Wednesday, February 24, 2016

Wealth Creation is Not Building -- It's Selling

"This man is creating wealth," someone remarked about the video embedded below.

It is certainly very impressive what can be made with very simple technology and raw materials. But is that wealth creation? Or is it merely consumption of raw materials? Arguably, when you cut down trees to build yourself a house, you are merely consuming the resources at your disposal. But when you sell what you build to somebody else,  you have created wealth.

Wealth has no objective existence apart from a social situation in which the value of some objects is compared with the value of others. Without a market, there can be no wealth.

I once went to look at a house and ten acres when I was shopping for a new home. The house was in a desolate, wooded area. The owners had lived there for years and had cut down all the trees on their acreage, using them to heat their home. They now told me proudly how they felt they had improved the land by clearing it. But I came from the big city, and I was looking for land with unspoiled woods on it. From my perspective, the property lost value when the trees were cut down.

What is more important: hard work, creativity or raw materials? I know people who can argue about this for hours on end and never come to an agreement. Why? Because there is no objective, universal answer to this question. It depends on the circumstances. Important to whom? That is the question they don't seem to grasp.  Some  are under the impression that standing trees are not valuable, but lumber is. There are even those who think that by clearing their land, they are improving its resale value. In this fantasy, you can have your cake and eat it, too. You can consume the wood, and what remains is even more valuable! It's like eating your dinner, and then selling the waste for fertilizer. It can be done, my friend, but it depends entirely on the market.

An excerpt from Our Lady of Kaifeng: Courtyard of the Happy Way
Sometimes, good fertilizer is hard to come by, and people will pay for our night soil. Sometimes, nobody wants our refuse, and we have to pay to have it hauled away. Like beauty, value is in the eye of the beholder. The market decides, and the market is just the shifting opinions of a large number of people.

What is of greater value today: the structures built by the man in the video embedded at the beginning of this post, or the right to own the land on which the structures were built? If you own the land free and clear, you can choose what to do with the trees and the lumber. But how much would an army to keep other people out cost? And would the market value of those wooden structures be enough to pay for it?

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