On Sat, Jul 26, 2003 at 01:23:34PM -0400, John Pedersen wrote:
>
> >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
Correction, per your later email: $20,550.
>
> 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.
>
He builds a table out of what? He had no assets.
> 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.
>
And Bob also has a $10,000 program.
> 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.
Corrected:
Jennifer $11,150
Bob $20,550 (includes program)
John $500
>
> 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.
>
Corrected total: 1,000,032,200.
This is a very contrived example, and leaves out a lot of things,
including whatever assets John had to have in the first place in order
to create the table. And if you're going to count his _unsold_ table
under assets, then you have to count Bob's program. Theoretically, Bob
could turn around and sell the program to someone else for that $10,000.
Jennifer, using only her labor, managed to create a $10,000 program out
of nothing. I would venture to say that anything which can be sold has
potential value or wealth.
I don't think you're going to win this argument, and I doubt I am
either.
Paul
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