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Summary - eco1300 (ECO1300)
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Summary of 6 pages for the course eco1300 at UQAM (wealth)
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Topic: wealthWealth is the abundance of valuable financial assets or physical possessions which can be
converted into a form that can be used for transactions. This includes the core meaning as
held in the originating Old English word weal, which is from an Indo-European word
stem. The modern concept of wealth is of significance in all areas of economics, and
clearly so for growth economics and development economics, yet the meaning of wealth
is context-dependent. An individual possessing a substantial net worth is known as
wealthy. Net worth is defined as the current value of one's assets less liabilities
(excluding the principal in trust accounts).At the most general level, economists may
define wealth as "the total of anything of value" that captures both the subjective nature
of the idea and the idea that it is not a fixed or static concept. Various definitions and
concepts of wealth have been asserted by various individuals and in different contexts.
Defining wealth can be a normative process with various ethical implications, since often
wealth maximization is seen as a goal or is thought to be a normative principle of its own.
A community, region or country that possesses an abundance of such possessions or
resources to the benefit of the common good is known as wealthy.
The United Nations definition of inclusive wealth is a monetary measure which includes
the sum of natural, human, and physical assets. Natural capital includes land, forests,
energy resources, and minerals. Human capital is the population's education and skills.
Physical (or "manufactured") capital includes such things as machinery, buildings, and
infrastructure.
History
Adam Smith, in his seminal work The Wealth of Nations, described wealth as "the annual
produce of the land and labor of the society". This "produce" is, at its simplest, a good or
service which satisfies human needs, and wants of utility.
In popular usage, wealth can be described as an abundance of items of economic value,
or the state of controlling or possessing such items, usually in the form of money, real
estate and personal property. An individual who is considered wealthy, affluent, or rich is
someone who has accumulated substantial wealth relative to others in their society or
reference group.
In economics, net worth refers to the value of assets owned minus the value of liabilities
owed at a point in time. Wealth can be categorized into three principal categories:
personal property, including homes or automobiles; monetary savings, such as the
accumulation of past income; and the capital wealth of income producing assets,
including real estate, stocks, bonds, and businesses. All these delineations make wealth
an especially important part of social stratification. Wealth provides a type of individual
safety net of protection against an unforeseen decline in one's living standard in the event
of job loss or other emergency and can be transformed into home ownership, business
, ownership, or even a college education by expending the wealth to complete a purchase
of such.
Wealth has been defined as a collection of things limited in supply, transferable, and
useful in satisfying human desires. Scarcity is a fundamental factor for wealth. When a
desirable or valuable commodity (transferable good or skill) is abundantly available to
everyone, the owner of the commodity will possess no potential for wealth. When a
valuable or desirable commodity is in scarce supply, the owner of the commodity will
possess great potential for wealth.
'Wealth' refers to some accumulation of resources (net asset value), whether abundant or
not. 'Richness' refers to an abundance of such resources (income or flow). A wealthy
individual, community, or nation thus has more accumulated resources (capital) than a
poor one. The opposite of wealth is destitution. The opposite of richness is poverty.
The term implies a social contract on establishing and maintaining ownership in relation
to such items which can be invoked with little or no effort and expense on the part of the
owner. The concept of wealth is relative and not only varies between societies, but varies
between different sections or regions in the same society. A personal net worth of
US$10,000 in most parts of the United States would certainly not place a person among
the wealthiest citizens of that locale. However, such an amount would constitute an
extraordinary amount of wealth in impoverished developing countries.
Concepts of wealth also vary across time. Modern labor-saving inventions and the
development of the sciences have vastly improved the standard of living in modern
societies for even the poorest of people. This comparative wealth across time is also
applicable to the future; given this trend of human advancement, it is possible that the
standard of living that the wealthiest enjoy today will be considered impoverished by
future generations.
Industrialization emphasized the role of technology. Many jobs were automated.
Machines replaced some workers while other workers became more specialized. Labour
specialization became critical to economic success. However, physical capital, as it came
to be known, consisting of both the natural capital and the infrastructural capital, became
the focus of the analysis of wealth.Adam Smith saw wealth creation as the combination
of materials, labour, land, and technology in such a way as to capture a profit (excess
above the cost of production). The theories of David Ricardo, John Locke, John Stuart
Mill, in the 18th century and 19th century built on these views of wealth that we now call
classical economics.
Marxian economics (see labor theory of value) distinguishes in the Grundrisse between
material wealth and human wealth, defining human wealth as "wealth in human
relations"; land and labour were the source of all material wealth. The German cultural
historian Silvio Vietta links wealth/poverty to rationality. Having a leading position in the
development of rational sciences, in new technologies and in economic production leads
to wealth, while the opposite can be correlated with poverty.
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