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Redefining a Nation's Definition of Wealth

George_Washington

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Adam Smith had some good ideas, yes. He said that the true measure of a nation's wealth is the number of goods and services it can produce. He advocated machinery, the division of labor, and producing low, selling high. He rebelled against the old mercantilist system. He also said that a product's true value is the amount of labor that went into it.

But what if this is false. What if the true measure of a nation's wealth isn't how MUCH goods and services they can produce but the QUALITY of goods and services they produce. And then let's say that the true value of a product isn't how much labor went into it but THE USAGE OF NATURAL MATERIALS. It seems to me that most products are expensive because they use resources that are often times nonrenewable. For example, why are diamonds so expensive? Well, because the Debeers family owns a monopoly on it but also because they are rare and nonrenewable within a human time frame. It seems like pretty much every product is expensive because it uses something natural in it. For example, why are a pair of Gucci athletic shoes more expensive than a pair of Nike athletic shoes? Gucci is imported, so you're going to have to pay import costs. BUT, I think it's how they are made. Gucci shoes use leather and other natural materials, whereas Nike uses plastic and man made materials.

So is it better for a nation to produce one high quality pair of shoes than 10 cheaper ones?

This is just a theory of mine. Discuss.
 

Iriemon

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George_Washington said:
Adam Smith had some good ideas, yes. He said that the true measure of a nation's wealth is the number of goods and services it can produce. He advocated machinery, the division of labor, and producing low, selling high. He rebelled against the old mercantilist system. He also said that a product's true value is the amount of labor that went into it.

But what if this is false. What if the true measure of a nation's wealth isn't how MUCH goods and services they can produce but the QUALITY of goods and services they produce. And then let's say that the true value of a product isn't how much labor went into it but THE USAGE OF NATURAL MATERIALS. It seems to me that most products are expensive because they use resources that are often times nonrenewable. For example, why are diamonds so expensive? Well, because the Debeers family owns a monopoly on it but also because they are rare and nonrenewable within a human time frame. It seems like pretty much every product is expensive because it uses something natural in it. For example, why are a pair of Gucci athletic shoes more expensive than a pair of Nike athletic shoes? Gucci is imported, so you're going to have to pay import costs. BUT, I think it's how they are made. Gucci shoes use leather and other natural materials, whereas Nike uses plastic and man made materials.

So is it better for a nation to produce one high quality pair of shoes than 10 cheaper ones?

This is just a theory of mine. Discuss.
What is this, an Econ 101 test? :)

I don't know how that question can be answered in the abstract. It depends on a lot of things. If the nation has 10 people and 9 have to go shoeless so one can wear the high quality pair, I could argue the nation is not better off.
If there is no demand for quality shoes but there is demand for cheaper ones, the nations would be better off producing the cheaper ones, and vice versa.
 

Kandahar

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George_Washington said:
For example, why are diamonds so expensive? Well, because the Debeers family owns a monopoly on it but also because they are rare and nonrenewable within a human time frame.
Actually this is just a myth. The monopoly is pretty much the only reason they're so expensive. Diamonds are plentiful and technology is currently being developed to make high-quality diamonds cheaply in laboratories.

George_Washington said:
It seems like pretty much every product is expensive because it uses something natural in it. For example, why are a pair of Gucci athletic shoes more expensive than a pair of Nike athletic shoes? Gucci is imported, so you're going to have to pay import costs. BUT, I think it's how they are made. Gucci shoes use leather and other natural materials, whereas Nike uses plastic and man made materials.
Also, the Gucci shoes say "Gucci" on them.

George_Washington said:
So is it better for a nation to produce one high quality pair of shoes than 10 cheaper ones?
That obviously depends on whether or not ten cheaper ones yield more or less profit than one high quality pair.
 

Canuck

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Certainly it can't be defined as wlamarts peddling chinese items that the nation buys by the tonage
it may be more expensive to buy american made items but is it really
in terms of security and long term prosperity
 

Ether

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George_Washington said:
Adam Smith had some good ideas, yes. He said that the true measure of a nation's wealth is the number of goods and services it can produce. He advocated machinery, the division of labor, and producing low, selling high. He rebelled against the old mercantilist system. He also said that a product's true value is the amount of labor that went into it.

But what if this is false. What if the true measure of a nation's wealth isn't how MUCH goods and services they can produce but the QUALITY of goods and services they produce. And then let's say that the true value of a product isn't how much labor went into it but THE USAGE OF NATURAL MATERIALS. It seems to me that most products are expensive because they use resources that are often times nonrenewable. For example, why are diamonds so expensive? Well, because the Debeers family owns a monopoly on it but also because they are rare and nonrenewable within a human time frame. It seems like pretty much every product is expensive because it uses something natural in it. For example, why are a pair of Gucci athletic shoes more expensive than a pair of Nike athletic shoes? Gucci is imported, so you're going to have to pay import costs. BUT, I think it's how they are made. Gucci shoes use leather and other natural materials, whereas Nike uses plastic and man made materials.

So is it better for a nation to produce one high quality pair of shoes than 10 cheaper ones?

This is just a theory of mine. Discuss.
Ah yes, there is much to discuss here. I'll try to keep it short :)

First, Adam Smith did have many good ideas when he wrote The Wealth of Nations and began the science of economics. His labor theory of value was not one of them. The LTV has been discarded as an adequate explanation of utility, and the modern subjectivist school has instead established that the all "values" are products of individual cognition and human choice. So the "true value of a product" is NOT how much labor is put into it - that idea was discredited over a century ago.

This should be a warning to any layman who cites classical economists as authority on a particular subject. Because it was Adam Smith's labor theory of value that Marx built upon...... and you know the rest of the sotry.

Every human being analyzes each good he comes across and attaches a certain importance to that good. Thus, he creates a value scale which is purely ordinal in nature and is the basis for all of his action. To take this one step further, all these individual preferences form supply and demand schedules, which in turn determine equilibrium prices. Labor and land factors which are used as means of production are valued according to the consumer goods which they must eventually become. The process of valuation occurs leftward along the line of production, not rightward. Labor and land have no inherent value in themselves unless they are directly satisfying consumer wants (in that case, they are not producers goods but consumers goods) or are transformed into products which do.

The above summary can explain why any good is "expensive" or "cheap". Of course, that only applies to a free marketplace. As noted above, the diamond industry is completely monopolized. And with regards to the shoes, the fellow above noted that the Gucci shoes have the classy brand name and Nike shoes are thought of as more casual.

Second, it is never a good idea to try to determine how much "better off" a nation is. Because nations do not act - they are only conceptual illustrations. Only the acting man can tell you whether or not he's better off which ten Nike shoes or one Gucci shoes. Personally, I prefer the Gucci but that's just my preference ;)

There's much more I can say but that should be enough for now.
 

MiamiFlorida

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George_Washington said:
Adam Smith had some good ideas, yes. He said that the true measure of a nation's wealth is the number of goods and services it can produce. He advocated machinery, the division of labor, and producing low, selling high. He rebelled against the old mercantilist system. He also said that a product's true value is the amount of labor that went into it.

But what if this is false. What if the true measure of a nation's wealth isn't how MUCH goods and services they can produce but the QUALITY of goods and services they produce. And then let's say that the true value of a product isn't how much labor went into it but THE USAGE OF NATURAL MATERIALS. It seems to me that most products are expensive because they use resources that are often times nonrenewable. For example, why are diamonds so expensive? Well, because the Debeers family owns a monopoly on it but also because they are rare and nonrenewable within a human time frame. It seems like pretty much every product is expensive because it uses something natural in it. For example, why are a pair of Gucci athletic shoes more expensive than a pair of Nike athletic shoes? Gucci is imported, so you're going to have to pay import costs. BUT, I think it's how they are made. Gucci shoes use leather and other natural materials, whereas Nike uses plastic and man made materials.

So is it better for a nation to produce one high quality pair of shoes than 10 cheaper ones?

This is just a theory of mine. Discuss.
I think most of us have a very superficial view of what "national wealth" really is. Back in the 80's I found it very amusing that some people were saying Japan was "wealthier" than us. Today some Europeans would have us believe that the EU as a whole is "wealthier" than the US.

How do you calculate how much 9,600,000 square kilometers are worth? Or 2 million square kilometers producing one fifth of the food consumed around the planet?

What value do you place on a bridge,a port, a highway, a tunnel, a university? How about a forest?

We have 19,000 km of coastline. Given the 200-mile coastal territorial rights....how many million square kilometers is that?

Does Europe have a territory the size of Alaska which is basically wilderness? Do they have our natural resources?

How can we talk about our National Debt without talking about our National Worth? What percentage of our National Worth would you say our trillion-plus debt represents? 1%? half of that? one tenth of that? one thousandth of that?
 

TimmyBoy

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MiamiFlorida said:
I think most of us have a very superficial view of what "national wealth" really is. Back in the 80's I found it very amusing that some people were saying Japan was "wealthier" than us. Today some Europeans would have us believe that the EU as a whole is "wealthier" than the US.

How do you calculate how much 9,600,000 square kilometers are worth? Or 2 million square kilometers producing one fifth of the food consumed around the planet?

What value do you place on a bridge,a port, a highway, a tunnel, a university? How about a forest?

We have 19,000 km of coastline. Given the 200-mile coastal territorial rights....how many million square kilometers is that?

Does Europe have a territory the size of Alaska which is basically wilderness? Do they have our natural resources?

How can we talk about our National Debt without talking about our National Worth? What percentage of our National Worth would you say our trillion-plus debt represents? 1%? half of that? one tenth of that? one thousandth of that?
Japan never had the sort of wealth the US had. It is an economic powerhouse. One of the reasons Japan ran into serious economic troubles was because their government had a bad habit of bailing out Japanese businesses that ran into trouble. This sort of practice encouraged Japanese businesses to be inefficient in their operations because they could count on government to bail them out when their inefficient practices started to cause problems for their businesses. Eventually, the Japanese government could no longer afford to bail out these businesses and stopped doing so. So, then this was when the Japanese economy ran into a recession and trouble. Because Japanese businesses were used to counting on government bailouts and continued to run inefficient businesses and the day came where the Japanese government could no longer bail them out. In the US, generally, the government will not bail out businesses unless they are an absolute national necessicity. Most US businesses cannot count on government bailouts and so they have no choice but to run an efficient operation or to go out of business.

Europe tends to have more social programs and laws that give more days off to their people. They also have alot more laws that protect workers from losing their jobs. It is one of the reasons why finding a job in Europe is harder than finding one in the US. Companies in Europe know that when they hire somebody, they are taking a risk and that it will be difficult to fire them if they are not good at their jobs. So they are less likely to hire people, because once they hire and the worker turns out to be inefficient, they can't get rid of them, or it's very difficult. Generally, these social programs and laws do not do well for poducing wealth for the European economy. And the social programs and taxes required to pay for them also put a drain on the European economy.
 
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