Creation of Wealth (finite / infinite)?

[Mr. Purple]

I think I know my opinion on the matter, but would love to hear some of your thoughts. Incidentally, I am not well educated in economics (understatement) so be gentle.

It would be awesome to avoid the political overtones and associated nonsense.

From this point downward I typed (and subsequently deleted) a long argument that I am pretty sure contradicted itself 3 times. Though an odd number of contradictions would put me on the original path, right?
:boggled:

Please, discuss. Many thanks!

[theprestige]

I think I know my opinion on the matter, but would love to hear some of your thoughts. Incidentally, I am not well educated in economics (understatement) so be gentle.

It would be awesome to avoid the political overtones and associated nonsense.

From this point downward I typed (and subsequently deleted) a long argument that I am pretty sure contradicted itself 3 times. Though an odd number of contradictions would put me on the original path, right?
:boggled:

Please, discuss. Many thanks!

In a closed system, creation of wealth is finite. In the closed system we inhabit, though, "finite" is probably a really big number.

[Mr. Purple]

In a closed system, creation of wealth is finite. In the closed system we inhabit, though, "finite" is probably a really big number.

Devil's Advocate:
Wealth is (loosely) the accumulation of value (manifest as $, shells, whatever).
A 'non-tangible' product (Music, medicine, accounting services) has value.
This 'non-tangible' product invalidates the description of the system as 'closed'.

[Dinwar]

Also remember that value is a relative term. Things that were once considered garbage are now worth waging wars over, and things which were once worth their weight in gold are tossed aside without thought. In one case (methane from garbage dumps) trash is literally CREATING value. So I would say it's more a dynamic equilibrium of some sort, rather than an upper limit--as soon as someone finds a use for some bit of refuse it becomes a value, and when a better value comes along it goes back to being refuse. (Yeah, yeah, it's oversipmlified--I know, for example, that the product which is of better objective value doesn't always win. This is a broad stroke, not a detailed discussion.)

[theprestige]

Devil's Advocate:
Wealth is (loosely) the accumulation of value (manifest as $, shells, whatever).
A 'non-tangible' product (Music, medicine, accounting services) has value.
This 'non-tangible' product invalidates the description of the system as 'closed'.

This 'non-tangible' product requires energy. Music requires a composer, who must wake up, don clothes (optional), eat breakfast, burn many calories in the process of contemplating the musical forms of his choice, and ultimately perform the product he has composed or else record it in some form that others can appreciate.

All this requires energy, some of which is lost as heat. In a closed system, the amount of music your composer can produce before all the available energy is lost as heat, is, in fact, finite.

Still, I think composers will be able to produce quite a bit of music before this closed system we inhabit ends in heat death. Our sun alone will keep us in avant-retro jazz-punk classical reggae for millions of years to come.

[Loss Leader]

So long as there is more available labor, there will be increasing wealth. The only time that wealth will even out or decline is if nobody ever works again.

[Mr. Purple]

So long as there is more available labor, there will be increasing wealth. The only time that wealth will even out or decline is if nobody ever works again.

Devil's Advocate:
There is a finite amount of resources. What will you pay for this wealth with? Labor?

ETA: Point being, a finite amount of resources invalidates the assertion that labor / non-tangible goods add wealth to the system. Eventually, labor would be traded only with other labor as the natural resources ran out as the population increased. The limiting factor is natural resources.

[Stylesjl]

Given that the universe is finite, so is wealth. In the long run we are all dead.

However aside from that wealth can be effectively infinite in the sense that wealth is defined in terms of value. Things considered worthless now can become quite valuable and vice versa. And the means to create it vary, from being very resource intensive (manufacturing) to using almost practically no extra resources (the services sector)

[Mr. Purple]

I am moving farther and farther into the 'wealth is finite' camp. The implications of this is that economic models predicated on growth are systemically flawed.

Thoughts? Can anyone make a really good argument for the creation of wealth from nothing?

Where am I wrong? Surely those smarter than I have stumbled upon this....

[drkitten]

I am moving farther and farther into the 'wealth is finite' camp. The implications of this is that economic models predicated on growth are systemically flawed.

Not really. As was pointed out, "finite" can still be "really, really, really big." If your economic model will make successful predictions for the next trillion years, but then fails, that's hardly a "systematic flaw."

[lomiller]

The problem I have is that “wealth” is somewhat subjective. It’s true that “stuff” is finite, but stuff isn’t really the same thing as wealth. Consider:

If I go from zero TV’s to one TV I think I have increased my wealth. I may even think that if I go from one TV to four. If I go from 4 to 100, however I have no place to put them and while I may be able to trade them to someone who has 0-3 there comes a point when no one really needs any more and all I really have is junk I’ll need to pay someone to dispose of.

Conversely If I go from 4 old TV’s to 2 new High Def TV’s I will probably see this as an increase in wealth even though it represents a decrease in stuff. This leads to the interesting phenomenon that while stuff may be finite, there can still always be increases in wealth. Now remember that infinity is not a number, it’s a state of unbound growth. Depending on how we are counting wealth then, we can view wealth as infinite as there will always be ways to increase it due to it’s subjective nature.

[Mr. Purple]

That got the discussion going...lol.
I just needed to pick a side. :)


Not really. As was pointed out, "finite" can still be "really, really, really big." If your economic model will make successful predictions for the next trillion years, but then fails, that's hardly a "systematic flaw."

For the most part valid, and I see your point. However, I would still call that 'systemically flawed'. It will eventually fail. Also, I probably disagree with the assessment of how big this 'really big number' is.

Consider:

100 people are on an island.

There is enough fresh water and coconuts available for exactly these 100 people. (Finite / Closed system). Mind you, it isn't as though there are X number of coconuts, there is a capacity to produce enough coconuts to feed 100 people.

I rub to sticks together, *bang* I have fire. Valuable for a variety of purposes. I however, own the technology / education / idea about fire.

Now, I have 'wealth'. However, what good does it do me? All I can trade that for is other ideas / tech / education. All of the natural resources are spoken for.

No matter, I barter my idea for others, and eventually we all now own the same technology / ideas / education.

Did we truly increase wealth? We can't support any more people than we already do because of the limited natural resources.

With the capacity of the environment finite, it seems to me, to limit the end game. I guess that gets us into a semantic discussion of the possibility that education (etc.) is wealth, in and of itself.

[MikeMangum]

So long as there is more available labor, there will be increasing wealth. The only time that wealth will even out or decline is if nobody ever works again.

Actually, the ultimate wealthy system is one in which no is has to perform labor, ever. They might have hobbies, but all actual work is automated.

Of course, we'd then have to worry about the self replicating robots becoming sentient and killing us all. I, for one, welcome our new robot overlords.

[Roboramma]

I rub to sticks together, *bang* I have fire. Valuable for a variety of purposes. I however, own the technology / education / idea about fire.

Now, I have 'wealth'. However, what good does it do me? All I can trade that for is other ideas / tech / education. All of the natural resources are spoken for.

But technology can be used to get more out of a finite resource. You can use your fire to convert sea water to drinking water, thus in theory increasing the maximum population capacity of the island.

I can invent the raft, made of coconut trees, and use it to go fishing, taking advantage of a previously untapped resource.

My brother invents the fishing net, increasing the efficiency with which i can use my raft. Etc.

Of course, it seems to me there is still a limit to this. We aren't there yet, but there's certainly a limit to technology. Matter can, after all, only be arranged in so many ways, and a very very small fraction of those are useful technologies which increase the efficiency with which we do things, or open up avenues for doing knew things. There are only so many untapped resources.

However, it's also clear that we're no where near those limits. Let's look at energy: the sun pumps out 3.846 × 1026 watts. We use a tiny fraction of that. There's plenty of potential there.
The outlook for both fission and more importantly fusion is similar (similar not in order of magnitude, but simply in that there is a great deal of untapped potential.

And once you've got energy, the question is only what you want to do with it.

[Roboramma]

Conversely If I go from 4 old TV’s to 2 new High Def TV’s I will probably see this as an increase in wealth even though it represents a decrease in stuff. This leads to the interesting phenomenon that while stuff may be finite, there can still always be increases in wealth. Now remember that infinity is not a number, it’s a state of unbound growth. Depending on how we are counting wealth then, we can view wealth as infinite as there will always be ways to increase it due to it’s subjective nature.

I can't agree with that. There may always be ways to change it, but there are only so many states that the matter in our solar system can be put in, which suggests that the possible "wealth" within that system is also finite. Extremely large and indistinguishable from infinite from our current vantage point, perhaps, but still necessarily finite.
You can go from an old TV to a new High Def TV, but there is certainly a best possible TV (made in our universe, with the constraints of its physical laws) for any particular state of you. And that will be true of any technology.

Thankfully, or not, I don't think we are anywhere near approaching that limit.

[drkitten]

Also, I probably disagree with the assessment of how big this 'really big number' is.

Consider:

100 people are on an island.

There is enough fresh water and coconuts available for exactly these 100 people. (Finite / Closed system). Mind you, it isn't as though there are X number of coconuts, there is a capacity to produce enough coconuts to feed 100 people.

I rub to sticks together, *bang* I have fire. Valuable for a variety of purposes. I however, own the technology / education / idea about fire.

Now, I have 'wealth'. However, what good does it do me? All I can trade that for is other ideas / tech / education. All of the natural resources are spoken for.

No matter, I barter my idea for others, and eventually we all now own the same technology / ideas / education.

Did we truly increase wealth? We can't support any more people than we already do because of the limited natural resources.

Sure we can. Fire allows metalworking; metalworking allows improved fishing technology, and improved fishing technology increases the food supply and allows more people.

Or, if you like, fire allows drying coconut, drying coconut reduces waste and means that more people can be fed from the same supply of trees/nuts.

Or if you like, fire allows distillation of water, which increases the freshwater supply on the island, allowing.... well, you get the idea.

Most of what technology does is allow either more efficient use of existing resources (steel ploughs allow better farming of the same land), or make new resources available (steel fishhooks allow me to catch larger fish).

As was pointed out, the ultimate limit of our current environment is basically energy. With enough energy, I can literally turn straw into gold. Given that we've got uberwatts of solar energy available for an estimated four billion more years, finite resource availability is not going to be an issue.

More worrisome, of course, is our (in)ability to harvest those uberwatts and put them to use; the Easter Island natives literally starved in the middle of an ocean filled with fish. But that's something that our economic models should be good at -- predicting what kind of resources will be coming up short and suggesting how to allocate resources now to R&D, manufacturing, and whatnot. It would have really helped them to invest in fishing boats, and it might equally help us to invest in thorium reactors in the short term and solar power research in the long-term.

[daenku32]

That got the discussion going...lol.
I just needed to pick a side. :)




For the most part valid, and I see your point. However, I would still call that 'systemically flawed'. It will eventually fail. Also, I probably disagree with the assessment of how big this 'really big number' is.

Consider:

100 people are on an island.

There is enough fresh water and coconuts available for exactly these 100 people. (Finite / Closed system). Mind you, it isn't as though there are X number of coconuts, there is a capacity to produce enough coconuts to feed 100 people.

I rub to sticks together, *bang* I have fire. Valuable for a variety of purposes. I however, own the technology / education / idea about fire.

Now, I have 'wealth'. However, what good does it do me? All I can trade that for is other ideas / tech / education. All of the natural resources are spoken for.

No matter, I barter my idea for others, and eventually we all now own the same technology / ideas / education.

Did we truly increase wealth? We can't support any more people than we already do because of the limited natural resources.

With the capacity of the environment finite, it seems to me, to limit the end game. I guess that gets us into a semantic discussion of the possibility that education (etc.) is wealth, in and of itself.

If you end up living happier than before then you've created wealth. You may not be able to put $ amount on it, but I'd say you've certainly gained something.

After all, happiness is what it is all about.

[Ziggurat]

I am moving farther and farther into the 'wealth is finite' camp.

Wealth is unbounded. This is a different statement than wealth being infinite, but its implication is closer to what people usually mean by wealth being infinite than what people mean by it being finite.

Thoughts? Can anyone make a really good argument for the creation of wealth from nothing?

Why does "from nothing" matter? Until our species dies, we won't ever have nothing available.

But we can (and do) create wealth, we don't simply find it. There is no fixed supply of wealth to be doled out: we create it, and the choices we make can lead to more or less wealth in total, not just for some particular person.

[lomiller]

I can't agree with that. There may always be ways to change it, but there are only so many states that the matter in our solar system can be put in, which suggests that the possible "wealth" within that system is also finite.

Sure the number of states are finite, but which state represents the most wealth is still subjective so you can still have a more desirable one no matter which state of matter you have.

[Mr. Purple]

I very much appreciate the discussion everyone, thanks for making my first thread so rad.


Why does "from nothing" matter?


Because there is a finite amount of matter/resources/coconuts.
I *think* I understand what some are getting at - that intellectual (etc.) components can combine with natural resources to create wealth. I don't agree, for reasons I stated before, but I guess I get it.

[drkitten]

I *think* I understand what some are getting at - that intellectual (etc.) components can combine with natural resources to create wealth. I don't agree, for reasons I stated before, but I guess I get it.

Why don't you agree? I think it's fairly apparent that if I can figure out a way to make coconut fronds edible, the amount of food available on your hypothetical island goes up, and we're all more wealthy.

If you're thinking that not all new knowledge creates wealth,.... well, that's true. My writing a poem about how badly it sucks to live off nothing but coconuts will probably not add value to the island. But not all knowledge needs to create wealth for (some) wealth to be created from (some) knowledge....

[Roboramma]

Sure the number of states are finite, but which state represents the most wealth is still subjective so you can still have a more desirable one no matter which state of matter you have.

That subjective judgement is simply the relationship of the state of the matter that we call you to the rest of the matter in the system, which is why I said "but there is certainly a best possible TV (made in our universe, with the constraints of its physical laws) for any particular state of you". Moreover, because there are also only so many possible states of you, there is still a finite (albeit incredibly large) number of possible configurations of you in relation to the rest of the matter in the system.

[roger]

fsm, say I do you a favor - I thatch your roof for you. In return, you owe me a solid. That's wealth. Through my labor you have something you didn't have before - a non-leaking roof, and I have something I didn't have before - a social obligation that you help me in the future.

It should be obvious that we both have more than if we had just both sat around that afternoon, staring at the ocean.

Okay, so it gets cumbersome to trade in 'solids', so we use little pieces of paper that represent our obligations to each other.

Everybody in town hates thatching roofs because everyone but my gene line has severe grass allergies. So me and my family thatch everybody's roofs. And, since new family's are born, grass degrades, people move, and storms wreck roofs, we have steady work. We build up a bunch of solids, I mean little slips of papers.

When I have reached my deathbed I've done a lot more solids for people than they have done for me, so I have quite the pile of little papers. I give those papers to my sons. I die, and they continue thatching roofs and collecting little pieces of paper.

There is nothing to stop that going on forever, assuming a steady-state island. Grass will continue to grow, my family will continue to thatch more homes than we ever need to redeem those favors, and new families will continue to be born, new houses will be built, old ones will be torn down or redone.

In 500 years my family will have 500 years worth of favors built up. In 10,000 years we will have 10,000 years built up. In 5 million.... well, you get the idea.

I don't know if this answered the OP - the wording is pretty vague. Surely no one things that a bank account could ever = infinity; it will always be some finite number. So, I'm guessing that you are asking if it can continue non-stop. And the answer to that is yes, so long as humans and/or their machines can produce something that others want.

[Loss Leader]

Devil's Advocate:
There is a finite amount of resources. What will you pay for this wealth with? Labor?


Natural resources are infinite. Technical innovations will continue to squeeze more value out of the land. One acre of woodland could provide only a certain number of trees for fire. It was discovered that the coal under it could provide much more energy than the trees. Eventually, the hydrogen on that acre will provide more energy than the coal.

[Mr. Purple]

I realize my question was rather vague. I am just trying to get my head wrapped around the entire concept.

Watching a nova show last night, I heard the phrase (to the effect of):
"In minutes billions of dollars of wealth were destroyed". (Regarding the 2008 crash).

I just don't understand this.

Honestly, I am having trouble even figuring out what the intelligent questions are relative to the subject.

I am not an idiot, I just haven't really thought about economics very much.
Thanks again!

[drkitten]

I realize my question was rather vague. I am just trying to get my head wrapped around the entire concept.

Watching a nova show last night, I heard the phrase (to the effect of):
"In minutes billions of dollars of wealth were destroyed". (Regarding the 2008 crash).

I just don't understand this.

Well, if your house burns down, wealth is destroyed, right?

But if your house burns down, the value of the houses next to it are likely to go down, even if the houses themselves are untouched. Which means that wealth-as-measured-by-dollars is destroyed even if the underlying objects are unchanged. Because wealth is a subjective concept related to how much people are willing to pay for something.

[Aepervius]

Natural resources are infinite. Technical innovations will continue to squeeze more value out of the land. One acre of woodland could provide only a certain number of trees for fire. It was discovered that the coal under it could provide much more energy than the trees. Eventually, the hydrogen on that acre will provide more energy than the coal.

That still palce an upper bound, once you reach the maximum energy and exploitation of a resource per acre. Anyway, Natural resource are not infinite, the one dependent on a cyle, are dependent on our sun and climate (water cycle) as well as potential pollution from other activity. The one "growing" are even more sensible on climate. None of the resource are infinite or unlimited. They are all limited by some factors.