Magic Poriferan
^He pronks, too!
- Joined
- Nov 4, 2007
- Messages
- 14,081
- MBTI Type
- Yin
- Enneagram
- One
- Instinctual Variant
- sx/sp
Not only is each additional dollar less valuable that the previous one for an individual person, it's less valuable for a whole market. When money is produced, it does not make anyone richer. No wealth is actually created.
Money is a place holder. A dollar, or a digit on a computer, has little practical value. Its value is in what it represents. This is its monetary value. Monetary wealth is valuable as a place holder for real wealth, those things that actually do have practical value in and of themselves. Food, a car, a home, a power tool, medicine, these things are all real wealth. Monetary wealth can never truly assume the value of real wealth because you simply can't live off of eating money or drive 300 miles in it. However, we live in a society with so many people, and so many goods, and so much time keeping, etc.. that we need some kind of placeholder for wealth. Bartering or allocating real wealth is no longer practical. So we have a system where real with is pegged to monetary wealth.
The psychological difference between the two is important. The fact that monetary wealth can never really function as real wealth is why you can't make a wealthier world just by printing money. You know that your money can't serve the purpose of a power tool or whatever, it is only a commodity used as a placeholder for such a thing. So, the more articles of money there are, the smaller a share your place holder is of all the place holders out there, making less valuable. In other words, if I tried to print my society into prosperity, I would actually just make our currency worthless. Basically each additional dollar I add just makes every other dollar proportionally less viable by the tiny fraction that is one dollar divided amongst every other dollar out there. So, if I gave everyone 10,000 dollars, nobody would really be any richer.
But what if I took 10,000 dollars from one person and give it to another? The answer is obvious. One person would be poorer and the other would be richer. This is because one person gained a larger share of all the monetary wealth out there, and one now has less of it. Basically, when it comes to money, the only thing that makes you wealthy is what percentage of all the money out there you have is.
The problem is, as mentioned above, all wealth is now based on this. If a house costs money, that means your ability to get a house is based on the percentage of all the money out there that you have. Your ability to get any real wealth is dependent on your share of monetary wealth. What that also means, is that if you get richer, somebody got poorer. That's what we call a zero sum game.
The idea of the economy being zero sum is very unpopular. There are a lot of stupid, mostly idealistic reasons people reject this notion, but there is one that's a pretty fair question. If it's zero sum, how has the world become wealthier? The answer is that not everything that happens now or in human history has happened within the workings of a money market. First of all, humanity predates money by a while. As time has gone on, monetary wealth has become more common and also more relativistic. Only within the 20th century did we hit a point where all economics basically revolved around a totally relativistic monetary system. Still, even now we can generate real wealth, we can make the entire world more wealthy overall. How is that possible? Because though our deliberate economic activity is confined to redistribution of monetary wealth, the impact of that distribution can cause the production of real wealth. For instance, if you just had a system where all of the money out there just flows around different peoples' bank accounts, little to no real wealth would be generated. Because monetary wealth sometimes gets redistributed into factory construction, or research and development, real wealth is generated. In the case of the factory, it might make real wealth that is some commodity which assumes value through supply and demand. On the other hand, research and development doesn't necessarily do this, even if it makes the world a wealthier place.
The important take away from all of this is that as a society, we can only influence the generation of real wealth by choosing how to distribute our monetary wealth. Conventional concepts of making a country wealthier by "growing the pie" tend to be oblivious to this subtlety. It all comes back to the previous entry. If you only care about the supposed growth of wealth without concern for its distribution, then you are allowing for an economy like the one mentioned in that entry, one wear wealth is wasted above the threshold of avarice and the potential for productivity of real wealth is severely squandered. And that's just the issue of how wealth is distributed amongst private individuals. An economy that forbids redistribution of monetary wealth is a dead economy.
Money is a place holder. A dollar, or a digit on a computer, has little practical value. Its value is in what it represents. This is its monetary value. Monetary wealth is valuable as a place holder for real wealth, those things that actually do have practical value in and of themselves. Food, a car, a home, a power tool, medicine, these things are all real wealth. Monetary wealth can never truly assume the value of real wealth because you simply can't live off of eating money or drive 300 miles in it. However, we live in a society with so many people, and so many goods, and so much time keeping, etc.. that we need some kind of placeholder for wealth. Bartering or allocating real wealth is no longer practical. So we have a system where real with is pegged to monetary wealth.
The psychological difference between the two is important. The fact that monetary wealth can never really function as real wealth is why you can't make a wealthier world just by printing money. You know that your money can't serve the purpose of a power tool or whatever, it is only a commodity used as a placeholder for such a thing. So, the more articles of money there are, the smaller a share your place holder is of all the place holders out there, making less valuable. In other words, if I tried to print my society into prosperity, I would actually just make our currency worthless. Basically each additional dollar I add just makes every other dollar proportionally less viable by the tiny fraction that is one dollar divided amongst every other dollar out there. So, if I gave everyone 10,000 dollars, nobody would really be any richer.
But what if I took 10,000 dollars from one person and give it to another? The answer is obvious. One person would be poorer and the other would be richer. This is because one person gained a larger share of all the monetary wealth out there, and one now has less of it. Basically, when it comes to money, the only thing that makes you wealthy is what percentage of all the money out there you have is.
The problem is, as mentioned above, all wealth is now based on this. If a house costs money, that means your ability to get a house is based on the percentage of all the money out there that you have. Your ability to get any real wealth is dependent on your share of monetary wealth. What that also means, is that if you get richer, somebody got poorer. That's what we call a zero sum game.
The idea of the economy being zero sum is very unpopular. There are a lot of stupid, mostly idealistic reasons people reject this notion, but there is one that's a pretty fair question. If it's zero sum, how has the world become wealthier? The answer is that not everything that happens now or in human history has happened within the workings of a money market. First of all, humanity predates money by a while. As time has gone on, monetary wealth has become more common and also more relativistic. Only within the 20th century did we hit a point where all economics basically revolved around a totally relativistic monetary system. Still, even now we can generate real wealth, we can make the entire world more wealthy overall. How is that possible? Because though our deliberate economic activity is confined to redistribution of monetary wealth, the impact of that distribution can cause the production of real wealth. For instance, if you just had a system where all of the money out there just flows around different peoples' bank accounts, little to no real wealth would be generated. Because monetary wealth sometimes gets redistributed into factory construction, or research and development, real wealth is generated. In the case of the factory, it might make real wealth that is some commodity which assumes value through supply and demand. On the other hand, research and development doesn't necessarily do this, even if it makes the world a wealthier place.
The important take away from all of this is that as a society, we can only influence the generation of real wealth by choosing how to distribute our monetary wealth. Conventional concepts of making a country wealthier by "growing the pie" tend to be oblivious to this subtlety. It all comes back to the previous entry. If you only care about the supposed growth of wealth without concern for its distribution, then you are allowing for an economy like the one mentioned in that entry, one wear wealth is wasted above the threshold of avarice and the potential for productivity of real wealth is severely squandered. And that's just the issue of how wealth is distributed amongst private individuals. An economy that forbids redistribution of monetary wealth is a dead economy.
