Why study Economics?

You’ve heard: “In 1970, the top 1% of Americans owned 25% of national wealth. Today in 2015, the top 1% owns over 40-50% of national wealth.”

This assumes that the pool of wealth is static and fixed and does not grow – that there’s only so many slices of pie, so many seats on the bus, so much stuff to be had. If true, the rich could only get richer by taking more from the poor who continually get poorer. If true, the only solution can be to take from the rich and redistribute variously to the poor.

But if wealth is created, then the pool of available wealth grows. If this is true, the rich gain more wealth not by stealing it from the poor but by creating it where it previously did not exist. Such is the capitalist free market way – and this created wealth is inevitably put back into the economy which makes the whole society that much richer. The gap between rich and poor increases, not because the rich are gaining and the poor are losing, but because the rich are gaining quicker and the poor are gaining slower – but they are still gaining. And it is precisely because the rich wealth-creators are gaining quickly that the poor non-creators of wealth are gaining at all. In fact, the quicker the rich can gain – the less obstacles and regulations placed before them – the quicker the poor also will gain. Conversely, to destroy or hinder the wealth-creators’ ability to create wealth is not only to keep the poor in their poverty but also is to make all of society poorer.

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4 thoughts on “Why study Economics?

    • Pixy dust – joking. Economists vary in their explanations but they generally divide between the two views I presented: wealth is static (and we’re all fighting for it and struggling to survive) or wealth grows (and diminishes).

      The view I favor says wealth is created out of labor and resources; by applying labor to less useful (or valuable) resources to make them more useful (or valuable). The labor is not the wealth (Marx), nor is the raw resource (mercantilism); but the usefulness or value at the end (a free market view, yet also espoused by distributionists like Hilaire Belloc).

      Example: mining raw iron out of the earth -> refining it into steel -> molding the steel into large beams -> using the beams to construct a bridge. At each step human labor adds value or usefulness to the resource that it previously did not have. Iron is now accessible, steel is now refined, then shaped, then constructed. The overall process if called “production”. And, regardless of opinion, everyone generally measures wealth by production.

      • If one contributes neither then that person cannot create anything. Wealth can be transferred to that person (welfare, donations, etc) in the form of money, which is a representation of wealth. Technically, neither is wealth created by the laborer, since he doesn’t own the resources. Rather it is transferred also to the laborer in the form of money. The laborer trades his labor in exchange for representations of wealth (money). In the distributist scheme (Belloc, Chesterton), the laborers would own the fruit of their labor and thus own the wealth directly. But in capitalism they get paid money.

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