Ten Pillars of Economic Wisdom

Barry Ritholtz reposts Ten Pillars of Economic Wisdom. I take issue with three (3) of these pillars, mainly to do with wealth creation.

There are some of these rules I want to take issue with.

The first is about creation of wealth:

4. The only way to create wealth is to move resources from a lower-valued to a higher-valued use. Corollary: Both sides gain from exchange.

Here we have the old canard about wealth being created in the exchange by increasing the use-value. Instead, Marxists believe that value is added by the application of labour-power. People create things of higher value by working on them. A car is worth more than a lump of iron ore, sap of a rubber tree, etc. because human beings worked to turn them into something more usable.

The second is about value again:

7. The value of a good or a service is subjective.

The value of a good or a service is determined by its exchange value. In Marxist terms, there is no profit to be made in exchanging commodities for money. In this way, the exchange value is subjective, but becomes objective through a large number of such transactions.

It is possible for someone to exploit arbitrage by finding people with different subjective exchange values for the same commodities. The free market is supposed to eliminate such discrepancies through the free flow of information.

The third is about wealth creation vesus jobs:

8. Creating jobs is not the same as creating wealth.

Yes and no. There are jobs that do not add to the value of a commodity. These are usually policing roles such as supervisors, managers, regulators, etc.