12 December 2008

Wealth and Prosperity

I should never be allowed to have a "definitions" tag.

Wealth is a relative measure. If you take 100 pounds, troy, of silver, current price something like 12,250 USD, and get in a time machine and go back to the Kingdom of Wessex in 950 CE, you would be wealthy, having 20 years of a minor nobleman's annual income as cash in hand. (An income of five pounds a year is when you started paying thane's taxes.)

You would be in an excellent position to buy land and be set for life, for the values of "life" and "set" that applied to a time when "the worms that dwell in a man" was a proverbial utterance.

Prosperity is an absolute measure: what is the infant mortality rate? how old are people when they die? what proportion of the population does not get enough to eat? how many people can read and write?

Policy should always prefer the absolute measure of prosperity to the relative measure of wealth.

This is for three reasons:

  1. the proper function of government is to promote the general welfare, rather than the benefit of some specific group over other groups of people. Prosperity is the measure of the general welfare.
  2. prosperity without wealth will, given time, produce wealth as the exceptionally gifted, able, driven, or lucky work. Wealth without prosperity collapses, as the range of wealth the society can support diminishes below the level of existing fortunes.
  3. Increase of prosperity is a positive sum activity; increase of wealth is at best a zero-sum activity, because concentration of wealth decreases the general accessibility of choice, which in turn reduces the overall scope of innovation available to that society.
One of the things afflicting the present global economy is that it has spent 30 years being tremendously concerned with wealth, and as a result, against the general increase in prosperity.

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