Where does Wealth come from?
Libertarianmonarchy.com
Professors of economics, philosophers, professional economists and socialists. What do they all have in common? Answer: They have no idea where wealth comes from.
Poverty programs, urbanization, women’s rights, wealth inequality, credit, savings, capital, health, education, foreign aid, democracy, good government, regulations, trade agreements, environment/geography, technology, efficiency etc., or the lack there of, have all been blamed for the poverty seen all around the world. Some of these factors may be technical reasons as to why some countries are poor and others are rich but they are all irrelevant in relation to how wealth is actually derived.
The one and only answer is that wealth is derived from private property.
The profit incentive comes from the desire to acquire private property. Factors of production will all be allocated efficiently if private property rights are respected. Savings only exist because of the ability to accumulate private property. Risk-taking only exists because of the fear of loss of private property. Natural resources are found across the world yet some countries are poor and others are rich. This is because natural resources stuck in the ground are not wealth. Natural resources will be extracted and refined if private property rights are upheld. Credit is only unavailable in poor countries because of the lack of private property rights. Law is the enforcement of private property rights. Contracts are agreements about future private property. If health or education were what poor countries lacked, then why wouldn’t entrepreneurs invest in the health and education of the citizens in exchange for the income that comes from the higher productivity? See more specific examples.
The profit incentive, the economic calculation problem, the ability to invest/take risk, the innovation problem, the desire to save, all require and are rooted in private property rights.
To put it simply, there is no way for wealth to be formed except by allowing humans to have private property rights. This should be clear intuitively. Each person will try to use their private property to make themselves as happy as possible. Any hindrance(coercion) regarding private property will cause distortions and diminish the amount of happiness that can be achieved.
Most economists waste time engaging in rigorous investigation of proximate causes of wealth in hopes of discovering how wealth is formed and how to pull countries out of poverty. Ironically, it is their socialistic mindset that has pushed many into poverty. Their strategy of attempting to identify concrete causes of wealth, or even erroneous fundamental causes such as democracy or good government, is fallacious and hopeless. It is a fool’s errand.
It does not matter how much effort or time the empiricists spend searching. They will never succeed. This is because wealth/utility does not exist in reality. Utility exists in the mind only. Wealth is purely subjective and is clearly synonymous with utility. A photo of a loved one can be worth infinitely more than a monetary fortune.
In order to further understand it must be explained from a different perspective. A more complex and accurate answer to the question is that wealth comes from Human Action. Clearly, this is a praxeological deduction. It is not a stretch from the fundamental praxeological axiom; humans act to remove uneasiness. If humans act to maximize utility then it is clear that utility/wealth is derived from human action.
Put simply, if you allow humans to engage in action, by giving them private property rights, then they will produce as much wealth/utility as possible.
A more precise explanation is as follows. Human action is the bridge between the mind and reality.(Hans Hermann Hoppe, http://mises.org/esandtam/pes1.asp) Reality is private property because ideally you could not disturb or interact with someone else’s property. Access to private property must be possible for human action to occur. If you restrict access to private property(namely through government coercion) you break the link between the mind and reality and therefore prevent Human Action, which prevents any wealth creation.
If we assume that every action is chosen to maximize utility then any coercion will, by logical deduction, lower utility for the individual because it forces someone to choose an alternative to the action that would maximize utility. This statement alone is enough to discredit any government policy.
Instead of wasting billions in foreign aid, attempting to increase health and education, or enforcing other central planning within the economy, the way to unleash infinite amounts of wealth is to enforce private property. The poorest nations on the planet could easily become the wealthiest in a very short period of time if security was provided for these countries so that private property could be safe.
Where does wealth come from? To summarize: Wealth exists in the mind only. Humans act to create as much wealth as possible. This statement is synonymous with the fundamental praxeological axiom, I.e. Humans act to remove uneasiness. Wealth is not derived from objective means. It is the goal of every human to maximize their individual wealth. Put in any scenario, humans will use their available private property to maximize their happiness. There is no way for government to create additional wealth because humans are already acting to maximize wealth.
With 0% private property rights, the extreme left, we wouldn't own our own bodies and therefore suffocate to death. No one could produce because they don't own anything. This fact is what makes socialism so unproductive. The less private property there is, the less wealth there will be. With full private property rights, human potential would be maximized. People always act to maximize utility and therefore if there are no impediments based on private property they will maximize the amount of wealth in society. Countries such as Cuba, North Korea, or the Soviet Union restricted private property and therefore had very little wealth. Countries such as Hong Kong, Singapore, Taiwan and South Korea have strong private property rights and therefore have become some of the wealthiest nations on the planet.
Lawrence: http://mises.org/esandtam/pes1.asp There's the source for what I paraphrased. You should read the entire article before responding because you obviously don't understand my argument. I view the statement "You said wealth comes from private property." and "Wealth comes from each individual attempting to maximize their utility." as the same statements. The latter is more precise but for the sake of simplicity I often use the former.
http://mises.org/esandtam/pes1.asp There's the source for what I paraphrased.
You should read the entire article before responding because you obviously don't understand my argument.
I view the statement "You said wealth comes from private property." and "Wealth comes from each individual attempting to maximize their utility." as the same statements. The latter is more precise but for the sake of simplicity I often use the former.
Uh,
1) Nowhere in that entire piece that you linked to does it say anything about private property, let alone private property being a requirement for human action.
2) It doesn't matter what your argument is, unless you're trying to claim that property = action there is no way that "wealth comes from private property" is the same thing as "Wealth comes from each individual attempting to maximize their utility".
I though utility was usefulness and wealth was value?
Isn't value derived from utility? how can wealth be usefullness?
It seems like it would be correct to say that utility is the usefullness and that wealth or value is created by innovating more usefullness out of something than was previously considered. Couldn't we call that productivity?
"With his recognition of action as the bridge between the mind and the outside reality". Reality is private property. But forget the quote and think about it intuitively.
Private property is obviously a requirement for human action. Imagine you didn't have private property rights over your own body, would you still be able to act? Obviously not.
But anyways, read the entire article and you will understand my argument.
Utility is not usefulness, it's just another word for happiness. Utility, happiness, wealth, value are all subjective and they are all the same thing.
Utility - something useful
wealth - anything that has utility and is capable of being appropriated or exchanged. - utility is a requirement of wealth (not the same thing)
value - the worth of something in terms of the amount of other things for which it can be exchanged or in terms of some medium of exchange.
happiness - a mental state of well-being
productivity - a measure of output from a production process, per unit of input
In no way are those things all the same thing. Why don't we say that definitions are subjective? The whole point of words is that they convey specific ideas. While these are all related in various ways, they aren't the same.
Lawrence:"With his recognition of action as the bridge between the mind and the outside reality". Reality is private property.
mmm kaaaay.
Private property is obviously a requirement for human action.
So what you're saying is that in societies where private property rights were not outlined, no one ever acted. Got it.
I don't know why you can't grasp such simple concepts.
In societies like the Soviet Union where private property rights were very limited(people still owned their own body in the USSR) very little wealth was created. In societies with a lot of private property like Hong Kong a lot of wealth was created. The wealth was created because private property, or in other words freedom/liberty, was given to the citizens. Each citizen tried to make themselves as happy as possible by producing as much wealth as possible. Hence the wealth came from the human acting to maximize utility, and he was only able to do it because he was free to do so because he had private property rights.
Value is subjective. If I take my poo and shape it into something you're willng to buy from me then I have created wealth. I added value to nature (my gastrointestinal byproduct) and can now invest in a super burrito that may become an even finer work of art to add to your collection.
We are the soldiers for righteousnessAnd we are not sent here by the politicians you drink with - L. Dube, rip
Mark:In no way are those things all the same thing. Why don't we say that definitions are subjective?
Someone else tried that nonsense earlier. I'm not sure you're going to get through to this one. When someone says "reality is private property" and that there is no such thing as action without private property, and that "Utility, happiness, wealth, value are all the same thing", and thinks Hoppe supports their ideas, I really don't see any progress being made regardless of what you try.
Wealth creation does not require private property, freedom, nor liberty. Its just the simple act of adding value to something which can occur in the most degrading of circumstances. You might be confusing wealth with capitalism?
"Wealth creation does not require private property, freedom, nor liberty."
Then explain this. If no one in society has private property rights over their own body and they don't have private property over any land then they can't interact with their surroundings. They wouldn't have the right to move. How can wealth be formed in that society?
John James,
You shouldn't insult people's ideas and arguments just because you cannot understand them. If you see a flaw in the logic then actually explain what it is.
Lawrence:I don't know why you can't grasp such simple concepts.
Because they are nonsense. Simplicity has nothing to do with it. "reality is private property". That doesn't even make sense. "Utility, happiness, wealth, value are all the same thing". It's like words have no meaning to you.
And on this "action cannot take place without private property" nonsense, slaves were someone else's property, no? Slaves did not own their body. They had no private property rights to their body or anything else. And you're seriously arguing that no slave, ever in the history of the world, performed one action. And you're telling me I don't get it?
The military and connected universities came up with the internet? One could argue that there was no freedom, liberty, or private proprerty involved. It was collusion and property taken from others that were then channeled into specific projects that only benenfited a few for a time. Then when it was made available the private property, freedom, and liberty cause the utility of the internet to explode which then leads to value of product and wealth from exchange.
Any information that we derived from the moon landing could also be an example, For instance, we could never "prove" that all things fall at the same rate because of air resistance, but since we were able to go to the moon and test Newton's hypothesis in a "controlled" (no air; no air resistance) environment we added wealth (in the form of scientific verification) and utility (because we can use that info for future scientific application)
The same could be said for the highway system, the manhattan project (not cause of the bomb, but the nuclear physics research involved).
Fact is the government CAN do good things, but it is rare because of how it conducts its business.
I think we all get what you are saying, but your semantical games trying to tell us about praxeology is getting everyone confused. Utility maximization leads to the creation of wealth and private property and liberty of choice lead to the best results where coercion and force lead to disutility and destruction of wealth (as people's time and labor is wasted) Is this correct?
When I said "reality is private property" it was in a specific context. What I mean is that theoretically individuals should not be able to interact with property that is not their own.
"Utility, happiness, wealth, value are all the same thing". These words all represent the same thing because they are each subjective. What makes diamonds more VALUABLE than rocks? The fact that the diamonds bring HAPPINESS AND UTILITY(economic term). Diamonds are only WEALTH so long as people VALUE them.