Comment by WalterBright
1 year ago
It's a fact, not a theory. The wealth in the economy did not exist 100 years ago. Therefore it must have been created.
And where did Musk's money come from? Who did he transfer it from?
1 year ago
It's a fact, not a theory. The wealth in the economy did not exist 100 years ago. Therefore it must have been created.
And where did Musk's money come from? Who did he transfer it from?
Some wealth is created. People build new things and sell them. Video Games or Programming Languages for example.
Some wealth is just transferred, like rent or interest.
It would be nice if everybody had somewhere to live for free, unfortunately, most people have to pay rent or interest on a mortgage to those that came before them.
> Some wealth is just transferred, like rent or interest.
Both of those are an exchange, not a transfer. Taxation is a transfer.
They may be an exchange, but they are not "creation".
We are arguing whether wealth flows to people who already have it, rather people who "create it". My augment is both.
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If I cut down trees to build a house, then I may have created "wealth" but I've also destroyed trees. Now the net affect may be that wealth has increased, but it may also have an effect which actually destroys wealth like for instance if those trees existed on a hill, and the roots were holding the soil in place, the act of cutting down
"Free market" economics does not capture this destruction of value. It only cares that some value was extracted out of the trees in the form of a new home sale, etc.
I'm sure all those slaves brought over to the New World created tremendous wealth, but I'm also pretty sure they would have rather preferred to stay in Africa.
Your first example is completely wrong. Trees are a renewable resource. In North America, most of the trees that are cut down to build houses were intentionally grown for that purpose and are selectively harvested in a way that preserves the long-term value of the land.
Meh, sort of. Today's construction lumber is nearly all farmed, true. But CITES exists for a reason. The demand for certain woods greatly outstraps supply, and deforestation and smuggling is a real problem that's difficult to solve. And that's even without considering deforestation that's done to open up new farmland.
Madagascar is the obvious example here highlighting both issues, but it's certainly not unique.
> "Free market" economics does not capture this destruction of value.
Oh, but it does. It turns out that people who own land take care of it, so that it keeps producing. People who own timber land tend to manage it so it continues to be productive.
Destruction happens with government owned land.
For a related example, why are we not running out of cattle, hogs, and chickens, despite slaughtering them on an epic scale? And why are we running out of fish?
They might take care of their land, but they don’t generally care what happens to other peoples land. So excess fertilizer creating dead zones downstream? Well sucks to be them I guess. Markets are not good at pricing in externalities such as those
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Come on. Sometimes wealth gets created. Sometimes wealth just gets moved around. That is a fact.
Musk's wealth is mostly notional. Most of it is based on people's guesses about the future of electric cars and so forth. It's not clear yet whether that is creation or transfer or what.
Musk's wealth was transferred from nobody. It was created.
When wealth gets "moved around", that is not the market doing that. It's force. Like social security payments.
That's why I prefaced it with "free market".
Maybe a startup can have a high valuation for a while and ultimately be worth nothing. Maybe that has happened.
Maybe Musk will turn out to have created 10x more wealth than he has now. Maybe he will screw up and go broke.
Maybe both.
Where did Bernie Madoff's wealth come from before he got caught? Where did Sam Bankman-Fried's wealth come from? We can't just point to a unit of wealth and automatically applaud its legal owner as having created it. Maybe they created it. Maybe they stole it. Maybe we all wigged out and handed it to them voluntarily. It's case by case.
We all read Ayn Rand back in the day. And I can groove with that at a certain dosage, but you're taking way too much.
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> And where did Musk's money come from?
No body (?) is contending that in a free market wealth is not created.
The contention is that when wealth is created it tends to head to other wealth.
When a bank lends capital and has a choice of lending to, say, Elon Musk or me, I think the bank will make that rational choice and lend to Elon. Thus once you have some wealth attracting more wealth is less difficult than from before you had wealth
This pattern is repeated over a d over.
See Captain Grimes' boot theory of economics: https://en.wikipedia.org/wiki/Boots_theory
Lending money is not transferring wealth, nor is it creating wealth. It nets out to zero.
This is clear when one does accounting. Accounting is based on the idea that (Equity = Assets - Liabilities). When one takes out a loan, the assets go up by the amount of the loan, and the liabilities also go up by the amount of the loan. The Equity stays the same. That this balances out is literally called "balancing the books".
BTW, banks are happy to lend out money to people that have a track record of paying it back. This includes poor people. Poor people have credit cards, too, which is how they borrow money.
This part is true, and the folks who equate new borrowings with income are liable to do some real damage if anybody ever listens to them.
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Ah, the boots theory.
A Ferrari costs far, far more to maintain than a Ford, and doesn't last as long. I drove my used Ford Bronco II for 32 years before giving it to a scrap yard. Best bang for the buck car ever.
Expensive shirts wear out just as fast as cheap shirts. They just look nicer (and are often less comfortable).
P.S. I still regularly wear the combat boots my dad bought me 50 years ago. The boot black on them has long since disappeared, but they still keep my feet dry and warm.
The "Boots theory" of economics is garbage, just utter nonsense. I don't understand why people keep mentioning it here without applying any critical thinking. It simply doesn't apply to the vast majority of actual consumer products. Some of most durable, longest-lasting footwear I ever bought was also among the cheapest. By contrast the expensive stuff tends to be fussy, fragile, and impossible to repair. This generally applies to apparel, electronics, automobiles, appliances, bicycles, firearms, etc.
Where do you buy shoes?
That is the exact opposite of my (and Cpt. Vines) experience