4 ms·

The transfer of wealth is in fact the creation of wealth in 99% of cases, otherwise you are talking about charity. There is no "good" wealth creation, nor is t

The transfer of wealth is in fact the creation of wealth in 99% of cases, otherwise you are talking about charity. There is no "good" wealth creation, nor is there "bad" wealth creation. It just simply is. A tornado is a horrible event, but it creates wealth. You are conflating simple wealth creation - the idea of providing value that wasn't previously there - with innovation and/or human progress. That's simply a misunderstanding of the term when used in the context of economics.

ef4 14y ago
> A tornado is a horrible event, but it creates wealth. Classic broken window fallacy. A tornado doesn't create wealth. On net, it leaves the society poorer than before. It may create a windfall for a particular industry, but that's just moving wealth around. The money spent on rebuilding had to get pulled away from something else. It would have necessarily been spent or invested, and now that spending or investment will never happen. Bastiat called it the seen vs the unseen. We see the builders making money. We don't see the economic activity that would have otherwise occurred if there had been no tornado. The overall impact on economic activity is a wash, and the only net effect is the original property destruction.
- run4yourlives 14y ago
  A tornado doesn't create wealth. Of course it does. It's a catalyst. On net, it leaves the society poorer than before. There's no basis for you to make that assertion. If a trailer park is destroyed and a regional business park is what replaces it, there's no way you can argue that there hasn't been a net growth economically. Natural disasters almost always increase GDP in the recovery phase. We don't see the economic activity that would have otherwise occurred if there had been no tornado. This is kind of irrelevant since economic activity can't be measured until it actually happens. It's like suggesting that going to the moon was a net loss for humanity because we could have reinvested those funds in going to Mars instead. We don't see the economic activity that would have otherwise occurred if there had been no tornado. Again, because said activity is completely irrelevant. The point is that there is economic activity that is a direct result of the event. Is Christmas a wealth creating event? You are suggesting it's not, after all, all the resources used for Christmas presents would have been used somewhere else, no? Using those terms, nothing is a wealth generator, and the economy is zero sum. That is completely wrong.
AznHisoka 14y ago
"The transfer of wealth is in fact the creation of wealth in 99% of cases, otherwise you are talking about charity." How is that so? Yes, creating wealth does involve transferring of wealth, but if it's simple redistribution entirely from A to B, that's not new wealth creation at all. Say I take out a loan of 100K to build a house. Did I create new wealth? "A tornado is a horrible event, but it creates wealth." I can see your point, if that's your definition of wealth. Divorces create wealth. Wars create wealth. I guess that shows how useless any economic indicators are: they don't tell you whether the standard of living is improving at all.
- run4yourlives 14y ago
  They do tell you how the standard of living is improving, because standard of living as a measurement is linked to things like purchasing power, GDP, overall wealth etc. What you are looking for though is Quality of Life. This measurement is an attempt to do what you are looking for: harness non-economic indicators together with the empirical data to determine how people are doing. EDIT: To your first point - If you are giving some of your wealth (often in the form of money) to someone else, you are usually doing so for a reason, in that they are producing something that you value. The very act of producing value is creating wealth. Say I take out a loan of 100K to build a house. Did I create new wealth? Yes. You're paying interest to the bank aren't you? Interest that wasn't there before. That's new wealth. You're also paying your realtor. That's new wealth, etc. etc. The fact that you don't think the bank needs any more wealth is entirely besides the point. There's a good pg essay on this that explains these concepts well: http://paulgraham.com/wealth.html http://paulgraham.com/wealth.html
  - intellegacy 14y ago
    This has devolved into a semantic argument about wealth and pies. Part of the confusion isn't helped by one line in PG's essay: People think that what a business does is make money. But money is just the intermediate stage-- just a shorthand-- for whatever people want. What most businesses really do is make wealth. They do something people want. Besides this one confusing sentence PG gets wealth creation correctly: its about increasing the size of the pie, and that is what's important for the country as a whole. Your example of the realtor and the bank is not wealth creation, but money transfer. They didn't create new wealth. They made money from you, and your "wealth" is now decreased. The only wealth created in this instance is the wealth you add to the pie when you use that loan to complete your house. The realtor and bank add value in that they enable you to do your wealth-creating thing: build a house. The simple act of lending you 100k is not wealth-creation because if you piss that money away or burn it, all you have done is give money to someone else. The world is not richer as a result.

ef4 14y ago

> A tornado is a horrible event, but it creates wealth. Classic broken window fallacy. A tornado doesn't create wealth. On net, it leaves the society poorer than before. It may create a windfall for a particular industry, but that's just moving wealth around. The money spent on rebuilding had to get pulled away from something else. It would have necessarily been spent or invested, and now that spending or investment will never happen. Bastiat called it the seen vs the unseen. We see the builders making money. We don't see the economic activity that would have otherwise occurred if there had been no tornado. The overall impact on economic activity is a wash, and the only net effect is the original property destruction.

run4yourlives 14y ago
A tornado doesn't create wealth. Of course it does. It's a catalyst. On net, it leaves the society poorer than before. There's no basis for you to make that assertion. If a trailer park is destroyed and a regional business park is what replaces it, there's no way you can argue that there hasn't been a net growth economically. Natural disasters almost always increase GDP in the recovery phase. We don't see the economic activity that would have otherwise occurred if there had been no tornado. This is kind of irrelevant since economic activity can't be measured until it actually happens. It's like suggesting that going to the moon was a net loss for humanity because we could have reinvested those funds in going to Mars instead. We don't see the economic activity that would have otherwise occurred if there had been no tornado. Again, because said activity is completely irrelevant. The point is that there is economic activity that is a direct result of the event. Is Christmas a wealth creating event? You are suggesting it's not, after all, all the resources used for Christmas presents would have been used somewhere else, no? Using those terms, nothing is a wealth generator, and the economy is zero sum. That is completely wrong.

AznHisoka 14y ago

"The transfer of wealth is in fact the creation of wealth in 99% of cases, otherwise you are talking about charity." How is that so? Yes, creating wealth does involve transferring of wealth, but if it's simple redistribution entirely from A to B, that's not new wealth creation at all. Say I take out a loan of 100K to build a house. Did I create new wealth? "A tornado is a horrible event, but it creates wealth." I can see your point, if that's your definition of wealth. Divorces create wealth. Wars create wealth. I guess that shows how useless any economic indicators are: they don't tell you whether the standard of living is improving at all.

run4yourlives 14y ago
They do tell you how the standard of living is improving, because standard of living as a measurement is linked to things like purchasing power, GDP, overall wealth etc. What you are looking for though is Quality of Life. This measurement is an attempt to do what you are looking for: harness non-economic indicators together with the empirical data to determine how people are doing. EDIT: To your first point - If you are giving some of your wealth (often in the form of money) to someone else, you are usually doing so for a reason, in that they are producing something that you value. The very act of producing value is creating wealth. Say I take out a loan of 100K to build a house. Did I create new wealth? Yes. You're paying interest to the bank aren't you? Interest that wasn't there before. That's new wealth. You're also paying your realtor. That's new wealth, etc. etc. The fact that you don't think the bank needs any more wealth is entirely besides the point. There's a good pg essay on this that explains these concepts well: http://paulgraham.com/wealth.html http://paulgraham.com/wealth.html
- intellegacy 14y ago
  This has devolved into a semantic argument about wealth and pies. Part of the confusion isn't helped by one line in PG's essay: People think that what a business does is make money. But money is just the intermediate stage-- just a shorthand-- for whatever people want. What most businesses really do is make wealth. They do something people want. Besides this one confusing sentence PG gets wealth creation correctly: its about increasing the size of the pie, and that is what's important for the country as a whole. Your example of the realtor and the bank is not wealth creation, but money transfer. They didn't create new wealth. They made money from you, and your "wealth" is now decreased. The only wealth created in this instance is the wealth you add to the pie when you use that loan to complete your house. The realtor and bank add value in that they enable you to do your wealth-creating thing: build a house. The simple act of lending you 100k is not wealth-creation because if you piss that money away or burn it, all you have done is give money to someone else. The world is not richer as a result.