concrete in the physical world? Could the attribution of money to virtual goods without any link to a physical resource lead to bubbles / economic breakdown, because there's no ceiling on the amount of wealth that can be generated from it? > The whole point is that prosperity isn't measured relatively. I'm (incorrectly) using 'prosperous nation' as a synonym of 'wealthy nation'.
    - roel_v 15y ago
      "what is the basis for pricing that item when it isn't linked to anything concrete in the physical world?" The same basis that is used to price physical goods: demand, or rather, the maximum a consumer is willing to pay. Supply and demand are not a pricing strategy, they are macro concepts that gravitate towards equilibrium. If I am Apple and I sell iPods, how do I set its price? Not by looking at how many I can produce, but by looking at what people will pay. You are confusing two things: - limited supply: there are only a few items of something, and therefore they are valuable. - substitution options: people want to pay for this song because it's the one they want to hear, not some recording of my neighbor playing his ukelele. "Could the attribution of money to virtual goods without any link to a physical resource lead to bubbles / economic breakdown, because there's no ceiling on the amount of wealth that can be generated from it?" No, although I'm not quite sure how to argue because I don't understand the assumptions leading to this question. An economic 'bubble' is, generalized, a sociological phenomenon where people ascribe an unrealistic value (as in, real value) to a good (the 'irrational exuberance'), leading to a bidding war fueled by the prospect that this value will continue to rise. Then at some point, it becomes clear that the good is overvalued, and the people who at that point own the goods are left hanging, much like musical chairs. If they borrowed to pay for the goods, they're double screwed because now they can't pay on their debts, the effects of which can then ripple through the economy. Bubbles don't come from too much wealth being concentrated in one hand.
- davidw 15y ago
  > I think I need to read a bit about economics in general. Be careful: a lot of purveyors of "economics knowledge" on the web are trying to sell you an ideology along with it. This is fairly neutral: http://www.introecon.com/ http://www.introecon.com/ A good author is Tim Harford, who has some "popularized" economics books that are, once again, reasonably neutral. In particular "The Undercover Economist" and "The Logic of Life".

by roel_v 15y ago

lwhi 15y ago

I 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 ago
That'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.
- lwhi 15y ago
  > 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? If I can take an item of IP (a music download) and sell it indefinitely at fixed rate, and distribution costs are very low; what is the basis for pricing that item when it isn't linked to anything concrete in the physical world? Could the attribution of money to virtual goods without any link to a physical resource lead to bubbles / economic breakdown, because there's no ceiling on the amount of wealth that can be generated from it? > The whole point is that prosperity isn't measured relatively. I'm (incorrectly) using 'prosperous nation' as a synonym of 'wealthy nation'.
  - roel_v 15y ago
    "what is the basis for pricing that item when it isn't linked to anything concrete in the physical world?" The same basis that is used to price physical goods: demand, or rather, the maximum a consumer is willing to pay. Supply and demand are not a pricing strategy, they are macro concepts that gravitate towards equilibrium. If I am Apple and I sell iPods, how do I set its price? Not by looking at how many I can produce, but by looking at what people will pay. You are confusing two things: - limited supply: there are only a few items of something, and therefore they are valuable. - substitution options: people want to pay for this song because it's the one they want to hear, not some recording of my neighbor playing his ukelele. "Could the attribution of money to virtual goods without any link to a physical resource lead to bubbles / economic breakdown, because there's no ceiling on the amount of wealth that can be generated from it?" No, although I'm not quite sure how to argue because I don't understand the assumptions leading to this question. An economic 'bubble' is, generalized, a sociological phenomenon where people ascribe an unrealistic value (as in, real value) to a good (the 'irrational exuberance'), leading to a bidding war fueled by the prospect that this value will continue to rise. Then at some point, it becomes clear that the good is overvalued, and the people who at that point own the goods are left hanging, much like musical chairs. If they borrowed to pay for the goods, they're double screwed because now they can't pay on their debts, the effects of which can then ripple through the economy. Bubbles don't come from too much wealth being concentrated in one hand.
davidw 15y ago
> I think I need to read a bit about economics in general. Be careful: a lot of purveyors of "economics knowledge" on the web are trying to sell you an ideology along with it. This is fairly neutral: http://www.introecon.com/ http://www.introecon.com/ A good author is Tim Harford, who has some "popularized" economics books that are, once again, reasonably neutral. In particular "The Undercover Economist" and "The Logic of Life".