Friday, July 27, 2012

A Few words on the Idea of "Limited Wealth"

A common yet pernicious belief is that there is but a finite amount of wealth available to us all; and directly or indirectly the wealthy and the poor must battle for it (or we as a society must even it out to prevent conflict, a hopeless task). Thus, the rich fight to maintain their wealth, seeking to keep the poor impoverished, and the poor fight to take the assets of the rich, seeking to change places with the wealthy.
The amount of wealth in the world is not finite but changes dependent on human creation or destruction. A potential goal (not necessarily the only goal) of society is to maximize wealth. Wealth may be maximized by maximizing opportunities for creation.1 Opportunities for creation may be maximized by maximizing access to resources and the ability and incentive to productively use them.2 Doing so depends on preventing hoarding of resources while fostering education and freedom. These activities are contrary to the approach individuals (and social rules they foster) often take when believing that wealth is finite (and they hence in a battle with others to maximize their own). The creation of wealth creates new resources. Capitalism properly fostered is neither laissez-faire nor about "survival of the fittest." It is about fostering opportunities to create wealth.
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Minimax theory does not apply because it applies to zero-sum situations. The goal is not to minimize maximum loss in most situations, though that can be a legitimate goal when there is a risk of catastrophic loss (such as full scale nuclear war).
2 A recurrent -- and recurrently unanswered --question is, for what generation's interests should society act, if any? How far into the future should we plan? Is there a target for which to maximize resources? Maximizing short term creation of wealth may prevent fully maximizing long term creation of wealth. And, no, that's not a full answer.

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