Thursday, July 12, 2012

Wealth is whatever people value -- the economic way of thinking

Value is in the eyes of the chooser.

Economics growth consists not in increasing the production of things, but in increasing the production of wealth.

Production/manufacturing is to rearrange those materials into more valuable combinations.

The result of exchange, the same as production, is an output value greater than input value for both parties.

Think outside the box: suppose Jack has a pear and Rose has an apple. Jack values an apple more than a pear while Rose values a pear more than an apple. Jack has a machine that can convert a pear to an apple. By producing an apple from a pear, Jack is better off. The same with Rose: if Rose can produce a pear from an apple, she is better off. Well, if you think carefully, the production process is equivalent to voluntary exchange between Jack and Rose. So voluntary trade is a productive process that create wealth.

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