Something that’s bothered me for a while is: how is wealth created and value added to society? If I start a software company which marginally makes some people’s lives better, does this actually contribute to society? How zero sum are our efforts?
I know the answer to this is somewhere in economics but I’m not really sure where and the 1 course I took on macro wasn’t really enough to answer this for me.
Any recommendations/people willing to talk me through this?
Make a software company that helps people keep track of their finances through an app? You are saving the [size of your userbase] * [hours per year each person saves or (hundreds of dollars in unneeded spending the person avoids)].
There are ways it might seem zero sum. For example, Microsoft Excel. It’s a tool that saves billions of hours versus pre-computer days, but some could argue that by occupying the niche it squats in, it prevents investment into maybe superior tools like (mathematica, google sheets, open office).
Make a software company that performs high frequency crypto trades? Arguably this is kind of zero sum—any money you scoop up is money left on the table by less sophisticated investors. Essentially you are skimming wealth from a whole bunch of people without creating any.
Say I make a software company that develops the software to adapt robotics platforms (like machines from Boston Dynamics) to do real world tasks. Probably this is absolutely a net good: in the long term, those robots are doing labor humans would have been stuck doing, and our civilization gets richer [once it finds a new job for the people the robots unemployed]. But in the short term, yes, your company workers won’t be too welcome at the factory you visit when designing the robots.
Okay nice, I think this answers half my question: can I do things that make a difference?
Where answers seems to be: just think about it, there isn’t a black magic answer
though I still want to get a better idea of what makes GDP/income/wealth of a nation increase
Well, in real terms, if the nation has N people, working M hours on average each.
Either you employ more people (economic crises cause employment to shrink and the inverse happens in booms), making M bigger and economic output larger, or you get more done per hour, making productivity higher.
Any sort of machine you invent that helps people get more done per hour increases real GDP if the machine is adopted and use many places.
For example, if you had invented the tractor, the consequences would temporarily have been mass unemployment, but later the people that would have been working in the fields can be doing other things.
You might not agree that the things they are doing are adding value—for example they might be wearing cosplay costumes in Times Square and charging tourists to take pictures of them. However, any good or service that other humans are willing to voluntarily pay for is adding to GDP, as if it were not providing value in excess of the cost, the buyer wouldn’t pay.
At an extremely basic level, different people value various goods and services differently, so if I trade something that you value more for something that I value more, then we’re both better off.
Don’t forget inventions: in the long run, changing the set of available goods and services has been even more important (!) than improving their distribution. Notable post-WWII examples include high-yield cereal varieties, smallpox and polio vaccines, everything made with semiconductors and all the services they enable...
Something that’s bothered me for a while is: how is wealth created and value added to society? If I start a software company which marginally makes some people’s lives better, does this actually contribute to society? How zero sum are our efforts?
I know the answer to this is somewhere in economics but I’m not really sure where and the 1 course I took on macro wasn’t really enough to answer this for me.
Any recommendations/people willing to talk me through this?
I would look at what your efforts are doing, net.
Make a software company that helps people keep track of their finances through an app? You are saving the [size of your userbase] * [hours per year each person saves or (hundreds of dollars in unneeded spending the person avoids)].
There are ways it might seem zero sum. For example, Microsoft Excel. It’s a tool that saves billions of hours versus pre-computer days, but some could argue that by occupying the niche it squats in, it prevents investment into maybe superior tools like (mathematica, google sheets, open office).
Make a software company that performs high frequency crypto trades? Arguably this is kind of zero sum—any money you scoop up is money left on the table by less sophisticated investors. Essentially you are skimming wealth from a whole bunch of people without creating any.
Say I make a software company that develops the software to adapt robotics platforms (like machines from Boston Dynamics) to do real world tasks. Probably this is absolutely a net good: in the long term, those robots are doing labor humans would have been stuck doing, and our civilization gets richer [once it finds a new job for the people the robots unemployed]. But in the short term, yes, your company workers won’t be too welcome at the factory you visit when designing the robots.
Okay nice, I think this answers half my question: can I do things that make a difference? Where answers seems to be: just think about it, there isn’t a black magic answer
though I still want to get a better idea of what makes GDP/income/wealth of a nation increase
Well, in real terms, if the nation has N people, working M hours on average each.
Either you employ more people (economic crises cause employment to shrink and the inverse happens in booms), making M bigger and economic output larger, or you get more done per hour, making productivity higher.
Any sort of machine you invent that helps people get more done per hour increases real GDP if the machine is adopted and use many places.
For example, if you had invented the tractor, the consequences would temporarily have been mass unemployment, but later the people that would have been working in the fields can be doing other things.
You might not agree that the things they are doing are adding value—for example they might be wearing cosplay costumes in Times Square and charging tourists to take pictures of them. However, any good or service that other humans are willing to voluntarily pay for is adding to GDP, as if it were not providing value in excess of the cost, the buyer wouldn’t pay.
At an extremely basic level, different people value various goods and services differently, so if I trade something that you value more for something that I value more, then we’re both better off.
Don’t forget inventions: in the long run, changing the set of available goods and services has been even more important (!) than improving their distribution. Notable post-WWII examples include high-yield cereal varieties, smallpox and polio vaccines, everything made with semiconductors and all the services they enable...