Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : US Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: gpowell who wrote (5)	8/10/2005 2:19:06 AM
From: gpowell	Read Replies (2) \| Respond to of 97

How is wealth created? The first cause of wealth creation is the initiative to produce goods and services. All goods and services (henceforth the term output will be used) are produced from “pure” resources, such as land and labor. The output derived from pure resources can be augmented through man-made resources, sometimes referred to as “produced means of production”, more commonly known as capital, but more accurately termed non-permanent resources. Strictly speaking, capital includes the pure resources, but we will use capital here to mean only the non-permanent resources. In a very simple economy, capital comes into existence only after an act of savings, i.e. delayed consumption. However, in a complex society where capital exists in different forms and at various stages in the production process, the act of savings and capital creation (or investment) are distinct acts - separated by time and by agent. Importantly, in a complex economic structure savings need not occur before investment, where here we define increases in investment as any act of delaying the output produced by capital from nearer dates to more distant dates. Most often the saving required to support new investment occurs well after that investment is made. Thus, a large part of savings comes from the foresight of entrepreneurs in correctly assessing the future demands of consumers. Why delay output? The direct answer is to increase the output produced (an hence the return to the entrepreneur), by combining a particular instantiation of capital (capital that exists in distinct form) with other instantiations of capital that will be available only at a later date.