Stone Pigs

Posted By Alan Partis on February 8, 2009

Very simply put, wealth is stuff other people want. While money is often thought of as wealth, and in some ways it is, it really is just a currency to exchange, or transfer, wealth from one person to another.

A farmer might have very little money in the bank, but he usually owns large tracts of land. When that land is in high demand for another purpose, such as building new homes, the farmer can exchange that land for money to use for the purchase of other things.

Wealth can be thought of as a store house of value.

Also, wealth is not a closed loop nor a zero sum game. Wealth can be created, usually through labor.

Consider this scenario. I have a pile of wood in my back yard. By itself, it is of little use and thus of little value. But if I spend time and expend a great deal of energy (which I get from the food I eat), I can use my tools to form that pile of wood into dozens of bird houses, or toys, or furniture, etc. My store of value has now grown and I have created wealth that was not there before. The amount of that new wealth is determined solely by the availability of willing buyers for my bird houses in the market. In other words, I could turn that same pile of wood into wooden frisbees and not have created any wealth at all.

The key to wealth creation is in the definition of wealth itself: creating things that other people want.

Category: Economics, Stone Pigs
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