3 ms·

Your reader vitriolic isn't really grasping the particular distinction between "wealth" and "money" you're trying to make. You really would want a three-way sp

by frig 17y ago

Your reader vitriolic isn't really grasping the particular distinction between "wealth" and "money" you're trying to make. You really would want a three-way split between wealth and money and value; it's often the case that wealth production leads to value-destruction, which keeps things interesting. It's also the case that once you have the three way wealth/value/money dynamic going you have to figure out: - what are other people's states of mind in this classification? or, at least, what can they be? Because, for example, in some sense fame is a kind of wealth -- it's useful if it's the right kind -- as is demand for your particular goods (or disdain for your competitor's wares), as it's also useful. On the other hand it's not clear that it fits your description of wealth. If it is wealth then advertisers and other persuaders count as wealth-producers. If it isn't either you need a fourth category or you need to shoehorn it into some more-abstract notion of value. Sidenote: I've always thought it extremely unfortunate that English uses the phrase "make money", as unless you're actually "making money" what you're doing is "getting money" (which phrase is, incidentally, apparently the vernacular amongst the unschooled dwellers of the inner city); first, rectify all the names. This kind of sloppiness in language leads to worse derangements, as evidenced in Vitriolic's notion of creating wealth (what he's talking about is accumulating surplus wealth).

dmoney 17y ago
What's the difference between wealth and value?
- frig 17y ago
  An impossible thing to really nail down and something people can spend their entire lives chasing their tails over. Intuitively there should be a difference (I'll justify the intuition in a second) but really making it precise is very tricky. "Value of X" == what someone might pay for X; thus, if you have a barrel of oil and the current market price is $50/barrel then the value of your barrel is $50 (assuming you can get the market price for it, etc.); if tomorrow the market price is $55 or $45 that's its value tomorrow. If your primary interest in oil is buying it and selling it value is what you should care about. Now, let's suppose your interest is in using that oil; you operate a machine shop and the oil is enough fuel to run some machine for a week. How long the oil powers your machine doesn't change overnight; if the market price goes to $55 or to $45 you get a week of machine operation out of that barrel, same as you did when it was @ $50. The intuition behind splitting off "wealth" from "value" is that you want some term that captures how useful something is for a particular non-market use (powering a machine); this term captures the notion that there is a kind of utility which is not very effected by the item's market price. So usually when people make a distinction between "wealth" and "value" they're trying to differentiate between "what price something costs/fetches" and "how useful is it if actually used"; intuitively those are two different things but it becomes very hard to thoroughly disentangle them. You see this notion re-invented many times, but not always with the same terminology; Warren Buffet likes to say that "price is what you pay; value is what you get", which is expressing something like the same distinction but using the term "price" for "value" and "value" for what I (and the original post) call "wealth"...the important thing isn't what you call things so much as that you can make the distinction. The reason disentangling the notions is harder than it looks is that in any kind of market economy each is in effect dependent on the other in a kind of endlessly recursive fashion. Explaining the endless recursion is an endless chore so I won't bother; you can get a hint of it if you think about the machine shop: - a barrel of oil's intrinsic utility to the machine shop is that it lets the shop operate for a weak - ...but why does the shop want to operate? It could be that this is a hobby shop and the operator just has an intrinsic love of working in it, but it's probably the case that the shop operates b/c the product of its operation has enough value that it's worth doing - thus the barrel is intrinsically useful in that it lets the shop run, but the utility of running the shop has to do with value, and so forth As for wealth-production leading to value-destruction, this is readily apparent if you look at any time technology's disrupted an industry. A great historical example is the invention of refrigerators circa the 1900s and how it impacted the ice merchants of the time. Before the invention of the refrigerator there was a large industry in the form of going to cold places, carving out giant chunks of ice, packing them in insulation (generally thick layers of straw), transporting them to warmer locations, and then selling them off piece-by-piece to anyone who needed to keep stuff cold. After the invention of the refrigerator this ice-market evaporated, as you might expect; this wasn't b/c ice suddenly stopped working as a source of cold but b/c its relative utility compared to refrigeration plummeted...since money is scarce people allocate it towards what they think is the best available option and once you had refrigeration the ice-merchants were the best available option a lot less of the time. You see something similar today: by any measure having substantial portions of the world's intellectual property available online for free is an enormous increase in the world's wealth -- the same as if every home having the entire library of alexandria in it -- but it also destroys a great deal of value, in that there's a lot less willingness to pay for the stuff that's easily findable online. But even without disruptive technology there are often cases of increased wealth leading to value destruction; a common example is that in cities with effective mass-transit systems (most Japanese cities, most major cities in the Eurozone, NYC + other east-coast USA cities) there's a lot less demand for personal transit...having a solution to a problem (in this case: getting around) is a kind of wealth, and tends to reduce the value of other solutions to the same problem (private transit alternatives), b/c it's a solved problem.

by frig 17y ago

dmoney 17y ago

What's the difference between wealth and value?

frig 17y ago
An impossible thing to really nail down and something people can spend their entire lives chasing their tails over. Intuitively there should be a difference (I'll justify the intuition in a second) but really making it precise is very tricky. "Value of X" == what someone might pay for X; thus, if you have a barrel of oil and the current market price is $50/barrel then the value of your barrel is $50 (assuming you can get the market price for it, etc.); if tomorrow the market price is $55 or $45 that's its value tomorrow. If your primary interest in oil is buying it and selling it value is what you should care about. Now, let's suppose your interest is in using that oil; you operate a machine shop and the oil is enough fuel to run some machine for a week. How long the oil powers your machine doesn't change overnight; if the market price goes to $55 or to $45 you get a week of machine operation out of that barrel, same as you did when it was @ $50. The intuition behind splitting off "wealth" from "value" is that you want some term that captures how useful something is for a particular non-market use (powering a machine); this term captures the notion that there is a kind of utility which is not very effected by the item's market price. So usually when people make a distinction between "wealth" and "value" they're trying to differentiate between "what price something costs/fetches" and "how useful is it if actually used"; intuitively those are two different things but it becomes very hard to thoroughly disentangle them. You see this notion re-invented many times, but not always with the same terminology; Warren Buffet likes to say that "price is what you pay; value is what you get", which is expressing something like the same distinction but using the term "price" for "value" and "value" for what I (and the original post) call "wealth"...the important thing isn't what you call things so much as that you can make the distinction. The reason disentangling the notions is harder than it looks is that in any kind of market economy each is in effect dependent on the other in a kind of endlessly recursive fashion. Explaining the endless recursion is an endless chore so I won't bother; you can get a hint of it if you think about the machine shop: - a barrel of oil's intrinsic utility to the machine shop is that it lets the shop operate for a weak - ...but why does the shop want to operate? It could be that this is a hobby shop and the operator just has an intrinsic love of working in it, but it's probably the case that the shop operates b/c the product of its operation has enough value that it's worth doing - thus the barrel is intrinsically useful in that it lets the shop run, but the utility of running the shop has to do with value, and so forth As for wealth-production leading to value-destruction, this is readily apparent if you look at any time technology's disrupted an industry. A great historical example is the invention of refrigerators circa the 1900s and how it impacted the ice merchants of the time. Before the invention of the refrigerator there was a large industry in the form of going to cold places, carving out giant chunks of ice, packing them in insulation (generally thick layers of straw), transporting them to warmer locations, and then selling them off piece-by-piece to anyone who needed to keep stuff cold. After the invention of the refrigerator this ice-market evaporated, as you might expect; this wasn't b/c ice suddenly stopped working as a source of cold but b/c its relative utility compared to refrigeration plummeted...since money is scarce people allocate it towards what they think is the best available option and once you had refrigeration the ice-merchants were the best available option a lot less of the time. You see something similar today: by any measure having substantial portions of the world's intellectual property available online for free is an enormous increase in the world's wealth -- the same as if every home having the entire library of alexandria in it -- but it also destroys a great deal of value, in that there's a lot less willingness to pay for the stuff that's easily findable online. But even without disruptive technology there are often cases of increased wealth leading to value destruction; a common example is that in cities with effective mass-transit systems (most Japanese cities, most major cities in the Eurozone, NYC + other east-coast USA cities) there's a lot less demand for personal transit...having a solution to a problem (in this case: getting around) is a kind of wealth, and tends to reduce the value of other solutions to the same problem (private transit alternatives), b/c it's a solved problem.