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.
Slaves didn't own their own bodies which is why they were not allowed to do the actions that maximize their happiness. The slaves had to do exactly what their masters told them. Slaves were the private property of their masters. The masters created wealth and happiness for themselves by making their slaves work. So the slaves never really acted in the sense that they never chose an action that they wanted to do, they only behaved in the ways that their masters told them to.
What makes diamonds more VALUABLE than rocks?
Scarcity? the geological process that make them aren't as plentiful as the average rock? Happiness is an abstraction, use is not. It brings happiness because my girlfriend would rather have it (happiness). If i gave her an average rock she wouldn't be happy. The happiness that is wrought from a diamond is derived from its scarcity.
theoretically individuals should not be able to interact with property that is not their own.
this flies in the face of making nature more useful/valuable. Who owns a nature? Property is created from things that people do not own. No one owns a trees, but when i cut one down and make a boat it becomes my property THEN all of the subjective judgments can be considered.
These words all represent the same thing because they are each subjective.
Just because the judgments of things are subjective doesn't mean they mean the same thing. Words have meanings. You could interpret them differently, but it doesn't make sense to.
"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?"
Yes, overall you understand my point. However, I'm not playing "semantical games" I'm just trying to take things to the extreme to prove the validity of my arguments.
I do not believe the government can do any good. In order for the government to have any money it must steal it. Any coercion by definition lowers the amount of provate property rights and therefore restricts the amount of wealth creation. In the examples you gave the money that was used by the government would have been better allocated if it was done by the free market.
Utility is an economic term. You should google it. It doesn't mean "usefulness".
The geological process, and the supply of rocks is not what makes diamonds have value. Diamonds have value because people like them. There is plenty of water but people still value it and consider it wealth because it brings happiness and utility.
But why does the diamond make people happy? It is because not everyone has one. Which deduced, as far as i can, comes down to where they come from = geological development (which is out of the control of mankind)
"Here baby, i got you this (a rock) it was in the yard. =D."
" =| You know everyone can acquire one of these and i could have picked it up myself. In fact, i saw this rock on my way in today. Why didn't you get me something that i can show off to people that don't have one?"
or
"I got you this rock, nothing special everyone has one, wanna bang?"
"OH HELL YES, i love it and because everyone else has one it makes me happy."
now sure, she could be happy with a rock, but i doubt it is really "the thought" that counts...
Utility (from wikipedia) - In economics, utility is a measure of relative satisfaction. Given this measure, one may speak meaningfully of increasing or decreasing utility, and thereby explain economic behavior in terms of attempts to increase one's utility.
In the austrian tradition you can't use that definition because utility is NOT measurable, which is the point of subjectivity. Utility providing use is more accurate (which is why mainstream economics discounts mises and rothbard).
I do not believe the government can do any good.
You probably won't get a lot of disagreement around here. I was at pains to come up with the examples that i came up with a few posts ago, but looking back they aren't bad examples.
In fact, the creation of the internet was the result of government trying to make itself more efficient. kind of an interesting paradox. bueracracies trying to pass information to each other faster. haha, like that would help. It just made them more deadly.
Forget diamonds because it just confuses the issue. Hamburgers can be considered wealth and are valuable because they remove felt uneasiness they satisfy your hunger. Wealth is purely based on the individual's judgement. If people liked garbage then garbage would be valuable and would be considered wealth.
you are not even arguing a cohesive point anymore.
The diamond was a perfect destruction of you hypothesis, but you want to discount it, even though it was originally your example. The hambudger gets rid of hunger (ie. it provides use) that is what gives it value. Not because i imagine it. HOW MUCH value it has is what is subjective, hence the price system.
I seem to have misunderstood your original intention having been caught up in your secondary postings.
Wealth creation does require some private property but not universally. If one person out of every 6 billion has property rights then wealth can be created.
We are the soldiers for righteousnessAnd we are not sent here by the politicians you drink with - L. Dube, rip
I don't even know what we're arguing about anymore. I still don't think you countered the main argument I was making in my first post.
You're presupposing the reasons why and at what level wealth is subjective. It is subjective due to interpretation of utility. Something isn't subjective because it is subjective, there are reasons why people act and because those vary, that is what makes it subjective.
And your point that private property is required for wealth creation is too broad. It is not true when taken to extremes and i even found examples where it is not true.
It is true when taken to the extreme. If you don't own your own body then wealth cannot be created because you would suffocate to death.
But explain what the flaw is with this logic: "If humans act to maximize utility then it is clear that utility/wealth is derived from human action."
What? my examples from before should clear this up.
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.
If the government can take resources away from people and create something (or research) then it does create wealth. As long as it serves some end wealth can be created, it just might not be the most efficient way to do so.
Nothing wrong with your quote, but that is like saying people breath because they are alive. You are stating the most basic axiom Mises had.
and tried to say that because utility,. value, wealth, etc, are all subjective that therefore they are the same thing. They are all different things, but can all be seen by different people in different ways, that is what makes them subjective. They could be said to fit in a category of ideas thats interpretation is subjective when applied.
But in your case you gave the government officials private property rights so there was still some private property which is why wealth creation was possible.
I didn't say they were the same thing BECAUSE they were all subjective. They are all the same thing because their definitions are virtually identical. It's like comparing happiness and enjoyment. They're the same thing. And happiness is subjective in the sense that people can acquire more happiness from a special photo then receiving a million dollars.
Well i'd disagree that their definitions are similar enough to say that they are virtually the same.
i said
"It was collusion and property taken from others that were then channeled into specific projects that only benenfited a few for a time."
they took private property, therefore negating the point of calling it private. I just said the government taking resources from the private market.
Lawrence:"Utility, happiness, wealth, value are all the same thing". These words all represent the same thing because they are each subjective.
So basically as long as something is subjective, it means the same thing as something else that's subjective.
Ugly. That's subjective. Must mean "happiness." Beautiful. That's subjective. Must mean "wealth." Actually, it must mean ugly too, for that matter. As, if Ugly = happiness and happiness = beautiful, that must mean beautiful = ugly. Isn't subjectivity fun?
Lawrence:Slaves didn't own their own bodies which is why they were not allowed to do the actions that maximize their happiness. [...] slaves never really acted in the sense that they never chose an action that they wanted to do, they only behaved in the ways that their masters told them to.
Right. So a slave never ate a scrap of food because he was hungry, he only ate because his master told him to. Slaves never had sex because they wanted to, their masters ordered them to do it. Slaves didn't run away from their plantations because it was in their own self interest and they were attempting to maximize their happiness....their masters commanded they do it. Yeah. I buy that.