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Sat 19 Jun, 2004 08:19 am

They say that the rich get richer and the poor get poorer. This statement implies that money is finite. If one person gains an extra $10, someone has to lose $10.

Is money finite?

If the amount of wealth was finite, then the rich could only get richer at the expense of someone else.

I do not believe the amount of wealth is finite. You can always go out and plant a few tomatos in your backyard or in pots, and create wealth when you harvest your tomatos. Of course, that's a simple example, and a few tomatos aren't much new wealth. On the other extreme you have Bill Gates, Sam Walton or Colonel Sanders who did it on a larger scale.

Re: The rich get richer, poor get poorer: Is money finite?

GeneralTsao wrote:**They **say that the rich get richer and the poor get poorer. This statement implies that money is finite. If one person gains an extra $10, someone has to lose $10.

Is money finite?

Who's the "They" that's saying all this?

There used to be a smuggler of exotic South American birds that used a pickup with a camper to bring them across the border. Now, every once in a while, he would stop the truck, get out, and whang the hell out of the camper with a big stick. You see, it was a half ton pickup, and he was carrying a ton of birds to make the trip pay out, so he had to keep at least half the cargo in the air at one time.

Actual money is finite, of course. Wealth probably is not. You just got to keep a lot of money up in the air, so to speak. I believe an economist would call this the velocity of money. Ask fbaezer or Thomas about it. They really know this kind of stuff.

I think there's a lot more to it than this.

Because wealth can be intangible and in some cases entirely imagined it is not finite.

But that does not mean that there are not losers when someone wins.

well this is more interesting that you think.

two things.

first ...at the dawn of time there were a few people...so only a bit of wealth.

now there are billions of people...and so much more wealth.

the limiting factor is the raw materials in the earth.

of course that's assuming we stay on this Planet.

finally if you think about it...the sun is the main provider of all wealth.

and we are all just stardust.

you realize what that means.....

you should be able to lock down some real values of things like currency and labour in absolute terms of say watts or kilojoules...

now that would take all the guessing out of the equations.

lucky Uncle Albert didn't think of it.

E may have= MC$

In response to Rogers comment, yes the velocity of money is integral to this branch of economics known as the quantity theory of money. This is shown by the Fischer equation:

MV = PT

where M is the money supply, V is the velocity of circulation, P is the price level and T is the number of transactions. Define these terms and you can see how the equation's two sides balance as by definition the LHS is the same as the RHS.

As for whether money is finite, theoretically it shouldnt be. It is traditionally used that V and T remain fixed so that through monetary policy manipulation a direct correlation between altering the money supply and inflation is achieved. Monetarism such as this was popular in the UK at around the 1970's (I think!)

Wealth is the stock of assets you have therefore cannot be easily changed. Government measures such as inheritance tax are legally avoidable in the UK (I am not so sure if the same is true in the USA). It is income which is seen to alter the distribution of income and wealth; income is the flow needed to increase the stock of wealth. Think of a river and lake anallargy where the river is income and wealth is the lake of pooled assets. So far the distribution of income in the UK has improved from historical times. This is shown economically by comparing Gini co-efficients from historical points until the present by plotting Lorenz curves. The smaller the co-efficient the better the distribution of income (which leads onto a change of the distribution of wealth albeit at a reduced rate of change).

Therefore stating the rich get richer and the poor get poorer cannot be true unless a policy such as regressional taxation is adopted by the government - it is government policy which primarly regulates the distribution of income and wealth and of course this differes between economic states. Or at least this is the basic argument from an economic point of view.