> Well, every time we come up with examples, the points of reference
> shift. I don't see how it's possible to reconcile these views under the
> circumstances. My understanding of basic economics says that wealth is
> simply the accumulation of value. And that value is derived from the
> exchange of goods _and_ services. Without such exchange, all value is
> only potential value. And both parties derive value from the exchange of
> goods and services.
Sorry about the shifting points of reference--I thought I was
responding to the different cases that you posed.
You're getting all confused because you're thinking in terms of people
accumulating wealth, etc.
It doesn't matter whether you think in terms of a couple of people, or
nations, or the entire world.
The basic principle:
Manufacturing ******* CREATES ******* brand new wealth. Or assets,
call it whatever you want.
Service does not.
One last example, and, by all means, take a global view if that helps.
1. Define a man's wealth as: the sum of his cash and his other assets.
For the sake of the example, can we say that shoes are worth $50 a
pair, and tables are worth $500. We could make a huge list of
everything under the sun, but I'd rather pretend that there are only 2
items that people own, ok?
2. Suppose EVERYBODY IN THE ENTIRE WORLD (except three people) are
frozen in time for a day, and therefore their assets DO NOT CHANGE.
Except for the three people, no person, and no country has ANY change
in their wealth status for this period of time. Correct?
3. Suppose the sum total of all the wealth in the world (except for
our three people) is $1,000,000,000. (one billion). Ok?
4. Now, let's look at our three people and add them into the equation.
Jennifer: Lives in Tampa
Has $1000 in the bank, plus 3 pairs of shoes:
her total assets 1150.00
Bob: Lives in Shanghai, China (or Germany, or New York, suit
yourself)
Has $20,000, owns a table and one pair of shoes
total assets 550.00
John: Lives in St. Pete
Broke, not even shoes.
total assets 0.0
Sooooo, in actual fact, the sum total of wealth in the world is:
$1,000,021,700.00
(Check my adding--I never was too smart)
Ok on everything so far?
5. Now, we allow our three fine people to do whatever it is that they do.
Jennifer, a great programmer, writes a program and sells it to Bob for
$10,000.
John, idiot that he is, builds a table.
6. At the end of the day, tally things up.
Jennifer now has 11,000 in the bank, plus, of course, whatever other
assets she had before (represented by 3 pairs of shoes).
Jennifer's total: 11,150.
Bob now has 10,550.
John now has 500.
7. NOW!!!!!!!!!!!!!! Add up all the wealth in the world. All the
frozen people are still at: 1,000,000,000
Jennifer 11,150
Bob 10,550.
John 500.
Total 1,000,022,200.
THE TOTAL WEALTH IN THE WORLD has mysteriously increased by EXACTLY
$500, which is exactly the amount of money generated by stupid John,
who MANUFACTURED something.
So you see, manufacturing CREATES wealth, "out of thin air", so to
speak, whereas the activity of "service" does not. You need to be
very very very clear on this--I am NOT saying that individuals, towns,
countries cannot become wealthier by selling a service. What I AM
saying is that manufacturing (and agriculture, mining) are DIFFERENT,
in that they CREATE new wealth.
And historically, countries have prospered the most when their
manufacturing was the strongest, and they have faltered when they
started discarding manufacturing operations. (recent examples:
Britain, USA, Japan)
John
This archive was generated by hypermail 2.1.3 : Fri Aug 01 2014 - 20:27:33 EDT