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Its kind of sad how many people dont get this. Its like the first thing you learn when you study economics at any level.
@freemo Uh. Correct me if I am wrong, but isn’t the whole point of currency that it is based on something that is scarce, and thus, by extension, valuable? This was essentially how the gold standard functioned in the US previously.
This obviously does not directly apply to fiat currencies commonly seen today, however even in that case there are penalties for producing unending amounts of cash, so in practice there is a finite cap on circulating cash.
As well, then there are the accelerating returns of capital ownership in modern property-oriented society. People with capital will always make better returns on their wealth than those who do not, and more capital generates more returns. This is one of the mechanisms underlying the growing wealth gap in the US and of course in many other places.
So I guess you’ll have to explain what I am missing here. 🤔
@freemo
Are you referring to Pareto improvements? Because, otherwise, how is it not pie?
I am not.
I think it is best understood with an example. You have to understand going in that money is not wealth, and that money is only a small portion of what determines wealth. a person can have no money (a room full of gold bars) and still be extremely wealthy.
With that understanding in mind it is important to realize that wealth is constantly being generated and destroyed. If I buy a shovel for 5$ and go dig up 10,000$ worth of gold in my back yard with it, I have just generated 9,995$ in wealth that didnt exist before. I did not need to take wealth from anyone else to do it.
This is a simple counter example but the idea of wealth generation is in every venture we do, sometimes it is more obvious than others however.
@freemo I see now, but I still find the statement in the image misleading.
Also, in the example, would not such events change the value of gold in the society making the gold of other people equal to less wealth than before?
@gioypi The number of dollars you have is not an indication of wealth. think of wealth as "how well can I live" not "how many dollars do I have in my bank".
Lets think of another example to illustrate that. this time I use an axe I own to go chop down trees and mix some concrete and I use my own man power over 20 years to build a luxury house on a mountain top. All of the wealth here is also generated. It has significantly improved my quality of living, beautiful views, luxury home, I am now "wealthy" where before I had nothing. However in doing so I have not made anyone elses home any less appealing or luxurious. Everyone quality of life other than me is exactly the same as it was before I built my home off in the woods.
So again this is an example of me generating significant wealth for myself without needing to take that wealth from anyone else. Even though having one more home in the world may have reduced the money value of everyone elses home by a few pennies they dont actually have any less wealth than they did before, because wealth is not dictated by the money value over time.
@freemo I get it, nice example. Thanks for the clarification.
However, I wish this was how very wealthy people acquired their wealth. The higher I look, the less relevant it appears to me.
@gioypi Well I wouldnt say its less common as you move up the wealth scale. Its just hard to see as things become more complex. Some wealthy of course steal from others, but there is a great deal of wealth generation from large companies as well. It really just depends on the details as always.
