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I = S - M

The modern way of thinking about economics has been I = M - S Where I is the I as in me, M is what is 'mine' and S is what ...


What is wealth?

Adam Smith (following the physiocrats) supposedly effected a giant leap in economic thinking when he introduced, from the opening sentence of the Wealth of Nations, time into the notion of wealth. Before Smith, wealth was seen as static, what was owned. Smith changed that forever by seeing wealth as the flow of things per unit of time, specifically in his view, one year.

In the Wealth of Nations Smith uses the word nation interchangeably with the word society. Smith is really exploring how wealth flows to a society over a period of time and what factors determine that flow, its size, its quality and how that may be influenced.

There was a big evolution in thinking of wealth with Adam Smith. However this evolution was incomplete and has stayed incomplete to this day. This almost technical-seeming incompleteness has brought us to the edge of destruction: Today we do not know if we will be able to reverse the changes in the earth and the atmosphere to survive.

Once we introduce time into the notion of wealth, we must look not only at the effects of the flow of wealth on the society receiving the wealth (as Adam Smith did) but also on the effects of that flow on everything else, over time. While it was convenient for Smith to think of the flow of wealth in annual terms, since he was only looking at the effects of that flow on the society being studied, expanding the notion to include the effects of that very flow on everything else can only be meaningfully understood taking account very long periods of time, measured in generations rather than years.

There is thus an essential asymmetry in how time affects wealth. While the flow of wealth has simple measurable effects (measured say, annually, in the tradition of Smith) on the society being studied, its effects on everything else can be felt only over a very long period of time and may not be measurable and must the qualitatively analyzed. If ignored these effects on everything else don't simply go away but life on earth will surely be gone.

Wealth not only flows to and through the members of the society being considered but has a sustained effect on everything else outside of that society.

So Adam Smith essentially effected a split in the notion of wealth by introducing time in a limited way but leaving out a fuller examination of time. This in turn led to the development, over time, of a monstrous system of exploitation of land and labor yielding ever-increasing annually measured wealth while the delicate balance of the earth was slowly, painfully and systematically destroyed over many generations of the application of so-called economic science, first in the industrialized world and over time through conquests and colonialization, worldwide.

If we expand the notion of wealth to include not just what flows to us but also through us and onto everything else, we will be at the beginning of bringing wisdom into economics. We will begin to heal the split between us and them, us and everything else. We must start now. The effects will only be felt generations later.

If we really manage to do that, together, you dear reader and me, generations from now will be able to feel our change as their change and our small steps as our wealth and theirs.