The following statement was made recently on another board, but I have heard it before in different ways;



I personally think it is false.

Wealth always comes from somewhere. For the Walmart heirs to become billionaires, people need to be spending money in their stores, so their money comes from millions of consumers.

If we think of wealth as a pie, there will always be some with a bigger slice than others. But according to the statement, "There isn't a finite amount of wealth", then that pie can grow.

If that's true, where did that come from?

What do you think?

Wealth isn't money.
Money only represents wealth.
That said, what are the limitations on wealth if, in fact, they exist?
IMO, wealth is unlimited.
Your pie analogy doesn't work.

Hypothetical.

I have all the food in the worls and you have all the money in the world but I won't let you have any food under any circumstances.
Who is wealthy and who has money?

That's a near-impossible question to answer ~ there was a recent study that said millionaires don't consider themselves wealthy until they pass the $5,000,000 marker ~ for me, the definition of "wealth" is subjective ~ in my own mind, I'm "comfortable" ~ yet to those with significantly less, I'm wealthy ~ and to those with significantly more, I'm not ~

And there's a second option to your "...that pie can grow" comment, John ~ instead of the pie growing, the biggest slice can just keep skimming more off the other slices ... which is what is happening in the US today ~

I'm thinking there IS a finite limit to "wealth", but that no one has come close to it yet ~ the more population grows, the more demand there will be for the products and services today's "wealthy" are providing/selling ~

Sooz

i think that wealth is measurable, but changing constantly.

Indeed Macro. I think that people forget that wealth can simply disappear as well as grow. And, while at any particular time the amount of wealth is finite (and so the pie analogy does work), what isn't at all clear is how far that growth can actually grow. There's a sense in which that is limitless, at least in theory.

What's happening with the "pie", particularly in the US, is that it is growing, but all the growth and more is going to a very small percentage of the population. Their slice is growing dramatically while just about every other slice is getting smaller.

The real problem with the "finite" comment on the other board is that it only looks at one side of the equation. Sure, go ahead and mine, drill etc. and some people will make a lot of money, but there are also costs associated with such actions. The imbalance is that the people who make the money aren't the ones who have to pay the costs.

Thanks for the comments, but I feel I'm still back to asking if there is or isn't a finite amount of wealth.

Allow me to add the following sentence that was posted.


To me this shows a certain type of thinking - thinking that I believe to be very misguided - so I'm trying to understand it.

How does a billionaire accumulate his billions without it coming from others? If his 'slice of the pie' grew, how can it not be by "skimming more off the other slices" as Sooz wrote or "just about every other slice is getting smaller" as Cattleman says?

If Sooz and Cattleman are right - and I believe they are - then the quote above must be wrong. It means there is a finite amount of wealth. It means that anytime someone's wealth increases, there must be a decrease somewhere else.

True or false?

True or false?

False. Unless you want to turn basic economics on its head and assert that the "creation of wealth" is a falsehood.
In a healthy economy all boats float but to varying levels. Problem is that we have a sick economy.
I am referring to wealth, not money.

OK, please define "creation of wealth" or explain how wealth is "created".

One way is "value added" but remember, that "value" isn't necessarily money. It is what is of value to you. It may differ from what I value.

In areas of Africa where there is rampant starvation food would likely be the commodity by which wealth is measured.
So if one is more successful at growing food than the neighbour one is wealthier than that neighbour due to the raw material (corn seeds, say) having more value added.

3. Economics: Total of all assets of an economic unit that generate current income or have the potential to generate future income. It includes natural resources and human capital but generally excludes money and securities because the represent only claims to wealth. Two common types of economic wealth are (1) Monetary wealth: anything that can be bought and sold, for which there is market and hence a price. The market price, however, reflects only the commodity price and not necessarily its value. For example, water is essential for human existence but is usually very cheap. (2) Non-monetary wealth: things which depend on scarce resources, and for which there is demand, but are not bought and sold in a market and hence have no price. Examples are education, health, and defense.

Read more: http://www.businessdictionary.com/defin ... z2c9rUrl7V

Although I ultimately agree with Oskar about the distinction between "wealth' and "monetary value" I think you are more concerned with the monetary side of things John.

"Wealth" can be created in a whole range of ways. Any activity that increases the output of goods or services in an economy increases "wealth". The "pie" can, and does, get bigger. But that doesn't guarantee how that growth will be distributed. In the 50s and 60s it was distributed in a way that actually reduced inequality, since the 1980s in particular it has gone the other way. That change is largely the product of political decisions.

Mesurable to a point but can fluctuate due to definition of wealth. There is a "finite" amount of some resources but fluid definition based on what you can do with the resources at any given time

Today's junk is tomorrow's resource.

The pie can also shrink.

That's true as well Oskar. That's what happened in 1929. And events in the last couple of decades show that we seem to have forgotten that lesson.

Problem with the analogy is that pies are finite.

Please give me a specific example of the pie getting bigger and/or shrinking.

Sure John.

1929 the stock market crashes. You had a million dollars worth of stocks and shares, now they are only worth $100,000. Nobody got the extra $900,000, it just disappeared.

Late 1970s, Apple Computers come on to the market. They are a completely new type of product. They spawn a whole new industry which has a significant effect on the GDP of the US. Wealth has been created.

If you want a more complex example look at "creation of credit".