MrBill talks about wealth creation as if there were a "good" variety and a "bad" variety.
The good variety of wealth creation involves harnessing human ingenuity into the creation of products and services that will meet the needs of humanity with greater and greater efficiency and at lower and lower prices (adjusted for currency inflation, of course).
The bad variety of wealth creation involves catering to and titillating the lower human desires, much like giving crack to a crack addict. Bad wealth creation is where demand is created through advertising and the concept of "relative deprivation." The shiny thing on my wife's neck is shinier than the thing on your wife's neck, so I will occupy a higher position in the social order....
Bad wealth creation depletes resources needlessly and results in throwaway products and services that create economic activity but have a "running on the treadmill" quality, given that they are not meeting any real need and do not require any real breakthroughs in technology or science.
I sense that there is a certain nobility to good wealth creation, and it is deserved in many cases. When a person makes a genuine breakthrough in science or truly improves a product or service, then they should be rewarded for their efforts.
The question, of course, is what's the difference between good and bad wealth creation? Who decides? How do you encourage one and discourage the other?
Walmart is a great example. Some would say that its logistical system and buying power has allowed it to both provide lower prices and generate greater wealth for its shareholders--i.e., "good" wealth creation. On the other hand, the arguments for why Walmart is bad are familiar to most of us.
PeakOil is You
"Good" and "Bad" Wealth Creation
Re: "Good" and "Bad" Wealth Creation
by jlw61 » Tue 12 Feb 2008, 19:17:28
Interesting question. Is the originoal iPod a "bad" method of wealth creation which uses a hard drive that, like all other hard drives, have a very limited life compared to flash memory? Is the new ipod which is very slim, fully solid state, and probably a lot longer lasting "good"?
Where do we draw the line? I think being able to download electronic copies of songs and movies far better than a huge library of CDs and DVDs. Also hooking up my iPod Touch to the TV elliminates my desire for a DVD player. Isn't that a good thing?
Can a car be considered a "good" product when it allows me to quickly get to my desired location in nearly any weather? Would a lightweight electirc car be good if the ICE version is not?
I think you have some really good points, especially the shiny thing on the wife'ss neck part, but I think there must be more. We live in a 60+ year old 1500sf home and own a 10 year old 25+mpg Saturn and a 20 yr old Honda motorcycle for transportation. Yet while I telecomute and my wife works less than 2 miles from home, I'm not sure what we're doing is good, but simply better than most.
I would contend that ANY durable product (cars, ipods, bicycles, washing machines, etc) that does not last at least 15 years or is very recyclable is a "bad" product. I may give an exception to the ipod if it replaces a number of items in the house such as cd player, dvd player (along with all of the associated plastic disks) and, hopefully someday, radio while lasting 7+ years.
Where do we draw the line? I think being able to download electronic copies of songs and movies far better than a huge library of CDs and DVDs. Also hooking up my iPod Touch to the TV elliminates my desire for a DVD player. Isn't that a good thing?
Can a car be considered a "good" product when it allows me to quickly get to my desired location in nearly any weather? Would a lightweight electirc car be good if the ICE version is not?
I think you have some really good points, especially the shiny thing on the wife'ss neck part, but I think there must be more. We live in a 60+ year old 1500sf home and own a 10 year old 25+mpg Saturn and a 20 yr old Honda motorcycle for transportation. Yet while I telecomute and my wife works less than 2 miles from home, I'm not sure what we're doing is good, but simply better than most.
I would contend that ANY durable product (cars, ipods, bicycles, washing machines, etc) that does not last at least 15 years or is very recyclable is a "bad" product. I may give an exception to the ipod if it replaces a number of items in the house such as cd player, dvd player (along with all of the associated plastic disks) and, hopefully someday, radio while lasting 7+ years.
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Re: "Good" and "Bad" Wealth Creation
by BigTex » Tue 12 Feb 2008, 19:22:39
I think that the "good" and "bad" labels are about the best we can do. I think most would agree that some wealth belongs in each pile. It's just a question of where to draw the line....and who gets to draw it.
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Re: "Good" and "Bad" Wealth Creation
by threadbear » Tue 12 Feb 2008, 19:35:11
Glad you brought this up. This is one of my favorite articles from Atlantic Monthly. I read it several years ago, and try to link it every chance I get:
If the GDP is Up, Why is America Down?
Why we need new measures of progress, why we do not have them, and how they would change the social and political landscape
by Clifford Cobb, Ted Halstead, and Jonathan Rowe
"By the curious standard of the GDP, the nation's economic hero is a terminal cancer patient who is going through a costly divorce. The happiest event is an earthquake or a hurricane. The most desirable habitat is a multibillion-dollar Superfund site. All these add to the GDP, because they cause money to change hands. It is as if a business kept a balance sheet by merely adding up all "transactions," without distinguishing between income and expenses, or between assets and liabilities."
http://www.theatlantic.com/politics/ecbig/gdp.htm
http://en.wikipedia.org/wiki/Genuine_Progress_Indicator
If the GDP is Up, Why is America Down?
Why we need new measures of progress, why we do not have them, and how they would change the social and political landscape
by Clifford Cobb, Ted Halstead, and Jonathan Rowe
"By the curious standard of the GDP, the nation's economic hero is a terminal cancer patient who is going through a costly divorce. The happiest event is an earthquake or a hurricane. The most desirable habitat is a multibillion-dollar Superfund site. All these add to the GDP, because they cause money to change hands. It is as if a business kept a balance sheet by merely adding up all "transactions," without distinguishing between income and expenses, or between assets and liabilities."
http://www.theatlantic.com/politics/ecbig/gdp.htm
http://en.wikipedia.org/wiki/Genuine_Progress_Indicator
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Re: "Good" and "Bad" Wealth Creation
by CrudeAwakening » Tue 12 Feb 2008, 20:51:37
I haven't thought too much about this question, but I think any answer would have to take account of the degree of negative externalities associated with the "wealth creation" under consideration.
Many forms of wealth creation provide wealth for a few, but destroy the wealth of others in the process, taking wealth in its greater context beyond its usual financial definition.
You could argue that any deviation from sustainability (whatever that is taken to mean) is a "bad" form of wealth creation from the longer term perspective of humanity as a whole.
Many forms of wealth creation provide wealth for a few, but destroy the wealth of others in the process, taking wealth in its greater context beyond its usual financial definition.
You could argue that any deviation from sustainability (whatever that is taken to mean) is a "bad" form of wealth creation from the longer term perspective of humanity as a whole.
"Who knows what the Second Law of Thermodynamics will be like in a hundred years?" - Economist speaking during planning for World Population Conference in early 1970s
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Re: "Good" and "Bad" Wealth Creation
by BigTex » Tue 12 Feb 2008, 21:13:13
$this->bbcode_second_pass_quote('CrudeAwakening', 'I') haven't thought too much about this question, but I think any answer would have to take account of the degree of negative externalities associated with the "wealth creation" under consideration.
Many forms of wealth creation provide wealth for a few, but destroy the wealth of others in the process, taking wealth in its greater context beyond its usual financial definition.
You could argue that any deviation from sustainability (whatever that is taken to mean) is a "bad" form of wealth creation from the longer term perspective of humanity as a whole.
Many forms of wealth creation provide wealth for a few, but destroy the wealth of others in the process, taking wealth in its greater context beyond its usual financial definition.
You could argue that any deviation from sustainability (whatever that is taken to mean) is a "bad" form of wealth creation from the longer term perspective of humanity as a whole.
Measuring the negative externalities is probably a good way of making the good/bad wealth split.
I was thinking about wealth created making styrofoam cups earlier and it is clearly the negative externalities that would make me call this a bad form of wealth.
Negative externalities would probably shed some helpful light on how useful the new efficient light bulbs are as well (they do NOT last as long as claimed because most usages have you turning them on and off a lot, which shortens their lives).
To my example of the flashier and flashier wife bling, it is the negative externalities of the mining and the artificial (or whatever keeps the price so high) market for diamonds that makes that, to me, "bad" wealth.
What is good wealth? A lightweight and more aesthetic artificial limb fits the bill. Most energy saving technologies would probably fall into the good wealth category. Most internet wealth seems to be good, since much of it reduces paper, speeds up transactions and offers end users more flexibility and options than the systems the internet replaced.
[Ed. - We're talking about negative externalities on the first page! MrBill is going to get a boner when he sees this thread.]
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Re: "Good" and "Bad" Wealth Creation
by Kingcoal » Tue 12 Feb 2008, 22:11:19
It's basically a comparison between a long term, "real wealth" building strategy to a fast buck, short term accumulation of money. The bedrock of the fast buck economy is cheap resources and we all know which direction we are headed with that.
Maybe I'm being optimistic, but I'm seeing a departure from the "Reagan Revolution" which is really responsible for our current situation. Back in '80, we met peak oil face to face and chose a strategy to simply make oil as cheap as possible using any method available. We then took the proceeds from the cheap oil to blow air into the economy.
I think that people are starting to wake up. Oil is still cheap, just not excessively so like it has been for the past 35 years. Without cheap resources, you have to grow up and start creating real, tangible value. The only problem is that without the windfall from cheap oil, it is that much harder.
Maybe I'm being optimistic, but I'm seeing a departure from the "Reagan Revolution" which is really responsible for our current situation. Back in '80, we met peak oil face to face and chose a strategy to simply make oil as cheap as possible using any method available. We then took the proceeds from the cheap oil to blow air into the economy.
I think that people are starting to wake up. Oil is still cheap, just not excessively so like it has been for the past 35 years. Without cheap resources, you have to grow up and start creating real, tangible value. The only problem is that without the windfall from cheap oil, it is that much harder.
"That's the problem with mercy, kid... It just ain't professional" - Fast Eddie, The Color of Money
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Re: "Good" and "Bad" Wealth Creation
by phaster » Wed 13 Feb 2008, 01:34:21
$this->bbcode_second_pass_quote('BigTex', '
')
The question, of course, is what's the difference between good and bad wealth creation? Who decides? How do you encourage one and discourage the other?
')
The question, of course, is what's the difference between good and bad wealth creation? Who decides? How do you encourage one and discourage the other?
The unfortunate reality is good and bad are relative terms. If you're an auto worker building SUVs you think of those products as good, cause that is your bread and butter. You would also look at Wal Mart as a good thing cause you're buying power is greater at that shopping establishment, because that consumer store can offer a wide varity of good at lower prices (because of economies of scale).
The only way I see to encourage minimal long term damage, is to look at a basic idea found in physics and that is energy is conserved. If somehow one could calculate the embodied energy and life cycle of a product and calculate its actual cost (in terms of human work to build the product, and put an approximate value of the cost in environmental terms), then somehow got all market players (producers and consumers) to agree to said system of "human and environmental economics" that would eventually solve the good vs bad product problem.
For example if the US government closed the SUV "weight and vehicle description" loophole, and made GM and FORD abide by passanger car fuel standards (CAFE), and actually estimated a human health and environmental cost due to buring hydrocarbons, then SUVs would have never been mass market items because most people would not buy an 6000+ lb vehicle to get a gal of milk from the local strip mall.
Likewise if the government gave tax credits to domestic electric car makers and consumers, you would see those industies grow.
IMHO a GOOD product is something that must meet several criteria:
1) it must be useful and efficent
2) it must minimize damage to the environment
3) it must be a procuct that can be leveraged to grow an economy
4) it must scale to provide people employment
and a BAD products has these general characteristics:
1) kitschy products (who the hell needs plastic pink flamingos and crap like that?)
2) disposbale (one time use) except in health sector
3) inefficent (in terms of resource production natural resouce useage)
truth is,...
www.ThereIsNoPlanet-B.org
www.ThereIsNoPlanet-B.org
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Re: "Good" and "Bad" Wealth Creation
by mmasters » Wed 13 Feb 2008, 02:26:28
I mentioned it in the other thread but yes our money system is very much a double edged sword. It particularly encourages short term investing over long term because the money loses value over time through inflation of the money supply. It encourages monopolization activity, cartels to form and wipe out all the little guys (starbucks, walmart, etc...). Business towards the lowest common denominator for greatest revenue (really takes the individuality out of things). Corporatization - with all the mom and pop shops out of the picture you're now giving your money to some mammoth corporation where you have no idea who the people are running it. These are all symptoms of the type of money system we have. Many people do not realize there are many different money systems and the people incredibly empowered by the current system do not want you to understand this. IMO the money system we have in place is probably the most dangerous of them all. Then again, any serious efforts to tamper with it lead to certain death. It is an extremely well protected system you're not likely to hear the truth about. Keep in mind the path to researching this subject is riddled with disinformation.
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Re: "Good" and "Bad" Wealth Creation
by MrBill » Wed 13 Feb 2008, 06:37:11
I cannot remember ever talking about good or bad wealth creation, but while we're on the subject here are my thoughts. Why not?
I really do not think there is an arbitrary line between good and bad. Two examples.
One is improving standards of living (as defined by the UN human development index as opposed to conspicous consumption) only to find out that those improved living standards are environmentally or economically unsustainable.
Two, a product that is clearly bad for the environment in many ways - vehicles, planes, launching rockets into the ozone layer, electronics, etc. - but that play a useful role in helping us to understand the implications of human activity and climate change by monitoring our globe from outer space and by making painstaking measurements on the ground and in the sea.
Clearly there is a balance to be acheived. Sustainable development is obviously one useful yardstick by which to measure good versus bad wealth creation. Improving living standards versus conspicuous consumption is another.
Buying a house to live in it, thereby not paying rent and building equity in that house, would be in my opinion good wealth creation for the individual. But building an apartment building to rent to those that cannot afford to buy their own home is also good wealth creation in my opinion. Not having affordable housing is certainly worse.
The shiny object as a status symbol is both good and bad. On one hand a $100.000 luxury watch or bracelet is not a necessity. But on the other hand as a status symbol it is probably more environmentally friendly than owning one or more $100.000 luxury SUVs.
The best is to spend $100.000 on a lousy stamp or piece of canvas with a few verticle lines on it. Those status symbols, although completely unnecessary, hardly leave any environment footprint at all. And luxury goods do help re-circulate capital directly back into the market. Otherwise that capital would be used to create more wealth. That might also create jobs, but in a different manner. It would tend to be more concentrated in fewer hands.
But without wealth creation - literally creating an economic surplus - you would not have the capital to help build infrastructure like railways, ports and roads because you would not have the 'money' to pay for worker's labor, materials and those workers that provide those materials - energy, metals, commodities, etc.
Without wealth creation we would have no means by which to store wealth either. That means that we would have to live hand to mouth forever in the present with no way to make provisions for the future.
I know that we tend to think about good wealth as being growing food and building useful things. But I think that would require no more than 15% of our workers. What do we do with the other 85%? The reality is that the economy has grown to absorb the remaining 85%, and some of them are engaged in highly dubious economic activities, but they are not necessary to supply us with the things we really need like food, water, clothing, heat and shelter.
Two things you need to remember. One, the EROEI for humans is negative. And secondly, life is one big make work project! ; - )
I really do not think there is an arbitrary line between good and bad. Two examples.
One is improving standards of living (as defined by the UN human development index as opposed to conspicous consumption) only to find out that those improved living standards are environmentally or economically unsustainable.
Two, a product that is clearly bad for the environment in many ways - vehicles, planes, launching rockets into the ozone layer, electronics, etc. - but that play a useful role in helping us to understand the implications of human activity and climate change by monitoring our globe from outer space and by making painstaking measurements on the ground and in the sea.
Clearly there is a balance to be acheived. Sustainable development is obviously one useful yardstick by which to measure good versus bad wealth creation. Improving living standards versus conspicuous consumption is another.
Buying a house to live in it, thereby not paying rent and building equity in that house, would be in my opinion good wealth creation for the individual. But building an apartment building to rent to those that cannot afford to buy their own home is also good wealth creation in my opinion. Not having affordable housing is certainly worse.
The shiny object as a status symbol is both good and bad. On one hand a $100.000 luxury watch or bracelet is not a necessity. But on the other hand as a status symbol it is probably more environmentally friendly than owning one or more $100.000 luxury SUVs.
The best is to spend $100.000 on a lousy stamp or piece of canvas with a few verticle lines on it. Those status symbols, although completely unnecessary, hardly leave any environment footprint at all. And luxury goods do help re-circulate capital directly back into the market. Otherwise that capital would be used to create more wealth. That might also create jobs, but in a different manner. It would tend to be more concentrated in fewer hands.
But without wealth creation - literally creating an economic surplus - you would not have the capital to help build infrastructure like railways, ports and roads because you would not have the 'money' to pay for worker's labor, materials and those workers that provide those materials - energy, metals, commodities, etc.
Without wealth creation we would have no means by which to store wealth either. That means that we would have to live hand to mouth forever in the present with no way to make provisions for the future.
I know that we tend to think about good wealth as being growing food and building useful things. But I think that would require no more than 15% of our workers. What do we do with the other 85%? The reality is that the economy has grown to absorb the remaining 85%, and some of them are engaged in highly dubious economic activities, but they are not necessary to supply us with the things we really need like food, water, clothing, heat and shelter.
Two things you need to remember. One, the EROEI for humans is negative. And secondly, life is one big make work project! ; - )
The organized state is a wonderful invention whereby everyone can live at someone else's expense.
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Re: "Good" and "Bad" Wealth Creation
by threadbear » Wed 13 Feb 2008, 11:55:10
$this->bbcode_second_pass_quote('mmasters', 'I') mentioned it in the other thread but yes our money system is very much a double edged sword. It particularly encourages short term investing over long term because the money loses value over time through inflation of the money supply. It encourages monopolization activity, cartels to form and wipe out all the little guys (starbucks, walmart, etc...). Business towards the lowest common denominator for greatest revenue (really takes the individuality out of things). Corporatization - with all the mom and pop shops out of the picture you're now giving your money to some mammoth corporation where you have no idea who the people are running it. These are all symptoms of the type of money system we have. Many people do not realize there are many different money systems and the people incredibly empowered by the current system do not want you to understand this. IMO the money system we have in place is probably the most dangerous of them all. Then again, any serious efforts to tamper with it lead to certain death. It is an extremely well protected system you're not likely to hear the truth about. Keep in mind the path to researching this subject is riddled with disinformation.
The mainstream media sure aren't going to emphasize it, for obvious reasons.
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Re: "Good" and "Bad" Wealth Creation
by Iaato » Wed 13 Feb 2008, 15:24:03
$this->bbcode_second_pass_quote('BigTex', 'M')rBill talks about wealth creation as if there were a "good" variety and a "bad" variety.
The good variety of wealth creation involves harnessing human ingenuity into the creation of products and services that will meet the needs of humanity with greater and greater efficiency and at lower and lower prices (adjusted for currency inflation, of course).
The good variety of wealth creation involves harnessing human ingenuity into the creation of products and services that will meet the needs of humanity with greater and greater efficiency and at lower and lower prices (adjusted for currency inflation, of course).
You ask excellent questions, Father Guido, even if I can't get a good grip on your avatar (you're making me dizzy!).
This question gets at the basic definition of sustainability. As threadbear points out in the Atlantic article, most economic measures such as GDP make the basic assumption that more is always better. So good wealth is just "more." This leads to all kinds of perverse incentives, waste, and growth for growth's sake, which overruns the carrying capacity.
You've got to define sustainability first. Here are a couple of definitions:
$this->bbcode_second_pass_quote('', '"')Much of the current salience of concepts of sustainability has come from a wide-ranging international discussion about sustainable development, which has been defined variously as, for example:
Meeting the needs of the present without compromising the ability of future generations to meet their own needs (WCED 1987)
Improving the quality of human life while living within the carrying capacity of supporting ecosystems (IUCN 1991)
Economic growth that provides fairness and opportunity for all the world's people, not just the privileged few, without further destroying the world's finite natural resources and carrying capacity (Pronk and Haq 1992)." and
"Sustainability refers to a process or state that can be maintained indefinitely (IUCN 1991)
Natural resources must be used in ways that do not create ecological debts by overexploiting the carrying and productive capacity of the Earth (Pronk and Haq 1992)
A minimum necessary condition for sustainability is the maintenance of the total natural capital stock at or above the current level (Costanza 1991)."
Holdren, Daily, and Ehrlich on the Meaning of Sustainability, from dieoff.org
I agree with crude that a deviation from sustainability and overrunning your natural capital stocks would be my interpretation of "bad wealth." The idea that you have to look longer term (generations, or indefinitely) at what you are doing is an essential part of the sustainability definition, too. Various folks have made the attempt to use other, more sustainable measures. Hazel Henderson is one who has looked at community indicators.
And Phaster is right that using an energetic basis for the definition and valuation of products (such as emergy) would help to value resources properly in order to prevent waste, consumption, and overgrowth.
One thing I know for sure; our definitions of good and bad wealth are about to change in a big way culturally. Who will lead the charge on this? Religion? Governments? I agree with TB, it won't be economists or the MSM.
“Paper money eventually returns to its intrinsic value ---- zero.” --Voltaire
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