I have gotten into an argument here about the validity of using the term "wealth." Rodger Mitchell argues that "wealth" is a meaningless term. I argue that economics is the science of wealth creation. If true, this means we need to define wealth. But is that really possible?
Consider the following:
Biology is the science of life.
Aesthetics is the science of beauty.
Natural law is the science of justice.
Psychology is the science of the mind.
Now, define life. Define beauty. Define justice. Define mind.
Is it a coincidence that all our specialized areas of study are of terms we cannot fully define? Is it not then the definition of folly to argue that we should abandon the terms? Or is the point of the science to try to define the terms?
7 comments:
Troy,
Just read your exchange with "Rodger." Anyone who thinks inflation precedes money creation is not worth debating regarding matters of economics. WWI debt obligations did create really high prices in Germany, but only because the German government had to print a lotta buncha marks first. I think you must have better ways to spend your day.
I called out the big guns on him, but Steve Horwitz declared him uneducatable. :-)
He did reinforce my belief that a work defining wealth is needed, though.
Troy,
A philosophical one, or a measurable one? Material or psychic?
Rothbard talks about psychic value. Two people with the same stuff may feel differently about their "wealth" because maybe guy #1 really likes his stuff and guy #2 doesn't. So probably we'd want to stick to material wealth definitions.
So the first component would be current wealth: how much stuff do you have or could you have (if you spent all your savings) right now. The other is prevent value of future wealth: current value of your income (of all forms) from the future.
Obviously, this is a jumping off point, but this is a standard definition of current "wealth" I think.
I think the psychic value gets us into a lot of trouble. That's one of the arguments for redistribution and against wide disparities in wealth: those who have it don't appreciate it, and those who have less resent those who have more. Further, this wouldn't allow for a scientific definition of wealth, which ought to be as objective as possible. Thus, I would argue for the material-only definition of wealth. It is something that can be measured, and measured pretty easily, across time and space (meaning, among individuals, or even in aggregate -- state to state, country to country, etc.). But we do need an agreed-upon definition that we can use to actually discuss wealth in a clearer fashion. And I think we need to differentiate between wealth and riches. I think the two are very different things: you can redistribute riches, but not wealth. That matters.
Okay, we agree to leave the psychic business out of the 'wealth' calculation.
However, your distinguishing wealth from riches causes me to wonder if you are saying wealth goes beyond economic resources. Is this the case? If so, what sorts of things do you think should be included in the wealth calculation?
This is precisely what needs to be worked out. When I am talking about "riches," I am talking about money primarily. Let us say that there is a certain amount of money in the economy (to simplfy things, let's make it 3 people with $100). Person A has $85, Person B has $5, and Person C has $10. But C can redistribute the money as he wishes. If C redistributes the money so that A now has $34, B has $33, and C has $33, there is no loss in riches. However, if B spent his $5 to build something that A was willing to pay $40 for, wealth has been destroyed by this redistribution. In the first distribution, if we assume B had to pay C the $5 to make the $40 object, the end distribution would have been A=$45 + new object worth $40, B=$40, C=$15. Net wealth = $140. But in the redistributionist scenario, we would have had A=$34, B=$28 (-$40 for the unsellable object), C=$38. Thus, we would have net wealth destruction, because there is now a useless object that cannot be sold. Net wealth = $60. This is the difference between wealth and riches.
Of course, I oversimplified my example considerably. I did not take into effect the fact that the good would have gone down in price, making the wealth loss less (it would have at least dropped down to $34, making a real loss of $6 in wealth). I also did not take psychology into effect. Why would B want to make something to sell if 1) he was going to get money from wealth redistribution, and 2) whatever wealth he made would be redistributed? This is still an oversimplification, but it does point to some underlying principles on which one could and should build.
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