Category Archives: economics

Wealth versus Quality of Life

Conflating “wealth” with “quality of life”—in criticism of wealth inequality—is a fatal error. It is important to recognize that wealth in the form of capital (savings that are re-invested into factors of production toward increasing capacity for supplying goods and services into the future) speaks to supply-side capacity. The abundance created by this productive capacity is what provides for quality of life. On the demand side, quality of life comes from consumers with incomes that have purchasing power to acquire those goods and services. The greater the abundance of supply, the greater the purchasing power that consumers can wield (as expenses on the income statement or outflows on the cash flow statemen) WITHOUT wealth (assets and equity on the balance sheet) playing any role for consumers. The role of wealth is to associate ownership for management responsibility over factors of production to create and maintain supply. The role of income is to have purchasing power to enable quality of life for consumers. Savings (retained earnings that are re-invested) is how consumers cross over to participate in wealth toward the management of supply.

Economics of Human Valuation

(My evolving thoughts that extend from

The currency of life is life-energy. When we give things of value to someone to improve their well-being, whether it is material or intangible, we transfer life-energy from ourselves to the recipient. The esteem that we hold for others is counted in life-energy credits and debts registered in our personal accounting system. For strangers who we hold at arm’s length there is a direct conversion of life-energy into monetary units when we conduct transactions. Even then, the quality of such transactions is accounted for with non-monetary life-energy to account for goodwill that is earned or extinguished.

currency of goodwill

Success and failure in life and our relationships—personal and professional—relies in large part on goodwill. Goodwill is measurable. We maintain an account for every interpersonal relationship. We trade in goodwill. It has a currency.

People wonder what makes them liked or respected or appreciated. We hold others in esteem in proportion to the amount of goodwill they’ve accumulated in their account. If someone has been kind and thoughtful in the past, their account carries a higher balance. If someone has done many favors and has called in very few of them, they have earned a wealth of goodwill.