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SkorpivoMusterion
Livin in theTwilight Zone...


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Wealth is Produced
#5602464 - 05/07/06 08:22 PM (17 years, 9 months ago) |
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By G. Stolyarov II
Special interest groups often attempt to expropriate others, justifying their actions by claiming “their share of the economic pie.” They are able to get away with violating genuinely productive individuals’ property rights by exploiting a widespread fallacy.
This fallacy is the zero-sum view of wealth, perpetrated since at least the days of regulated Mercantilist economies. Its advocates view the amount of wealth in the world as static: what one man gains, another must lose. The “economic pie” was always there, and it was always the same size. The only question for the advocates of the zero-sum view is how to distribute that pie—how to “slice it up” among the different factions and pressure groups warring for possession of it.
Under this premise, socialist and mixed-economy governments everywhere pursue the “redistribution of wealth,” lest some people become “too wealthy”—which for the regulators necessarily implies that they had seized too much of somebody else’s pie.
But the zero-sum view is deficient beyond remedy. It presumes that there exists a static “economic pie.” But how did that pie come into being? Blank-out. If one answers logically, stating that the pie had to be baked, then the entire zero-sum view is demolished. If one pie can be baked, so can two; so can three; so can five billion—if somebody desires that many pies. Every pie—and every good whatsoever—had to be produced, and produced by some particular individuals. Wealth is not a static sum; it can be and must be created. Imagine a blacksmith, living in an area with abundant forests and iron deposits. As they are in the state of nature, the trees and iron deposits are of little value to anyone. One can neither consume them nor use them to produce other goods. But if a miner extracts the iron ore and a smelter refines it, if a lumberjack cuts down some trees and a carpenter refines them, if the blacksmith then takes the resultant wood and iron and combines them into a hammer—wealth has been produced. The hammer did not exist in the state of nature; it might have never existed were it not for the creative minds of each of the individuals who saw it as desirable and produced it. In the making of the hammer, wealth was created. The world now has one more hammer; everyone is potentially better off, and nobody is deprived of anything.
But what will happen if the local town council, under the zero-sum view of wealth, decides that the “distribution of wealth” is inequitable and seeks to remedy it by taking away the blacksmith’s new hammer and giving it to the town beggar? The beggar, after all, does not have a hammer of his own, which implies that his “slice of the pie” is smaller. Will there be any reason for the blacksmith to produce any more hammers, knowing that they will be taken away from him and given to the “less fortunate,” who will likely use them as weapons in drunken bar riots?
Furthermore, what if the town council decides that there is a need to “equitably distribute” all the more basic goods that go into the hammer—the iron and wood? What if it confiscates these goods from their producers, the miners and smelters and lumberjacks and carpenters, to give equally to anyone who “needs” the goods? Will these individuals have any more incentive to mine and smelt and chop and refine wood? Why would they, if they receive no reward for the wealth they produce—a reward which entitles them to the fruits of other men’s production? Would hammers even be made at all, if the blacksmith’s suppliers were not allowed to sell their own goods to him?
Under the zero-sum view of wealth, the production question does not even exist; distribution is the sole concern. Under the creation view of wealth, however, production is the primary issue; distribution directly follows from it. Man is a volitional being who can interact with reality solely through the use of his reasoning mind. Only those who invested their minds in the production process are entitled to its rewards. The blacksmith—provided that he produced the hammer entirely on his own—is entitled to full ownership of the hammer and the prerogative to do with it what he will. His suppliers also have full sovereignty over the basic materials they extracted and refined; these were the products of their minds, and the producers have the right to sell them or use them or even throw them away if they so please. If anybody else attempts to force them to act contrary to their wishes, this will be tantamount to coercing the minds of the producers.
It is crucial to note that the man who invests sheer manual labor in the production of a good is not necessarily entitled to the full rewards of that process. Labor is not the primary root of production; the mind is. The mind determines what to produce, how to arrange the production process, and what labor to use. To the extent that labor requires a mental component to be performed, the laborer should be compensated. Every human manual laborer has to think about the task he performs and deliberately orchestrate his movements; this is why he gets paid. On the other hand, sheer mechanical labor deserves no compensation; this is why robots on assembly lines receive no wages.
The man who expends the most mental effort in producing anything is the entrepreneur—the individual who conceives of the product to be made and plans the process of making it. The entrepreneur is the creator, the organizer, and the indispensable source of all production. Whether he is a blacksmith choosing to design and make his own hammer or a CEO of a multinational corporation choosing to produce a new oil platform, computer, medical drug, or skyscraper, the entrepreneur has full rights to the fruits of his production—once he has compensated everyone else he has hired for the value of their contributions.
The creation view of wealth is indispensable to capitalism. Under capitalism, private property is inviolate; any attempt to “equitably redistribute” it is deemed unjust and rightly resisted. But the validity of this system presupposes a certain view of wealth—a view clearly stating that any “redistribution” of wealth by anyone but the producers themselves would only be detrimental, because the producers would be harmed. This presupposes again that there is such a process as production and such people as producers, who engage in it.
Only if the possibility of wealth’s creation is recognized can the premises underlying capitalism be correct. Of course, it is quite elementary to recognize—if one observes overwhelming evidence for it in reality. Does there exist more wealth now than there was in the Paleolithic Period? If not, what explains the colossal technologies that people during the Paleolithic Period did not have, or the presence of thousands of times more food now than existed then? Unless one would make the ludicrous assertion that Paleolithic hunter-gatherers drove automobiles while listening to iPods, one cannot support the notion of a static “economic pie.”
The facts of reality are inescapable for those who choose to genuinely observe reality: there exists much more wealth today than there was five years before—not to mention fifteen millennia ago. What separates us from caveman savages is the creation of wealth—our own and that of illustrious minds before us. When somebody creates wealth, nobody loses. For every hammer Person X makes, Person Y does not magically lose one. Instead, everyone is potentially in a better position as that hammer might be used to build a machine Y will be interested in buying, or a facility Y will want to visit.
To all those who seek wealth through special interest group warfare, I say this: slice up all the pies you like, but bake them first. And keep your hands off mine!
-------------------- Coffee should be black as hell, strong as death, and sweet as love.
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Icelander
The Minstrel in the Gallery


Registered: 03/15/05
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I don't have a lot of interest in this topic but I was wondering about your reference to land. Land ownership can be considered wealth I think. There is a limit to available land as long as we are landlocked to this planet. What if a few people owned all of the land and would not share it as living space? There would seem to be some limits or am I misunderstanding the premise?
-------------------- "Don't believe everything you think". -Anom. " All that lives was born to die"-Anom. With much wisdom comes much sorrow, The more knowledge, the more grief. Ecclesiastes circa 350 BC
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SkorpivoMusterion
Livin in theTwilight Zone...


Registered: 01/30/03
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Loc: You can't spell fungus wi...
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Re: Wealth is Produced [Re: Icelander]
#5602551 - 05/07/06 08:45 PM (17 years, 9 months ago) |
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Actually, land is the one thing that I kept thinking of. That is a valid point. Land cannot be produced. But you can make the case that the human population in proportion to the amount of land we have available, will remain proportionate. In other words, there is no realistic reason to worry that someday no one will have enough space to move around and such. This argument seems to be based on a theory that the human population sort of corrects itself - a net result of a number of individual conclusions.
-------------------- Coffee should be black as hell, strong as death, and sweet as love.
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EmptySpace
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Humans will not make it long enough to actually take up all space on earth. Everyone will die, and all will be well.
-------------------- We can't stop here - This is bat country. -Duke--Fear and Loathing in Las Vegas
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Icelander
The Minstrel in the Gallery


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Re: Wealth is Produced [Re: EmptySpace]
#5602604 - 05/07/06 08:57 PM (17 years, 9 months ago) |
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Whew! That's a relief.
-------------------- "Don't believe everything you think". -Anom. " All that lives was born to die"-Anom. With much wisdom comes much sorrow, The more knowledge, the more grief. Ecclesiastes circa 350 BC
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SkorpivoMusterion
Livin in theTwilight Zone...


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Re: Wealth is Produced [Re: EmptySpace]
#5602661 - 05/07/06 09:05 PM (17 years, 9 months ago) |
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You're right, because the Sun will eventually consume the Earth in it's fiery wrath, and toast our globe. But, human fecundity combined with human ingenuity, will be the rise of human expansion in the Galaxy. We will rise and stake our territory in other planets, and solar systems, and hopefully ASAP.
-------------------- Coffee should be black as hell, strong as death, and sweet as love.
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Icelander
The Minstrel in the Gallery


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I want a bionic bod, with which to chase the babes in the off world colonies.
-------------------- "Don't believe everything you think". -Anom. " All that lives was born to die"-Anom. With much wisdom comes much sorrow, The more knowledge, the more grief. Ecclesiastes circa 350 BC
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fireworks_god
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Re: Wealth is Produced [Re: EmptySpace]
#5602719 - 05/07/06 09:13 PM (17 years, 9 months ago) |
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Quote:
EmptySpace said: Humans will not make it long enough to actually take up all space on earth. Everyone will die, and all will be well.
States "Empty space". 
 Peace.
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If I should die this very moment I wouldn't fear For I've never known completeness Like being here Wrapped in the warmth of you Loving every breath of you
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Silversoul
Rhizome


Registered: 01/01/05
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Quote:
SkorpivoMusterion said: Actually, land is the one thing that I kept thinking of. That is a valid point. Land cannot be produced. But you can make the case that the human population in proportion to the amount of land we have available, will remain proportionate. In other words, there is no realistic reason to worry that someday no one will have enough space to move around and such. This argument seems to be based on a theory that the human population sort of corrects itself - a net result of a number of individual conclusions.
Of course there is enough space for everyone to live if we all shared equal amounts of space. But obviously that is not the case. The wealthiest people(and corporations even more so) own immensely higher amounts of land. Not to mention that not all land is equal. If the land available to me is a bunch of sand dunes in the Saharrah, then that's just not going to cut it. Obviously, the situation is not that extreme, but it is more extreme than you might think. One reason that there is so much clear-cutting of the rainforest in Brazil is that a few wealthy landlords own all the good farmland, and hold much of it out of use for speculative purposes. Thus, poor ranchers have no choice but to raise their cattle on newly clearcut areas. And if you think that's just in the third world, think again. Big agribusiness corporations like Monsanto hold near-monopolies on the best arable land in the US, and a rather small portion of that is actually being used. This helps reinforce their grip on the agriculture industry, and prevents small farmers from competing with them. My biggest problem with land speculation is that it rewards people for doing things which are counter-productive or destructive towards society. It is true that much wealth is produced. However, land rent is a type wealth that is produced by society, but funneled into the pockets of a small handful of individuals. Rather than producing the wealth, they extract it from others. It is welfare for the rich.
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SkorpivoMusterion
Livin in theTwilight Zone...


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Re: Wealth is Produced [Re: Silversoul]
#5602840 - 05/07/06 09:38 PM (17 years, 9 months ago) |
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So, setting aside the theory of the LVT-solution, do you believe that one should have limited rental property rights, or absolutely none at all? Would there be a place for the college-student who wishes to rent the other side of a duplex to supplement his income, but not for Donald Trump who owns half of Manhattan? Where do you draw the line?
-------------------- Coffee should be black as hell, strong as death, and sweet as love.
Edited by SkorpivoMusterion (05/07/06 09:52 PM)
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Silversoul
Rhizome


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It is indeed a tricky thing to draw the line. So instead, I believe the solution is to pay for benefits rendered. If you own a large piece of land, rather than profit from withholding that land from others, you should have to pay society for the privilege of using it. I will not set aside the land value tax solution, precisely because it is the solution, at least within our socioeconomic context.
However, individualist anarchists such as Proudhoun or Benjamin Tucker have proposed that we simply change the way we view land. It should be a possesion, but not property. You may only have exclusive rights to the land for as long as you are using it, after which it goes up for grabs. I happen to think that this solution would be much more difficult to achieve, as it sets to redefine our social conception of property, rather than simply take advantage of it for the common good.
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Icelander
The Minstrel in the Gallery


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Re: Wealth is Produced [Re: Silversoul]
#5602925 - 05/07/06 10:05 PM (17 years, 9 months ago) |
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y biggest problem with land speculation is that it rewards people for doing things which are counter-productive or destructive towards society. It is true that much wealth is produced. However, land rent is a type wealth that is produced by society, but funneled into the pockets of a small handful of individuals. Rather than producing the wealth, they extract it from others. It is welfare for the rich.
This is also my problem with the idea that unlimited wealth is always a good thing. It pretty much comes down to what you do with it. Mostly , the lust for great wealth is a hindrance to spiritual development and humanities wellbeing. But it doesn't have to be.
-------------------- "Don't believe everything you think". -Anom. " All that lives was born to die"-Anom. With much wisdom comes much sorrow, The more knowledge, the more grief. Ecclesiastes circa 350 BC
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SkorpivoMusterion
Livin in theTwilight Zone...


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Re: Wealth is Produced [Re: Icelander]
#5603096 - 05/07/06 10:50 PM (17 years, 9 months ago) |
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It pretty much comes down to what you do with it

-------------------- Coffee should be black as hell, strong as death, and sweet as love.
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Silversoul
Rhizome


Registered: 01/01/05
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Quote:
SkorpivoMusterion said: It pretty much comes down to what you do with it

Well, that's half the equation. The other half is how you got the wealth in the first place. If you make a fortune by stealing, exploiting, and plundering, then giving a portion of that money to charity is not going to make up for that.
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Octavius
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Re: Wealth is Produced [Re: Silversoul]
#5604198 - 05/08/06 08:17 AM (17 years, 9 months ago) |
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One day I will own my own land and get to build a house on it. I would really like to not build a normal house, i'd like an eco-dome of sorts, skylights, and all sorts of neat eco style living things.
I will get energy from the sun, and wind and have filters that pump fresh water from below the earth. Grow my own food indoors, life with nature and enjoy it.
Peace, Octavius
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fresh313
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Re: Wealth is Produced [Re: Octavius]
#5604574 - 05/08/06 11:14 AM (17 years, 9 months ago) |
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ya sure, but in the zero-sum theory the problem lies not in the production but in the distribution.
say circuit city employee A on comminsion sells 100 computers in a month and makes 10,000.
best buy employee B works for 8/hr and sells 100 computers in a month and makes 8x40, x4. = 1300.
same work was done.
i see no economic usefulness in this article whatsoever. great in theory, but does not apply to the modern corporate world.
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Moonshoe
Blue Mantis


Registered: 05/28/04
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sadly, the worlds natural resources ARE finite, and they are running out..
However, the worlds economic pie is infinite because value can be added by making smaller amounts of material do more things and thus be more valuable as in the case of cell phones.
The fact remains though, the consumption rate of the north is too high to sustain human life on earth for more than a handfull of generations. Fortunatly, we are all privelaged to live at a point in history where we can enjoy this absurd quality of life and the spoils of the earth, and leave the empty wreck to our descendants to deal with.
party on!
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Everything I post is fiction.
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Icelander
The Minstrel in the Gallery


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Posts: 95,368
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Re: Wealth is Produced [Re: Moonshoe]
#5604623 - 05/08/06 11:31 AM (17 years, 9 months ago) |
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As Sting said, " when the world is goin down, you make the best of what is still around."
-------------------- "Don't believe everything you think". -Anom. " All that lives was born to die"-Anom. With much wisdom comes much sorrow, The more knowledge, the more grief. Ecclesiastes circa 350 BC
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TODAY
Battletoad


Registered: 09/25/03
Posts: 10,218
Loc: Metropolis City, USA
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I liked reading that.
I'm of the entrepreneurial type so I strongly advocate my own property rights. If I'm going to do something that nobody else is doing or that I think I can do more economically than somebody else, then turn that idea into a profit I shouldn't have to distribute that profit to somebody who doesn't add to my production, so long as I act conscientious when practicing compensation distribution for the sum of the parts that result in the end profits.
The only profit from my endeavors I should have to redistribute is the exact same dollar amount that everybody else under the government pays in taxes. This amount is exactly equal to the total necessary dollars the governments uses (lets say in a yearly period) to protect my rights to produce, distribute fair compensation for the sum of the parts that result in the end profits, and let me keep those profits to use as I please. Take that number and divide it by the total number of workers in that government's economy and that's how much each worker in the economy should pay.
The detriment of others questions comes into play if you consider expanding production. Expanding production is the result of a profitable business attempting to become more profitable by growing. A growing Company A in an industry takes market share of goods and services away from Company B, who provides those goods and services in an industry as well. Company B may decline in value as a result, necessitating layoffs of employees as production falls. This rate of layoffs should be directly proportional to Company A’s growth, assuming that Company A isn’t outsourcing production (lets save that example for a different conversation) and relying on the same type of work force that Company B fired, who we will call Employee B. The only person losing in this situation , save for the time when Employee B was not employed, is the owner of Company B, who has presumable already enjoyed ample profits from the company.
If Company A decides to automate production, they may not need to rehire workers so Employee B may have to search for another job. Company C, who builds the automation process, may actually need an employee with the skill sets of Employee B to work in their factory that produces the machines that took his own job! But that job should still be available somewhere in the job market.
Theoretically, nobody loses in this situation because Employee B still gets his sustenance and the owner of Company A ,who worked the hardest or the smartest, was rewarded the most. I argue that this is the only fair way a system can work and the only way to keep people motivated to keep moving the system down the road.
Sure, the rich do get richer. But the smart get richer too and the smart people don’t always have to have money in the first place to end up winning in a system like this.
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ca'rouse (k-rouz) intr.v. To engage in boisterous, drunken merrymaking.
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