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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.
Not really, if the wealth you have is generated and you can demonstrate you are exceptionally good at generating wealth, then it is not hoarding a festering pile, your existance is in fact a service to others and the nation by allowing you to have so much wealth since you can continue to generate more wealth for everyone (including yourself) more so than other people (who have not proven their abilities) might be able to do.
@freemo it is a festering pile unless it is necessary for whatever your wealth generation scheme is, which is unlikely as you have generated it without the pile in the first place. If it wasn't necessary before but is somehow necessary now, it's not exactly your skill it is just a gold mine you happened to stumble upon.
@gioypi
Generally wealth generating schemes generate more wealth the more money they have as an input. So generally every step along the way as they generate wealthy they use that to generate more wealth and a large portion of it is used for wealth generation in increasing amounts, sure.
But also some of it, as you suggest, is just money you have personally for whatever you want to spend it on. But since this is money that would have never existed in the system without you having generated it in the first place, then there is no harm or negativity associated with spending it. Especially when you consider that the spending of that money itself ultimately can go to fund other wealth generating enterprises of other people and helps ensure new people come into the game by winning over some portion of your free funds.
@freemo Even assuming best case scenario that it helped some, It is still bad if there are more people out there that need help. It's like coming across some food and destroying it, when you know your neigbour is starving. Their money being spent after their death doesn't mean they weren't greedy assholes their entire life. Also it might not be spent for a few generations if they teach their heirs(yeah that's still a thing) to be just as greedy and useless as they were.
@gioypi
That analogy isnt accurate.. It is more accurate to say it is like spending your summer growing tomatoes and instead of giving it to your starving neighbor you can them up and give them to your child, who then uses the canned tomatoes to feed himself or feed a starving naeighboor.
Yea its not "nice" that you had food and let your starving neighboor go hungry and all. But your neighboor is no worse off now than if you never grew that food in the first place.
@freemo I mistakenly assumed that by burry you meant destroy, and not save to dig up later, which makes it worse in my optinion. It's not "not nice" it's bad, really bad.
Also in the analogy you are fed for life (or foreseeable future). Obviously if you have to worry about not having enough food for yourself or your family tomorrow(during a harsh winter) that changes things, but would also be out of context.
@gioypi
@freemo
But is it wealth or money you are generating? If it is wealth then the canned tomatoes analogy is great. Can you generate money without having a country/bank print them?
Thinking about huge multinational companies that keep money in offshore accounts and never spend them I get concerned about inequalities. And since they are companies they could be immortal, so the money never return to the market, but they can be used as leverage. I hope I am not going out of context here, this is what pops into my head when reading @namark 's argument.
@freemo Well as usual I guess we are dancing around the same argument, that might not even be an argument.
The wealth might a be a pie or might not be a pie, dependent on the situation. You might be doing some good, no harm, or some harm. Regardless of all of that, once you have accumulated more than you need (that is can reasonably plan to spend in foreseeable future), it is immoral to not share/spend, if there are people in need.
Mostly agree, but the more than you need being immoral might need some clarification.
A billionair who uses much of their money to create programs to feed the hungry, even if they still have billions in their bank account is acting perfectly morally as they are using those large funds to generate some good for others. So even though they may own far more than they need to survive, it is all perfectly ethical because it is put to good use, even without exhasting that collection of funds.
I dont think it has anything to do with pride or showing off for many (some). Its just that keeping the money means they can generate more and help more.
If I have a billion dollars and give 100% away to buy food for the starving if im lucky ive fixed hunger issues for a short while. at best.
However if I have a billion and only spend 1 million a year to feed the hungry and leave the other 999 million that means I can use that money to regenerate what I spent to feed the hungry by next year and do it again, over and over, and help far more people.
@freemo not convinced that needing 999 million to make 1 a year is any sort of skill. Makes one wonder where did the 999 million come from in the first place (there has got to be some maths to that, I admit I haven't done). And as discussed before if you need it for any actual projects that involve other people the "input" doesn't have to be yours (or remain yours) for the money to do its work.
the numbers chosen are an exaggeration of course.
The point is, staying rich, rather than giving it all away, enables you to do far far more good if that is your intention.
The point your missing is that how much money you can make is dependent on howmuch you made. making 1 million when you have 999 is going to be much easier than making 1 million when you have 0.
An altruistic rich person who stays rich will do far more good in a life time than an altruistic person who gives away any money they dont personally need and thus never becomes rich.
@freemo there has got to be limits to what one person can manage. If you build one factory I guess you can manage it yourself. The second one? ok, but the third you gotta trust to someone else (or several other people). Now why not fully trust them and instead maintain some sense of ownership, reserving the right to close the factory and fire them at any moment, I don't get. Especially when your "investment" is not even in your actual field of expertise. "I wanna be king" is the only explanation I can think of.
Thats an argument you could extend to any sort of hierarchical structure: Why have a federal government why not just give all that tax money to the states.
The truth is consolidated power in one proficient director can and does have advantages.
If someone has made a billion dollars in their life chances are they are exceptionally good at managing money, it also means they are really good at delegating to others effectively. That means they know when to hire people to run a factory for them, but they also are going to be pretty good at knowing when to fire them and have them replaced with someone who would do a better job.
@freemo I would say we have devised and continue to devise various mechanisms to regulate and improve the hierarchical power structure in governments, so I don't see why the same does not apply here. If anything it should serve as a precedent and a model for people to follow and improve upon.
@freemo There are many mechanism in place to challenge and limit the authority. It's not perfect but at least that's the point and the goal. If anything people in doing business have more room for experimentation since the stakes are lower (relatively). Where are all the democratic, socialist, anarchist, capitalist or satanist(wait... no!) corporations? Why are they all monarchism/feudalism and considered good(tm)?
"The truth is consolidated power in one proficient director can and does have advantages". Is that the truth or just everyone's wet dream? Do we approve of the benevolent dictators because it's right, or because we each want to be one?
@freemo I said why own the 3rd factory, you said why federal owns state, I said it don't really own, there is nuance and rules. If you decide to not give away the 3rd factory and instead build a hierarchy, why go for monarchy/feudalism, instead of all the other things we have collectively arrived at as superior. Why not at least mimic it and experiment with it and improve upon it? You are a perfect testing ground. Because you don't want to build anything like that you just want to be the king of your little kingdom.
@namark
Accumulating wealth you generated isnt bad, it just isnt as good as spending it obviously. But if you generate a billion dollars and then dig a hole and burry it, you've done no more harm than if you never generated the billion in the first place. In fact you've probably done some good because you probably generated money for others along side generating that money for yourself.
With that said, all money will eventually get spent, even if that may not happen till after the person dies.
@gioypi