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Social Security index (Fearless Blue)

Simcountry: Simcountry Bulletin Board  Social Security index (Fearless Blue)

John Gresham (White Giant)

Tuesday, April 19, 2005 - 10:47 pm Click here to edit this post
... "utilised" and "capital"

I think that the only problem is the belief that money actually has value, instead of just representing value.


I actually think that money does have value. It has no intrinsic value, but it has a trade value, or a price. Land is anything that can be taken from it and used to make something else. Labor is the work that people or sometimes animals do to produce something else. Capital is the human-produced resources of production, including industrial machinery and human capital, the knowledge and training of individuals. These three categories correctly describe what resources are, and their primary aspects. Agrarian and feudal societies generate wealth by owning and getting others to perform labor on land. Industrial societies generate wealth by owning capital and getting other people to perform labor with that capital. It is a good definition and they are good categories.

Capital is not money. The capital market for corporations is named so because people buy capital with the money that is invested in that way (usually this happens at an initial public offering, but sometimes shareholders agree to offer more shares and dilute their own ownership a bit.) That is investment. What is not considered investment by economists is what usually goes on at Wall Street-- the trading of stocks between individuals. When you trade stocks nothing is produced. When you invest, production is expanded because capital (or sometimes labor or land resources) is bought with the invested money and utilized. So capital is not money. Capital is the human-produced resources of production, including education, training and machinery. Education is also considered investment (though I don't think it is represented as such in GDP; I think but am not absolutely sure that the GDP measurement quantifies it as a service that can be bought and as government spending, depending on the nature of the schooling.) But when one takes a class, they are investing money in themselves and buying some human capital.

Money is utilized to buy and trade things. It is not utilized to produce things. The production process is rather limited: it is considered directly; there is input and there is output and not much else. Since you do not feed money into the machine or plant it into the ground, it is not a resource. The process of buying resources utilizes money, but that doesn't make money a resource. Buying is not production. It is buying. Market activity utilizing money is essential to an economy that produces as much as we do, since it makes trade, and taking advantage of the benefits of specialization, very simple and efficient. But that doesn't make it a resource.

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