Can Profit Exist Without Exploiting Natural and Human Resources?

[russ_watters]

Land is and has been the primary conduit for human survival. Nearly all wealth is rooted ultimately to land and resources contained in land.

That may be your theory, on how economics should work, but that isn't now, and hasn't been for 300 years, the way economics actually works.

It is a fact that I can sell some stock and use the profit to buy some land.

In fact, most of the new super-rich got that way due to the stock market. Microsoft was started in a dorm room. Dell in a dorm room. Apple in a garage. These companies were essentially started from scratch. They had no assets whatsoever. Today, they are massive corporations that produced multi multi-billionaires.

How can you say that isn't real wealth? All of these people have used their wealth to buy land - some even buy small islands.

I'll even go further and say if you ever want a piece of the pie, you're going to need to get onboard with the realities of economics today: A good retirement fund gets the vast majority of its value from the stock market and a lot of people today (most?) have a stock fund - even if they don't know it.

 

[NoahAfrican]

Our current economic construct hides many realities. Here are two very salient points to consider. One: Currency or the Green Back (fiat money) has no intrinsic value. It is an arbitrary construct. Money (commodity money) once existed based upon the reserves of a commodity (Gold). Two: The vast majority of money in our economy is not real money but CREDIT money. I made this point once before. Credit money is money that banks lend out from their deposits. Thus, all that money represent a liability to the holder, while it is an asset to the depositor. Based upon the reserve requirements, a banks can multiply the amount of money in the economy via its lending. For example, if a bank receives a deposit of 1,000 dollars and the reserve requirement is 10%, it can thus lend out 900 dollars. The person who receives the loan will make a transaction that will ultimately have that 900 dollars deposited in another bank (or the same bank). In turn, the bank lends out 90% of those deposits, thus, injecting another new 810 dollars into the economy..and so on…and so on. This is called the multiplier effect in economics. The government does not directly control how much money is in the economy…banks do…via their lending, while the federal reserve system controls the reserve requirement and the lending rate between banks, thus making loans more or less attractive to money seekers.

The point of the above paragraph is simply to reveal the fact that if the much of the growth of our economy is simply CREDIT. Credit is the ability to get money now, without actually earning it. The whole thing works only because people with deposits in banks do not come to withdraw and hold them outside the banking system. If they did, all the money that has exponentially increased in the economy due to bank lending of deposits would now be exponentially subtracted from the economy. This is because assets would be balanced against liabilities.

Now it is true that wealth is increasing as a direct result of money increasing in the economy. People, as noted, usually attempt to convert their monies into wealth holding assets. How do they do such? The answer is that they make PURCHASES. A purchase requires a buyer and seller. If someone is selling a wealth asset, then obviously this asset already exist in the ownership of someone else and thus is not NEW wealth.

Human population growth produces new workers and consumers and hence new opportunities produce, buy and sell. It is the energies expelled by humans that is creating new opportunities and expansion of money supply. It is the growing population that creates the allusion of infinite wealth. Thus, if money and wealth expansion is correlated with population growth, then the issue is in regards to how wealth and money is distributed among the population.

If I can enter into human relations where I can get more in return out of the relation than what I put in, the more people who I enter in relation with the richer and wealthier I become through volume. The catch-22 is that if I am getting more from these relations than I put in, then other involved in those transactions are getting back less. It does not mean that they are getting NOTHING, just not the true worth of their input, because I skim that off to create my profit. Thus, the more people that you can get to participate in this system of unequal exchanges, the more profit there is to be made and therefore one can see how population growth or the expansion of the game to new countries thus increase opportunities.

What should be evident in this is the natural dichotomy that is created. The most popular way of profit is to get more back than put in, which results in others getting less back, which creates an equal and opposite effect economically for the participants. It is this profiting and the conquest and takeover land to be used for private ownership, which has had the equal and opposite effect of creating immense wealth while at the same time creating immense poverty.

I guess for me...the definition of new wealth would be a tangible asset that was not previously owned by another. That means that people must create wealth, without subtracting wealth from others.

 

[Hurkyl]

There are two major things you completely overlook, Noahafrican.

(1) Value is not linear; you can't simply look at an asset and declare its value, and then add up the value of all assets to get wealth.

Let's take an extreme case: we have two isolated cities, Agraria and Induvial.


Agraria is blessed with fertile soil: they make twice as much food a year as their population can eat. I shall assume it's obvious that having twice as much food as you can eat is somewhat less than twice as valuable as having as much food as you can eat.

Induvial has a thriving textile industry: they make twice as much clothing as their population will wear. I shall also assume it obvious that this is less than twice as valuable as having exactly as much clothing as they would wear.


Fortunately, Agraria and Induvial have a trading relationship; a years worth of food for a years worth of clothes. Both sides are, indeed, making a profit: there are no losers. Agraria is trading away its worthless food surplus for the clothing it needs, while Induvial is trading away its worthless clothing surplus for the food it needs.


This is the law of diminishing returns: for many (most?) commodities, doubling the quantity does not double the value.

This is the quantitative formulation of the obvious fact that if both sides of a trade give what they don't need/want and get what they do need/want, then both sides have profitted.



(2) The value of things can change in other ways.

The is the example where the patch of land becomes more valuable when you find it's sitting on an (ahem) gold mine.

If nobody in the world has a use for crude oil, then crude oil isn't very valuable, now, is it? Your wealth can increase solely by finding a new use for an existing asset that increases its value.


(3) Not all wealth comes in the form of possessions.

I would argue that if two people have exactly the same lot in life, but one has more knowledge than the other, then the former is wealthier. Similarly if one has more entertainment or companionship.

 

[NoahAfrican]

Lets Talk Hurky, supply and demand, which is pivotal in economics. Nothing has value until there is a demand for it. Thus, its value is the product of the forces of supply and demand. Much of what has value in this world is due to the disequilibria between supply and demand. Take the diamond industry. The major diamond producers of the world purposely restrict the supply of diamonds they allow to circulate in order that diamonds maintain their value and these companies can keep their heft profit margins. They do this via being the major producers and also via buying the diamonds from the minor players. Thus, they increase value by restricting supply.

With this knowledge, one must be cognizant of the fact that humans benefit from others misfortunes via the laws of supply and demand. For example, the fact that 25% of the population of the US does not have a college degree, when around 26% of the existing and created jobs require a college degree means that the failure to meet the equilibrium between supply and demand increases the value (salaries) of those who do have degrees. If say 50% of the population has college degrees, while the economy only had opportunities for 26% of those commiserate with their education, the value (salaries) of workers would decrease over time. Thus, the educated benefit from the lack of education of masses in terms of increased wages and salaries. They in turn convert these increased wages and salaries into completive advantage for the acquisition of wealth.

Much of the global capitalistic economy is in disequilibria maintained by the elites and wealthy. It is the state of disequilibria between supply and demand that is what maintains elite entities, such as nations. There is much underutilized labor and talent in the world. Having nations and people that are more dependant upon the goods and services that you produce more so than the reverse, increases income in your nation. That is called having a trade surplus and this helps nations grow (now go figure…the U has been running a trade deficit for the last 20 years) richer.

There was a period of time when the supply of intellectual and technical know how was concentrated disproportionately in the West. This meant the things produced in the West were being demanded all over the world by nations who could not produce these things. Thus, the West increased their GDP and incomes by having net exports over imports in dollar value as the demand for their goods and services exceeded supply, increasing the value and standard of living in Western societies.

Now that the world supply of educated and talented people are starting to increase in size outside the West, the extra supply is reducing the value of what is being produced in the West and actually starting to shift the balance of trade to the favor of Non Western countries like China, whose people are not only smart, but the work for a lot less money, thus producing equal quality at cheaper prices. The effect of this is that it lowers the standard of living in the West in the long run, while it benefits those consumers who have not lost their jobs to the foreign competition in the short run.


So in summation, the laws of supply and demand have equal an opposite effects, when the commodity is not in equilibrium. Given that at any point in time resources are finite, the only way that some can have more is for others to have less.

 

[Hurkyl]

Correct me if I'm wrong, but I thought your thesis was:

The only way one can increase his wealth by decreasing the wealth of another?


But you seem to merely be arguing that:

One way to increase wealth is to take it or to withold it from others.

And that this is

The most popular way to make a profit.


Which is it?

 

[NoahAfrican]

You are nearly correct. The central theme of economics is scarcity. Scarcity implies a finiteness. Thus, every time that an entity gains control of a productive or valuable asset, another entity loses the opportunity for it. Think of it like a game of musical chairs. You have more people circling the chairs than you have available seats. In other words, demand for seats is much greater than supply. Consequently, every time the music stops, the fact that someone gets the chair, means that someone else loses out on the opportunity to sit. Thus, as some gain wealth, others loose it. Remember, also, for every buyer their is a seller. Thus, everytime one acquires something, someone esle is giving up something.

Much of capitalism is like musical chairs. It is a competition. However, not everyone has equal opportunity to compete and thus often end up without chairs to sit in. Advantage begets advantage and disadvantage begets disadvantage. Also, we must remember that the natural consequence of competition as opposed to cooperation, if the creation of WINNERS and LOSERS. All competition produces winners and losers as a consquence of the competition.

 

[Hurkyl]

I ask again, what is your thesis?


Also, I brought up a point of my own: if both sides value what they get more than what they gave, then both sides have netted a profit. Do you intend to directly respond to this?

 

[NoahAfrican]

That’s an interesting point. Take for example the elderly. The elderly NEED their medication, thus value it. The producers or the Pharmaceuticals industry wants increased profits. However, although both can be said to be getting what they want, one is actually been exploited because of the captive dependency. The fact that the elderly need the medication for survival means that they have no choice but to accept the prices of the producers and sellers.

Unfortunately, those with advantage take advantage, to maximize self profit. The scenario that presented about two countries, one producing with the other cannot and visa versa is rarely that simply. Most developed nation produce EVERYTHING, to one degree or another. Most goods can be produced anywhere that has the Capital and knowledge to do so. What gives certain nations advantage is know how and or labor cost.


What is my Thesis...my thesis is that every action produces and opposite reaction. In other words...for every GET, there is a GIVE. For every credit, there is a debit. This is the Ying Yang of the universe.

 

[Hurkyl]

If I give you an object, I no longer have that object.
I certainly agree with this statement.
I'm still mildly confused, though, about your method for arguing this statement.

 

[NoahAfrican]

It is not I that is confusing you...rather, it is the fallacies of our economic systems. I was showing via economics, how the give and get aspect bounds the economics of capitalism as well. We have yet to discuss the effects of wealth creation and its effect on the ecological system that life is dependent upon. Take the green house effect and global warming as an example. This is all the effect of the industrial evolution, which increased wealth for so many people.

In all aspects of existence, one has to always be cognizant that there is a tradeoff or opposite effect for every action. This is why I say that nature keeps a balance of accounts and offsets every credit with a debit. That is the resultant of actions within a closed system.

The concept of win-win is simply a lie/fallacy...capitalism uses this fallacy as propaganda to promote the system.

 

[Nereid]

What is my Thesis...my thesis is that every action produces and opposite reaction. In other words...for every GET, there is a GIVE. For every credit, there is a debit. This is the Ying Yang of the universe.

In another thread here in Social Sciences we're looking at the factors which were important in the independent development of agriculture and animal husbandry.

One thing we will probably discuss is food productivity. Imagine a region with a good, stable climate, and tame rivers. From this same region ('land'), it is possible - with the same inputs of per capita labour - for that land to sustain (essentially indefinitely) very different numbers of humans. For example, if the humans engage in hunting and gathering, the sustainable human population density will be considerably lower than if they engage in agriculture and sedentary animal husbandry. Of course, ecosystems will vary considerably in their adaptability to farming, so in this sense not all land is equal.

However, in this case, it's not clear to me how NoahAfrican's GIVEs and GETs would be balanced.

 

[Hurkyl]

Slow down, Noahafrican. I'm trying to fix upon a topic of discussion so we may discuss it thoroughly. You sound like you have a lot to say, and seem somewhat impatient to get through all of it... but hopping along from one issue to the next will only convince people you like to hear yourself speak. (figuratively, uh, speaking)

I chose the "win/win" scenario because I have things to say about it, but mainly I just want to pin discussion down to a particular issue or two (hopefully one in which I'm interested in discussing) so we can stay focused and get somewhere.

 

[NoahAfrican]

I never offered up the proposition that all land was equal, or the occurrence of natural disasters such as floods or drought. All things being righteous with man, there would still be inequality of outcome, but certainly not to the egregious extremes that exist mainly due to mankind’s competition instead of cooperation.

In regards to food, there does exist a food chain that has a balance calibrated by the ebb and flow of animal population, water supply, grazing areas and so on and so forth. In regards to humans and agriculture or animal husbandry, there is still a give and take or trade off to humanity. One can argue that the success of the agrarian ere created the step that allowed for the reaching of the industrial era, which has had a detrimental effect on the ecological conditions of many regions of the world, if not the planet, despite the wealth and improvments to life. Also, many health problems related to obesity or over indulagance on food are manifesting from the hyper success that certain nations have achieved in feeding itself. Certainly, hunter-gathers did not offer suffer from obesity and health related problems linked with sedintary or more sedintary life styles.

 

[Nereid]

We have at least two aspects of NoahAfrican's ideas under active discussion here, and the thread is as a result somewhat disjointed.

To get this thread back onto a smooth path, I'll start a different thread, to explore NoahAfrican's ideas on land and balance.