which Big Four UK bank will be 1st to go kaput?

Nope. If you and I voluntarily trade X for Y, we can conclude the following:

You value X more than you value the Y you're trading for X (otherwise you wouldn't trade). You will be X-Y (in terms of how you value them) better off after the trade.

Conversely, I value Y more than the X I'm trading for it and I will be Y-X better off after the trade.

It looks like those two should cancel out, but there is no fixed system of value. The simple fact is that both of us are richer after the trade because we value the two items differently. Both of us show some positive gain and wealth has therefore increased. It is not a zero-sum game.

Of course in more complex markets, where there are many similar items, such as gold bars or shares, we can arrive at a kind of "average" price through the bid/sell auction process. That would be what applies when the original car is sold.

The the question simply becomes whether the price gained from the car is greater than the price of all the inputs to it such as digging up and processing the iron for the steel through to actually assembling the car. If there's a profit, then global wealth has increased as a result of all those endeavors. If there's a loss, then they wasted their time and those resources, which would have been better spent creating something that someone did value at greated than its cost of production.

If you imagine that every trade must necessarily be zero-sum, how come we're richer than our caveman ancestors?

FoFP

Anyone who bids 10K on it.

FoFP

I disagree. My wealth has increased because I want the painting more than the money. The artists wealth has increased because she, presumably, wanted the money more than the painting and for the gallery in the middle it's an arbitrage situation - quite possibly they only paid the artist as and when the painting sold.

Tim.

"Tim Woodall" wrote

Using what valuation system? (see below) ...

"Tim Woodall" wrote

OK, so using *your* valuation system, your wealth has increased and the artist's wealth has decreased (total overall still the same, using *your* system).

"Tim Woodall" wrote

OK, so using *her* valuation system, her wealth has increased and your wealth has decreased (total overall still the same, using *her* system).

Now, what valuation system are you going to use to determine "total global wealth"? Your system, or her system or another system entirely? I suggest that whatever system is chosen, the total global wealth will be the same before & after the sale...

After the sale

It doesn't make any difference whos valuation system you use.

The artist has created wealth by turning those paints into a painting.

Assuming I sell the picture in the future for a higher sum then I've created wealth by storing the picture for a time and matching the picture to a buyer. Of course, if I sell it at a lower price then wealth has been destroyed.

Tim.

"M Holmes" wrote

Without a "fixed system of value", how are you going to determine a **total global** figure?!

"M Holmes" wrote

That sounds good from each individual's separate point-of-view, but as a *collective* the two of you are no richer afterwards (between the pair of you, globally, you(plural) still have the same cash and the same object as before). When you consider "total global" wealth, you are looking at what everyone has together, and that is the same after the sale as it was before.

"M Holmes" wrote

Each person's perception of their own individual wealth has increased, but "total global" wealth is necessarily still the same. Overall, trades **are** a "zero-sum game" wrt total global wealth (the 'globe' has the same items after, as it had before).

"M Holmes" wrote

We're back to where we were before. I agree that it's the *endeavours* that might increase wealth, not the

"M Holmes" wrote

Because the past *endeavours* have produced total global wealth, not the *trades* !!

Why would their opinion be any more important than someone who bids 9K on it, or someone else who bids 11K on it?

And what if there are no bids?

"Tim Woodall" wrote

The above is not only before the sale, it is also before the painting has been painted.

Then you missed the intermediate stage: ## After painting was painted, but before the sale: ## 1000 of picture (owned by the artist) ## 1000 of cash (owned by you)

"Tim Woodall" wrote

So the sale has resulted in no change to total global wealth; that had already increased before the sale.

"Tim Woodall" wrote

That's what I said -- it doesn't make any difference, because there is no change in "total global wealth" from the sale under *any* valuation system.

"Tim Woodall" wrote

Yep - not from the subsequent sale.

"Tim Woodall" wrote

No, the increase in wealth would just be from storing the picture (assuming it is considered to be worth more later). You wouldn't need to actually sell it for wealth to be increased. Any subsequent sale itself would have no effect on total global wealth (which, ignoring all other things, would be the sale price plus the picture, both immediately before + immediately after the sale).

No. I disagree.

Starting from the point the artist has purchased the paints etc.

When they open the paints, use the brushes, start on the canvas etc total wealth decreases (assuming we're ignoring people like Picasso where unfinished works have a great value)

There comes a point where the artist considers the work complete and tries to sell it. But many (nearly all) artists create works that never sell at all. So a created work has an expected value based on the average income generated from completed pictures.

When one of them does actually sell then its value increases from the average for completed works by the artist. It's also possible that the sale might actually increase the artists estimation of the value of their unsold works as well - most artists will invite previous buyers to their studios, shows etc.

And from the sale. The matching of buyer to seller itself creates wealth. That matching occurs at the point of sale.

But wealth must be increased by the sale otherwise I wouldn't sell it. Its value to me is less than the buyer pays for it. Its value to the buyer is more than they pay for it.

And even a single person can have two different valuations for something depending on whether they're buying or selling. I wouldn't sell my painting to you for 100k. But if you owned it then I wouldn't buy it from you for 10k.

Similar things happen when you buy gifts. Your with your wife/girlfriend/whatever and they see something in the shops they like. But they think it's a bit expensive. "Would you like me to buy it for you?". It's worth more to me as a gift to give to my girlfriend than it is to my girlfriend. The item might be completely useless to me. So either wealth was destroyed in the purchase, and recreated in the gifting, or wealth was created in the purchase.

Tim.

You're not (well, not unless someone says "OK, I'll bid X for the planet, pets and all"). we don't know how big it is, but we know when people trade, it increases._

Yes, but we're both up in jollies. Money is just a means to facilitate the trade in jollies. It's the jollies that matter though, not the bits of paper.

I disagree. The map is not the territory.

FoFP

Let's ramp up the stakes a little. One guy has some insulin and is starving to death. The other has diabetes and a bunch of baked beans.

They agree to trade.

The world afterwards has two people alive and considerably happier than they were. And yet, the world still just has the same two guys and the same insulin and baked beans.

If you look at the objects of trade, the world hasn't changed. If you realise that the purpose of trade is to maximise human jollies, you realise the world just got a whole lot richer.

FoFP

If you just slash the painting to bits though then of course the world hasn't got poorer. It still has all the same stuff in it ;-)

FoFP

In most auctions, he who bids the most has the most important opinion, because that's what the item will trade at.

The item is only worth whatever it is worth to the owner.

Economists call this "revealed preference". It's a fancy way of saying that when someone buys something, they reveal the minimum it is worth to them. Different people have different revealed preferences for different things (I paid 400 quid for a Hawkwind single. Would you?) It's really not complicated.

FoFP

For the same reason perhaps that rents didn't rise when house prices rose? You are forgetting the effect of higher interest rates in your calculations.

If my landlord tried to increase my rent, I would point out that the place next door to me is on the market for the same amount per month that I am paying at the moment. So any required increase in yield would have to come from falling prices, not from increased rent.

There are the same number of houses available now (or in fact probably a little more) as there were before the crash.

And if the houses are available, people can live in them one way or another.

Yes. It is only in the last 10 years that they have been lower than that.

Rents diod rise as house prices rose. Trust me. I've been renting for over thirty years.

FoFP

You seem to be confusing "happiness/well-being" with (economic) *wealth*. They are not the same!

Every kind act will increase "human jollies"; do you really think that is an increase in *wealth* ?