A while back, I mentioned that economies can generate wealth without theoretical limit, prompting this question:
Can you go into more detail on this? As I see it, wealth is the the amount of stuff produced divided by the amount of stuff required. AFAICT, the only two things that can change that ratio are death and technology.
Let's see if I can get at what I was getting at. I don't know much about this sort of stuff, but that's why it's time for me to start thinking about it. Thinking through writing. Which means, this will be long...
For starters, there's a matter of definition. The question above obviously considers physical, tangible stuff. Gold pieces, certainly. Houses. Perhaps iPods. What about the music ON the iPod though, in the unlikely event that it was purchased? If I paid $0.99 for a copy of a song on iTunes, does that count towards my wealth? Even though I really can't re-sell it? What sort of wealth can Apple, Inc. claim by pure fact of having that song on their servers, available for sale? How wealthy is the musician who created the song, and the label that produced it? If I purchase a dividend future against the company that owns the label, how wealthy am I? If your 401K is invested in a company who owns a derivative sold by the company that lent me the money to purchase my house, and my ability to pay that mortage is dependent upon the success of my dividend futures, which depend upon the success of the label, which depends upon the success of the musician, which depends on you spending $0.99 to buy the song on iTunes... Well, where do we all stand?
Well, chances are that Twifkak, the questioner, was referring to more physical stuff, but the physical stuff is readily exchangeable for less phyiscal stuff, like services, or intellectual property, or what have you. Surely possession of those things, or rights to those things, constitute wealth as well.
Let's ignore currency, inflation, gold standard, and all that gobbledygook for a moment. We can ignore the ins and outs of mark-to-market for the most part too. Maybe we can even move beyond the term "wealth." Let's consider resources, and value.
Resources are the things that are limited. There's only so much gold. We can only make so many iPods before we run out of the metals and plastics required. There are other resources too, like the time and effort of the workers who mine the gold, and who design and manufacture the iPods.
Value on the other hand, which is sort of what I was indicating when I used the term "wealth," is the thing that isn't really limited, and is actually kinda hard to measure. Let's consider for example, a lump of gold. The lump isn't too valuable if it's mixed up with a bunch of stone, half a mile under the ground. The same amount of gold is way more valuable in a ring, or in a computer chip.
That makes sense on the surface, but how do we know that? It's the same elemental stuff, right? Well, we know that a customer will pay more for a ring or a computer than for mining rights. What if I'm a naturalist though, and I'd rather have the stuff in the ground? Value, it seems, is subjective. What if, a decade from now, our fancy quantum computers don't require any gold? The chips won't be valuable then, will they? Value, it seems, is time-dependent.
The same thing should apply to labor, right? Consider a lawyer whose expertise is intellectual property. How valuable is his time now? How valuable was it prior to the rise of the internet and all the patent wars, plagarism and copyright wars it brought?
Okay, so value is a slippery term. Wealth, in the sense I used it, is an aggregate measurement of the value currently owned and/or produced by an individual, a group, a nation, or whatever. So, if it's a measurement, how do we measure it?
Well, this would be a convenient time to bring back currencies and markets and all that, but let's resist. In a simple understanding, folks work for currency, which they spend in some form of market, in order to get goods and services that were produced using physical (e.g., gold) and non-physical (e.g., labor) resources that they value. Currency, then, shows up on both sides of the equation, which means we can safely discard it.
The market too is on both sides - there's a market for the labor that the consumer offers in order to earn the currency, and a market for the currency that the laborer then offers in order to get what he values. Since labor is really just a fancy name for "service," we can get rid of the extraneous stuff and concentrate on the important bit: we know how much you value MY good or service by measuring how much of YOUR goods and services you're willing to give up for MINE.
Okay, let's bring currency in, finally. Since the amounts I'll be willing to give up for what you've got and you'll be willing to give up for what some third person has got are all subjective, and time-dependent, and otherwise measured in incompatible units like "hours of time spent by a trained doctor on diagnosing a patient" vs "gigabytes of storage" vs "tins of gourmet green tea in China," things get confusing fast. So fast in fact, it's almost impossible to conduct any but the simplest of economies on currency-less barter. It's currency that lets me say that I'd pay $100 an hour for a physicians care, $100 for a 500GB USB drive, and $0 for gourmet green tea, since I don't like it. If you aren't sick, don't need a hard disk, and fancy green tea, your numbers will be different.
Useful though money is, it's not really special. It's just another good. You might value yen, I might value dollars. If an elementary school economy depends on hostess cupcakes for currency (a likely scenario), prices for, e.g., bully ransom might fluctuate wildly depending on whether the school lunch is yummy or not on any given day. If I offered you a million dollars to shovel manure for a day, you'd probably do it. You value your leisure a lot, and you value not smelling manure a lot, but you value 100 million bucks more. If you knew though, beyond a shadow of a doubt, that you were going to die tomorrow night, you'd probably pass on my offer. New information means that you value dollars a whole lot less (what use are dollars to a dead man?), and your lesisure (i.e., whatever you'd do with your last day otherwise) a whole lot more. If you're afraid that the US government won't be able to pay off its treasury bills, or that the dollars it gives you when it does won't be worth too many yen, maybe you won't purchase any more bonds. You know, that kind of thing.
Okay, rambling aside and a whole lot of opened cans of worms later, what has this to do with economies generating wealth? Well, resource allocation is zero sum, but value allocation isn't exactly. If a wealthy person as a nice Porsche, then it's true that I can't have that Porsche. I could however, build my own. Or take a second job and buy one. Or make something that you thought was worth $80,000 and sell it to you. Or, I could go online, look at some photos of Italian sportscars, and, four hours later, not want the Porsche at all. Or President Obama could announce the Porsche In Every Garage initative, allocating public resources to the hostile takover of Porsche (and, perhaps necessarily, Germany) by the US government, and subsequent mass production and distribution of 911-Turbos for all. Of course, if he did so, we probably wouldn't want the Porsches any more, since everybody would have one. Including the "wealthy" people, except they'd be driving Lambos, which is what we'd want.
Which of course, is the point. This isn't about resources at all, or even goods or services. Value and wealth are way more slippery than that. The overwhelming majority of the last couple thousand years of history consists of subsistence agriculture. For a subsistence farmer, a cheeseburger would a luxury rarely or never experienced. In our age, someone earning minimum wage can secure a cheeseburger for less than 10 minutes' work. Paris Hilton probably hasn't logged 10 minutes of work in her lifetime, as some would measure such things, so how much can we say that she values the 5,000 handbag that she totes? I know I value my pocket change more than that hideous thing. Which was valued more by whom, the entire fortune possessed by Steve Ballmer, who stresses out every night over what new product Apple might be released, or the tree under which the Buddha (himself a "wealthy" prince) attained enlightenment? Who was... wealthier?
Where we're going with all of this, is that redistribution is somewhat nonsensical. The cheeseburger you can get for a buck at Wendy's is the same combination of cheese, bread and meat that would be an unattainable luxury for many today, and nearly all of our ancestors. The value of that cheeseburger though isn't what it IS, but what it REPRESENTS. The Porsche driven by an AIG exec would be just as fast if everyone had one, but way less valuable. We don't evaluate these things based on what they ARE, or how much stuff is in them and in what combination, or how long it took to make them. We evaluate them based on the status they convey, the feelings we have about them, the difficulty or relief from difficulty they bring to our lives.
These are fickle things. They can change based on what your neighbor purchases, or what disease your mother died of, or what ads were on during the super bowl. These are "relative" in the sense that we compare what we've got to what "wealthy" people have got, but that's not the extent of it. They're relative in the sense that we all value different things, and value them differently at different times. It's silliness to conceptualize a giant pool of iPods, Porsches, cancer treatments and the like, and reapportion them out to everyone. Reapportioning them would change the values anyway, and there'd be no way to balance those equations. It's just nonsense.
The economy produced the "wealth" that the stereotype of an AIG exec commands right now. His mansion, his Porsche, the "services," if we might be so blunt, of his trophy wife. Surely it'll produce much more "wealth" in the future. Cures for cancer, quantum computing. Perhaps we'll get our flying cars. Mansions for everyone in moon colonies, 200 year life spans.
Are we being anti-materialist here? I don't really think so. Buddha attained enlightenment under a tree, but did someone plant that tree? Even if it grew naturally, are there enough trees for everyone? Would he have had the time to attain enlightenment had he been working in the fields like his peasant subjects? Even a monk has a rice bowl and a robe, right? I enjoy my computer, and I eagerly await the awesome capabilities offered of my next one. But that's just it, there's always a potential next one. Workers can become more productive. Computers can be faster and smaller. Porsches can be faster, or sleeker, or get sat-nav, or the power of... FLIGHT. Moon colonies can be made more spacious. Or maybe there's a better view to be had on a planet orbiting two stars so that you can have twice the sunsets and sunrises. Or perhaps we'll just have holodecks and simulate the sunsets. But the "wealthy" will be the ones whose holodecks have better contrast ratio and don't leave that weird feeling in the back of your head after a session that's kind of like when you start walking around in normal shoes after ice skating.
Surely once all those things come to pass, our GDP will be through the roof. Even the poorest of us will be wealthier, in dollar terms, or in flying car terms, or whatever terms you'd like, than the wealthiest AIG exec.
Perhaps I should quit rambling and move onto something else. Maybe I could give World of Warcraft another try. I quit last time, since I was only level 12, and it'd take weeks to get to level 80, which I'd have to do in order to get the kickass swords. That's way too much work. If I were in charge of Blizzard, I'd hack the database and give everyone kickass swords. Then they'd be happy.
