The Origin of Wealth

Punabantu, Siize (2010): The Origin of Wealth.

Abstract

What is wealth? This paper proposes wealth and poverty are opposite sides of the same coin and to know the source of one is to understand the cause of the other. It delves into the premise that if contemporary economics could consummately answer the question: what is wealth? scarcity, economic strife and poverty would not exist in the world today. Two kinds of wealth are discussed, aesthetic and technical wealth. Is it possible that contrary to belief, the use of assets and liabilities as a measure of wealth belong to the aesthetic view in the sense that in human psychology an asset is merely an object or factor that evokes positive emotional feelings; the capacity to measure this kind of wealth using complex mathematics does not turn assets and liabilities into real or technical wealth. Consequently wealth may be none of the popular or common notions human society perceives; this includes money, assets and so on. In addition to the psychological influence the tendency of money and assets to fluctuate over time reinforces its aesthetic stature. Businesses commonly publish financial statements in national media often as a legal requirement or a means of demonstrating their financial health or quite simply the state of their wealth , when in fact a financial statement, despite the mathematics applied to it, may be considered an example of aesthetic wealth; hence it is not reliable for clearly understanding or appreciating what wealth is as it is common knowledge even robust businesses can post attractive profits for the year in review then post losses for the same period the next year. Money is unlikely to be a form of real wealth either, it behaves like psychological or aesthetic wealth; the value of a large bank account which could purchase a boat may years later after the ravages of inflation may only purchase a golf cart. Appreciating this quandary is important in the sense that the rational processes motivating it affect financial literacy. There are many conundrums like this where what is observed is not necessarily what is taking place that defy conventional wisdom in economics, for example; the expenditure fallacy. Even brick and mortar assets are likely to be a form of aesthetic wealth rather than real wealth; the value of property can change dramatically year on year. Wealth is only as reliable as the economic operating system it functions in, in the same way that, as earthquakes demonstrate, a building, no matter how sturdy, has its sturdiness ultimately determined by the ground it stands on. Consequently, this paper introduces the concept of real or technical wealth; this is the capacity to understand what wealth actually is by being knowledgeable about how it functions at the level of the economic operating system. Blurring the lines between aesthetic and technical wealth can lead to an ambiguity about wealth as well as an inability to diagnose what prosperity is and where it originates from in the economy that leads to the inability to protect aesthetic wealth or create it in sufficient quantities. It also may lead to the immense disparities and peculiar discomforts of contemporary economies impaired by scarcity. A consequence of this may be a modern day inability to end poverty, unemployment and other economic problems. Consequently this paper employs cost curves to explain how the real wealth of businesses can be affected and determined by the economic operating system they function in. It goes further to employ the equation of exchange to demonstrate how wealth can be created in an economy at constant price and how the calibration of the economic operating system predetermines whether a country or economy is ultimately wealthy or wealthless.

• Item Type: MPRA Paper
• Language: English
• Keywords: Scarcity; banking; credit creation; resource creation; implosion; wobble effect; economic thought; poverty; wealth; equation of exchange; cost curve; money; price; mark-up; cost plus pricing; rationality; operating level economics; economic growth; barter; expenditure fallacy; paradox.
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation; D - Microeconomics > D0 - General > D01 - Microeconomic Behavior: Underlying Principles; B - History of Economic Thought, Methodology, and Heterodox Approaches > B4 - Economic Methodology > B41 - Economic Methodology; A - General Economics and Teaching > A1 - General Economics > A11 - Role of Economics ; Role of Economists ; Market for Economists

References

Afrida, Nani, April 2010 “Steel price may rise by 50% due to high production costs” The Jakarta Post, http://www.thejakartapost.com

Ashiwal, Shashi, Feb 2010, “Tata Steel may face industrial action at Corus”, The Hindu Business Line, http://www.thehindubusinessline.com/2010/02/17/stories/2010021750990300.htm

Baker, Dean, February 2010, The Budget Deficit Scare Story and the Great Recession, Centre for Economic Policy Research, Washington

BBC, 2010, “News - George Osborne outlines detail of £6.2bn spending cuts”, http://news.bbc.co.uk/2/hi/uk_news/politics/8699522.stm

BBC, 2010, “Millions of Pakistan children at risk of flood diseases”, http://www.bbc.co.uk/news/world-south-asia-10984477

BBC, August 2010, “Millions of Pakistan children at risk of flood diseases”, http://www.bbc.co.uk/news/world-south-asia-10984477August

BBC, march 2009, “Crisis 'will cost Africa $49bn”, http://news.bbc.co.uk/2/hi/business/7945843.stm

Bruce, Andy, 2010, “Bank to tread cautiously in face of budget cuts”, Reuters, http://uk.finance.yahoo.com/news/bank-to-tread-cautiously-in-face-of-budget-cuts-reuters-poll-reuters_molt-2dac78d80fe8.html

Business Wire, 2010, “Recession Costs Small Businesses $2 Trillion: Outlook Remains Gloomy For Many”, Business Wire Minneapolis, http://www.businesswire.com/portal/site/home/permalink/?ndmViewId=news_view&newsId=20100805007025&newsLang=en

Centre for Asia Pacific Aviation, December 2009, “Global airline outlook: Industrial action the big threat to aviation in 2010”, http://www.facebook.com/profile.php?id=685372627&v=wall&story_fbid=422634762627

CNN, 2010, “U.S. to boost aid as number of homeless doubles in Pakistan floods”, http://edition.cnn.com/2010/WORLD/asiapcf/08/19/pakistan.floods/index.html#fbid=ruoIzHy_jH1&wom=false

CNN, August 2010, Connect the World “Russian Wheat Production Plunges”, http://archives.cnn.com/TRANSCRIPTS/1008/02/ctw.01.html

Detroit News, 2009, "Nearly half of Detroit's workers are unemployed”, http://detnews.com/article/20091216/METRO01/912160374/Nearly-half-of-Detroit-s-workers-areunemployed

Guardian The, September 2010, "Unemployment hits highest since 1995”, http://www.guardian. co.uk/business/2009/sep/16/unemployment-rises-recession

Ivry, Bob , September 2008, “Paulson Seeks Mortgage Value That Eluded Bear, Lehman”, Bloomberg, http://www.bloomberg.com/apps/news?pid=newsarchive&refer=home&sid=aGT_xTYzbbQE

Kaiser Daily Global Health Policy Report, 2010, “Pakistani President, State Dept. Official Discuss Post-Flood Rebuilding”, http://globalhealth.kff.org/Daily-Reports/2010/August/24/GH-082410-Pakistan.aspx?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+kff%2Fkdghpr+%28Kaiser+Daily+Global+Health+Policy+Report%29

Makombe, Leonard, April 2010, “High Production Costs Fueling Inflation”, All-Africa , http://allafrica.com/stories/201004230616.html

Msnbc, December 2010, "Unemployment sets a grim record in 2009”, http://www.msnbc.msn.com/id/34641146/ns/business-stocks_and_economy/

Msnbc, December 2010, "Unemployment sets a grim record in 2009”, http://www.msnbc.msn.com/id/34641146/ns/business-stocks_and_economy/

Punabantu, Siize, 2009, The Greater Poverty & Wealth of Nations: An Introduction to Operating Level Economics. How every economy has the latent financial resources with which to finance the doubling of its GDP in one year at constant price, ASG Advisory Services Group, Lusaka.

Punabantu, Siize. July 2010, Financing the Doubling of GDP in One Year at Constant Price, http://econpapers.repec.org/paper/pramprapa/24132.htm

Reuters, July 2010, “ECB sees positive growth outlook despite budget cuts”, http://in.reuters.com/article/idINIndia-49858920100703

Reuters, August 2010, “Aer Lingus cabin crew vote for industrial action”, http://www.reuters.com/article/idUSLDE67A1ZF20100811

Rubin, Courtney. Aug 10, 2010, “Study: Recession Cost Small Businesses $2 Trillion”, Inc, Samuel Shen, Jason Subler, 2010, “ECB sees positive growth outlook despite budget cuts”, Reuters http://money.cnn.com/2010/05/05/news/economy/state_budget_cuts/

Schmitt John and Baker Dean, 2009, “The US$1 Trillion Wage Deficit, Centre for Economic & Policy Research (CEPR)”, Centre for Economic Policy Research, Washington

Schmitt John and Conroy Tessa, July 2010, “The Urgent Need for Job Creation”, Center for Economic and Policy Research, Washington

Shanker, Abhishek, August 2010, “Tata Steel Returns to Profit on Automotive, Engineering Demand”, Businessweek, http://www.businessweek.com/news/2010-08-12/tata-steel-returns-to-profit-on-automotive-engineering-demand.html

Stanlake, G. F, (1983:174) “Macro-economics: An Introduction” G.F Stanlake 2nd Edition (1983) Longman Group Ltd

Treasury Direct, August 2010, “The debt to the penny: who holds it”, http://www.treasurydirect.gov/NP/BPDLogin?application=np

United States Dept. of Labour, 2010, "Employment and Unemployment Among Youth Summary”, http://www.bls.gov/news.release /youth.nr0.htm

USGS, 2010, http://earthquake.usgs.gov/earthquakes/eqinthenews/2010/us2010rja6/#summary

Wall Street Journal, May 2010, "Broader U-6 Unemployment Rate Increases to 17.1% in April”, http://blogs.wsj.com/economics/2010/05/07/broader -u-6-unemployment-rate-increasesto-171-in -april/

Wray, Richard, January 2009, “Global Recession Costs 80,000 Jobs”, The Guardian, http://www.guardian.co.uk/business/2009/jan/26/job-losses-uk-europe-usa/print

Yorkshire Evening Post, May 2010, “BT faces industrial action threat over bonuses”, http://www.yorkshireeveningpost.co.uk/news/BT-faces-industrial-action-threat.6318389.jp