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Ideas. Innovation. These are the life blood of a capitalist economic system. But they don't appear on your balance sheet. So you deny they have any economic value. This is madness. The book example in your link assigns value based on the Return On Investment (ROI). Obviously you cannot know the return on an investment before making the investment. Furthermore in the real world discerning how much a particular factor contributed depends on the complexity of the situation at hand.If, for example, a particular educational programme is implemented and is broadly deemed economically successful (i.e. it boosts the earning power of the participants) there may well be a broad consensus amongst economists that the programme in question has economic value. But if you ask ten different economists to place a value on that educational programme you will get ten different answers. If you have ever seen two economists arguing you will know that the entire discipline involves people endlessly wrangling over which particular factors are responsible or relevant to a particular economic outcome.But I have never yet seen any economist claim that the economic value of an educational programme is the same as it's price. You insist you are taking a mainstream economic position. But can you find me a single mainstream economist who says that the economic value of education is the same as the price of education? Or that unpaid work has no economic value? Or that free software has no economic value?I suggest you type into Google the words 'economic value of unpaid work' and see what you get. Similarly type into Google 'economic value of education' and see what you get. If you ideas are so mainstream you should be able to provide a plethora of sources as a result of these searches that agree with you.I challenge you to find a single one. I looked up Investopedia definition of 'value' on the basis that this might be sympathetic to your notion. But even that seems to contradict everything you are saying. Here is what Investopedia says about value:

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The big problem for value investing is estimating intrinsic value. Remember, there is no "correct" intrinsic value. Two investors can be given the exact same information and place a different value on a company. For this reason, another central concept to value investing is that of "margin of safety". This just means that you buy at a big enough discount to allow some room for error in your estimation of value.

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Also keep in mind that the very definition of value investing is subjective. Some value investors only look at present assets/earnings and don't place any value on future growth. Other value investors base strategies completely around the estimation of future growth and cash flows. Despite the different methodologies, it all comes back to trying to buy something for less than it is worth.

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How can you buy something for less than it is worth if price and value are the same thing?Edited by Straggler, : No reason given.

The graph shows definitively where the proceeds of growth are ending up.The problem is, as this thread has clearly shown, is that the justification for this is based on equating ownership with wealth creation in a way that bears absolutely no relation to how actually wealth is actually created. The graph illustrates the point being made very well.

You think the rest of the internet agrees with you?The economic value of education is the same as the price of education? Unpaid work has no economic value? Free software has no economic value?I suggest you type into Google the words 'economic value of unpaid work' and see what you get. Similarly type into Google 'economic value of education' and see what you get. If you ideas are so mainstream you should be able to provide a plethora of sources as a result of these searches that agree with you.I challenge you to find a single one.Edited by Straggler, : No reason given.

The graph shows that the wealthiest have overwhelmingly appropriated the gains of increased productivity.This thread has clearly demonstrated that the justification for this is that in blinkered book-kepping terms at least the wealthy are the "wealth creators". Because the things that actually create wealth (such as innovations which lead to transformative technologies which boost productivity) don't show up on balancesheets. Only the ownership of increasing assets which such innovations lead to show up on balancesheets.So we have clearly seen that the appropriation of increased productivity by the wealthiest has everything to do with balancesheet accounting and little to do with the human activities that actually create wealth.

Because the methods of accounting put the emphasis on ownership to the exclusion of near all else. Free software. A particularly effective method of teaching. A revolutionary scientific idea. All sorts of things could boost productivity in ways that won't, in balance-sheet terms, get attributed to anyone except the shareholders of companies that benefit from them. It is certainly a facilitating factor in most cases. But we can see that the benefits of increased productivity get allocated almost exclusively to those who certainly aren't responsible for almost all the wealth creation. Thus we cannot realistically conclude that wealth is trickling down. Then let's give all the money in the world to one man and then we can attribute all subsequent wealth creation to him.Sounds crazy? We may not be doing that in terms of a single person but we are doing that in terms of concentrating wealth in the hands of a single figure percent of the population. And increasingly so.That isn't healthy for democracy. It isn't healthy for enterprise or entrepreneurism. Ultimately it isn't even healthy for capitalism.

I am not asking you about the future. If we are going to use education as our example - Then I am asking what the effect investing in education over the last 30 years has had on productivity and thus GDP? In short what is the economic value of education investment made over the last 30 years? Where is this shown on your balance-sheet? Good. Then you will necessarily agree that toting up the incomes and expenses of schools and colleges isn't going to give you the economic value of education investment made over the last 30 years.So tell me how you are going to work this out?

The beneficial economic effect is indeed reflected in productivity gains, company profits and thus GDP. We all agree on this. It is who these gains are being received by that is the issue. Thus the benefits of increased productivity end up in the hands of those who own rather than those who contribute to wealth creation through innovation or activity. Because the methods of accounting put the emphasis on ownership to the exclusion of near all else.Which means the wealthiest are receiving more wealth than they can claim to be creating and thus wealth is trickling up rather than down.That's the point.

You are just conflating cost and value at ever greater length and in ever more contrived ways.I want to know what the value to the US economy is of having an educated, rather than an uneducated, population.More specifically I want to know what the return is on the investment made in educating people at public expense over the last 30 years in terms of the effect this has had on the productivity (and thus GDP) of the United StatesCan you show me where I can find this information on your balance-sheets?

Have I said differently? The confusion here is yours and it pertains to who is creating wealth. I am simply saying that the wealthiest are receiving more wealth than they are creating and thus wealth is trickling up rather than down.The accounting view you are advocating as the be-all-and-end-all measure of economic value gives a warped and unrealistic view of wealth creation. If we simply look at wealth creation from this purely accounting perspective we will conclude that those who benefit from productivity gains and those who are the "wealth creators" are necessarily one and the same. Because in accounting terms the ownership of increasing assets is what qualifies as "wealth creation". Thus if we want to create wealth in society and we are too blinkered to see beyond accounting restrictions we would conclude that focusing financial resources at the wealthiest is justified because they are the "wealth creators". This is of course the flawed premise behind trickle down economics.However if we look past simplistic accounting we will conclude that focusing resources on those that cause productivity to rise and assets to appreciate is the way to best create wealth. Focus it on those who innovate, educate and act in other ways that significantly improve productivity.The problem is that this doesn't fit neatly on a balance-sheet. I don't know (for example) what value the invention of the microchip has added to the world economy. I doubt that on any company balance-sheet you will see a figure pertaining to "productivity gains as a result of using microchip technology". But the idea that the use of microchip technology hasn't boosted productivity and added value to the economy simply because it isn't listed as an item in this way is absurd.Conflating the necessities of accounting with the realities of wealth creation is a road to nowhere but plutocracy. In a capitalist economy where productivity gains are allocated on the basis of ownership to the exclusion of all else this is all but inevitable. Without some form of re-distributive counterbalance the sort of malfunctioning, plutocratic, undemocratic, monopolistic, too-big-to-fail, socialised-risk-privatised-profit capitalism we have today is going to happen.

You are the one who all along has said that the proceeds of increased productivity go to shareholders. I am agreeing with you. Capital doesn't create wealth on it's own. You have to invest in something. An activity. An idea. An excellent example of capital facilitating wealth creation. Who do you think disagrees with you on this? I haven't once said that capital doesn't have a role in wealth creation. What I am objecting to is the idea that this is the only significant factor that needs to be recognised when determining who is creating wealth and who is receiving it. So who are the "best at wealth creation" in your view? What numerical argument are you basing this answer upon? Why that rather than work in R&D on a productivity boosting technology? That is my point. It has added huge economic value but isn't balance-sheet quantifiable in the way you keep insisting upon in order to assign something value. Percy - What is the economic value of the invention of the microchip? So tell me how much wealth have the wealthiest 5% of the population accumulated as result of the invention of the micro-chip?You can't can you? I do agree that it is unquantifiable. It is you who has been telling me that all the wealth everybody owns can be perfectly accounted for in terms of who has created it. Now we know you are talking out of your arse. I already gave you the example of a publicly funded research scientist whose work resulted in a tenfold increase in national productivity. You said that his contribution to wealth creation consisted solely of his salary.Go figure...... The fruits of increased productivity go to shareholders regardless of who is responsible for increasing productivity or creating wealth. Shareholders do not create all new wealth. Therefore they must be receiving more than they are creating. Thus we can conclude that wealth is trickling up rather than down.Edited by Straggler, : No reason given.Edited by Straggler, : No reason given.Edited by Straggler, : No reason given.

In your latest reply you seem intent on misunderstanding me. And you have already accused me (amongst others) of seeking to misrepresent you. So things are in danger of just getting silly here. How many lines it gets is irrelevant. What I am talking about by accounting bias and over-emphasis on ownership is this: And this: You won't find the this scientist's contribution to national productivity in any way that meaningfully reflects the actual value of his contribution (the discovery/invention of a transformative technology that results in a tenfold increase in national productivity let us not forget) on any income statement. That is the point. His value to the economy is not reflected in your balance-sheet-definition of "value"Likewise you won't find the economic value of having an educated, rather than an uneducated, workforce on any income statement.Nor will you find the economic value of unpaid work to the economy showing up on any such statement.All of these things have economic value. Yet all will simply appear as increased productivity and the proceeds of this increased productivity (i.e. increased profits) will show as belonging to share owners of the companies that benefit from this increased productivity.In short the necessities of accounting reward ownership and largely ignore the contributions made by those whose contribution is made up of innovation, knowledge, skills etc. Because accounting can quantify ownership. And it can quantify profit. But it cannot so easily quantify the economic value of innovation or knowledge.Hence the accounting based approach you are taking gives a warped view of economic value and unduly rewards ownership above other, arguably more significant, contributory factors to wealth creation. Because that would confuse the example which is designed to explicitly find out whether you are unduly putting the emphasis on ownership or not. Let's say that our R&D scientist isn't too financially astute. A scientific genius who is a bit of an absent minded professor type. Finding matching socks in the morning is a challenge so all that money stuff is just a distraction from unlocking the secrets of the universe that he is really interested in.Let's also say that the boss of our R&D scientist is a bit of a cad. He spends most of is time shirking and taking credit for the successes of his team. But he is not without some intelligence. He recognises the potential of the work our absent minded genius is close to completing. He buys shares. As it becomes increasingly obvious that the work will be not only succesfful but transformative he buys all the shares he can get his hands on.The work is revolutionary. The transformative effect on the company profits and the national economy as a whole are immense. The boss makes a mint. Our R&D scientist continues to pick up his 70,000 dollar a year pay cheque.Which of these two do you think is best described as a "wealth creator"....? Which of these two would you consider to have added more value to the national economy?To me it is utterly obvious that the scientist has provided more economic value. And that this has very little to do with his income. Do you agree?

Wealth creation is a collective endeavour. We are all standing on the shoulders of giants when it comes to creating wealth. And the value to the economy of any person, company or government project is incredibly difficult to ascertain. Because wealth creation in a successful capitalist economy involves a complex interraction between innovative individuals, entrepreneurs, state funded institutions, workers, educators etc. etc. etc. etc. It involves a whole raft of things that don't appear on any balance-sheet (e.g. the level of education of the population that is essential to the knowledge economy).So you cannot possibly look at a set of accounts and say how much value someone has or has not added to an economy. Not in any meaningful way.Edited by Straggler, : Spelling

There is nothing contradictory in pointing out that whilst balance-sheets can adequately verify who is receiving the proceeds of wealth-creation your book-keepers approach to economics cannot meaningfully describe how wealth is actually created or who it is that is creating it.Your accountants approach inevitably glorifies ownership at the expense of other factors. Factors which we need to understand if we want to focus resources on the things that most effectively add value to the economy.Look past the balance-sheet.......

I'll tell you what I say. By being incapable of quantifying all of the factors that contribute to wealth creation. Thus the focus is inevitably on those things that can be most easily quantified. The chart clearly shows who is receiving the proceeds of growth. What it cannot do is meaningfully show how that wealth was created. In accounting terms it will predominantly be assigned to shareholders and thus give the false impression that the wealtheist are almost solely responsible for wealth creation. Thus many will conclude that they are the "wealth creators" who we need to nurture and pander to in the form of tax breaks and minimal legislation. This is the flawed thinking behind trickle down economics. That is where all this started. How do you know I don't? It depends on the project. And there is no reason that capital has to be provided by wealthy individuals rather than pensions company investments of the middle classes (for example). Yet in this trickle down world the pensions of the middle classes are faring no better than their salaries in terms of gaining from growth. Except for all the publicly funded projects. Except for "too big to fail" industries and companies. Except for the investor who loses everything and has to rely on the economic safety net supplied by the state.Risk is a lot more dispersed than the pseudo-idealised capitalism you and Percy keep preaching. Many of the most advanced and expensive research projects are publicly funded. Who pays for those? Who bears the risk? That's fine. But in the unlikley event you manage to join the top percent or so don't then have the gall to sit there telling everybody else how lucky we are to have you.