Friday, June 14, 2013

Tentative definitions: wealth, direct assets, promise assets

I thank commenter Jonas Feit who says that wealth is a store of value.  "Wealth" is one of the words that will need to be defined better as this work proceeds.

I have thought of wealth as being a set of choices.  A person who has many choices is probably more wealthy than a person who has few choices.  We might assume that a person who gains an option to make one more choice has become more wealthy.  But more specifically, I see now that these choices need to be favorable choices.  Suppose a person has nothing but bad choices.  We would not say that person is wealthy simply because that person has many choices.  Perhaps "asset" is a good term for my purpose here, since it implies something good.

But I think "store of value" also calls attention to an important aspect of wealth   "Store of value" may describe approximately the same thing as a set of favorable choices, and may provide a helpful view from a different angle.

One of my aims is to examine what we mean by "value" and to divide what we find there into two piles.  The distinction between the two piles will be whether or not a social institution is involved.  The two piles are:

  • Direct assets.  In the direct assets pile I would include material items that are entirely and unquestionably under my control and my control alone.  If I am alone in the desert and I have a Coke, so that I can choose to drink that Coke now or later, then that Coke would be a direct asset to me.  My choice is not contingent upon choices made by any other people.
  • Promise assets.  On the other hand, suppose I have a dollar in my pocket and I am not alone:  I see a vendor with a sign that offers a Coke for a dollar.  Then I would classify the dollar as a promise asset.  I feel promise that I can get a Coke.  But this promise is contingent upon a choice made by another person, in this case the willingness of the vendor to trade with me.  My promise stands upon the social institution of voluntary trade.

We must also recognize the action of property rights when we are deciding whether to classify an asset as direct or promise.  Suppose I have a Coke but I not alone.  Other, stronger people are around.  If none of these other people take my Coke from me, then I have an effective property right in the Coke.  Then the Coke is my promise asset, not my direct asset, because my control is contingent upon the choices of others to respect the property right.  I can continue to choose between drinking the Coke now and keeping it to drink later, only because of a social institution giving me a property right.

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