Wealth

Wealth is a concept generally agreed to be the abundance of valuable resources or material possessions, or the control of such assets. While "wealth" is considered to be an ambiguous and nebulous term, it is a concept that nonetheless has an important place in economics.

More specifically wealth can be defined as a claim on, or command of, resources (commodities, capital equipment, time, physical labor, et cetera) that have the potential to make the individual's existence easier, more comfortable or more enjoyable (i.e. "better") than it would be in the absence of such things.

More concisely, wealth is the ability to fulfill human desire. This means that all steps in production, including the transportation and advertising of products, can generate wealth, because they move the product steps closer toward fulfilling human desire. Raw materials start out as land, a good of the nth order; and as soon as any productive labor is performed upon them, become (capital); the value of n diminishing as the resource progresses through each stage of the production process, until finally the producer's good has been completely transformed into a good of the first order (consumer's good) ready for immediate consumption. The wealth represented by that material increases throughout this process.

It is also possible for war to destroy wealth by transforming resources that were closer to being ready to satisfy human desires into goods that are less ready to satisfy human desires. For example, war can destroy a building that was capable of immediately providing shelter, and make it necessary to recycle the remnants as scrap, melt them down, shape them into girders, and use those materials to build a new building before it can again provide shelter. Likewise, if a politician takes money away from a productive entrepreneur and allocates it to wasteful projects, that too can destroy wealth. In that situation, the resources that were once under the control of a person with the ability and willingness to devote them to efficiently want-satisfying uses are now under the control of people who will devote them to uses with less want-satisfying power.

Because value is subjective, wealth cannot be measured cardinally, but it is possible to measure ordinally.

Henry Hazlitt writes that real wealth "consists in what is produced and consumed: the food we eat, the clothes we wear, the houses we live in. It is railways and roads and motor cars; ships and planes and factories; schools and churches and theaters; pianos, paintings and hooks. Yet so powerful is the verbal ambiguity that confuses money with wealth, that even those who at times recognize the confusion will slide back into it in the course of their reasoning." Since money is a commodity that helps fulfill the human need to engage in indirect exchange, it could be regarded as a form of wealth, but that does not mean that printing additional paper money will add an amount of wealth to the economy equal to its face value. It could, instead, diminish the ability of each monetary unit to satisfy the desire to engage in useful indirect exchange.

Leftists such as Barack Obama have often advocated that the rich be forced to share or "spread the wealth" through welfare programs. To the extent that these program reduce the economy's overall ability to fulfill human desire, they actually destroy wealth, or in some cases prevent it from ever coming into being.

Links

• "Money vs. Wealth" by Robert P. Murphy, June 2010
• "What is Wealth Inequality?" by Art Carden, May 2003
• "The Fantasy of Wealth Redistribution" by Lorenz Kraus, November 2010
• "Obama's Wealth Destruction" by Llewellyn H. Rockwell Jr., February 2009
• "Real Bills, Phony Wealth" by Robert Blumen, June 2005
• "Destroying Capital with the Printing Press" lecture by Doug French, January 2011 (published as Mises Daily "Merger Monday and the Destruction of Wealth" here)
• "What is Wealth?" by Robert LeFevre (YouTube)
• What is Wealth?

• Wealth at Wikipedia