In the essay PG talks about how when you generate wealth you make the pie larger. So like if I invented some sort of spice rub that you could rub on any food and make it taste 50% better and sold it for an amount that’d cost people $1/day, that seems like it’d make the pie larger. For $30/month you get 50% more enjoyable food. I envision mostly everyone in developed countries making that trade.
But on the other hand I just have trouble visualizing this. What does a bigger pie actually mean? Happiness? That doesn’t feel right. We’ve supposedly created a ton of wealth over and over throughout the centuries but are we a corresponding amount happier than we were? I’m skeptical.
If it doesn’t mean happiness maybe it means something more like, if you take the things we have now, we’d be more willing to spend money on them than the things people had 100 years ago. I’m having a hard time thinking concretely about this. Like, Arthur in 1923 has an amount of things that he’s willing to spend $X on but Aiden in 2023 has an amount of stuff that he’s willing to spend 5X inflation-adjusted dollars on? Something feels wrong about that.
Seems like that would be more what I consider capital than what I consider as wealth.
But perhaps he was also thinking, but not really articulating, about things like network effects Smithian external economies. Your wealth increases, which increased the total wealth in society, which increases the size (extent?) or the market, which shifts the margins on specialization and increases in specialization result in further increases in productivity....
“Making the pie bigger” feels to me simply like there’s more stuff (= wealth?) to choose from.
If everything would cost money, that would mean you have more options to spend your money on, either because new things are invented or because existing things get cheaper so you have to spend less of your money on them.
In the essay PG talks about how when you generate wealth you make the pie larger. So like if I invented some sort of spice rub that you could rub on any food and make it taste 50% better and sold it for an amount that’d cost people $1/day, that seems like it’d make the pie larger. For $30/month you get 50% more enjoyable food. I envision mostly everyone in developed countries making that trade.
But on the other hand I just have trouble visualizing this. What does a bigger pie actually mean? Happiness? That doesn’t feel right. We’ve supposedly created a ton of wealth over and over throughout the centuries but are we a corresponding amount happier than we were? I’m skeptical.
If it doesn’t mean happiness maybe it means something more like, if you take the things we have now, we’d be more willing to spend money on them than the things people had 100 years ago. I’m having a hard time thinking concretely about this. Like, Arthur in 1923 has an amount of things that he’s willing to spend $X on but Aiden in 2023 has an amount of stuff that he’s willing to spend 5X inflation-adjusted dollars on? Something feels wrong about that.
I have not read the essay but wondering if perhaps Graham was perhaps focusing on social wealth rather than just individual wealth.
Nah he talks about individual wealth.
Seems like that would be more what I consider capital than what I consider as wealth.
But perhaps he was also thinking, but not really articulating, about things like network effects Smithian external economies. Your wealth increases, which increased the total wealth in society, which increases the size (extent?) or the market, which shifts the margins on specialization and increases in specialization result in further increases in productivity....
“Making the pie bigger” feels to me simply like there’s more stuff (= wealth?) to choose from. If everything would cost money, that would mean you have more options to spend your money on, either because new things are invented or because existing things get cheaper so you have to spend less of your money on them.