Been reading Hussman’s latest essay. So wealth comes from one of two activities. Either you do something useful, make something, teach something, invent something, perform some sort of useful activity for which people are willing to exchange money or whatever assets they may have, or you trade, getting something for a price and trading it for a higher price. Traders who get something and move it to a new location where it is of greater value than they paid for it, or improve it in some other way, can be said to be performing a useful service, but wealth creation, for a company or an individual, that derives entirely from speculation on price movements can not really be said to be adding wealth, even though it may at times provide useful information such as short sellers do, its only intention is to increase the wealth of the trader and not to perform a useful function and any value that is created is just an unintentional byproduct. And yet in our society we have glorified trading as though we could all trade with each other and the rest of the world until somehow, magically, we got more wealthy. We glorify and shelter the companies and individuals that get rich doing this and often penalize the ones who try to engage in activities which actually increase wealth. Hmmm.

Not sure if this is related, but what is a society, a culture, but a system for deciding how assets will be allocated. A better system increases whatever that culture values, paper money, gold, industrial capacity, happiness, pollution, obesity, and a worse one diminishes it. The laws and economic system, the cultural attitudes, the prejudices, the position of religion in the society, the relative tolerance or intolerance, the way the society chooses to interact with the natural world and with other societies, what do all of these choices accomplish? It’s just to determine the mechanism for who gets what. Nature has a simple system for this, competition and natural selection. That is the system of nature. That is the system that determines which life forms prosper and grow in numbers and which go extinct. Obviously we haven’t escaped the system of nature, but we have so handily overcome its restrictions that we have overpopulated the planet in a way that, were we any other animal, would have resulted in a massive die off, and may yet for us. In the meantime, however, the suspension of vast numbers of people (not all, to be sure) above the fray of tooth and claw survival, a fortuitous (if it turns out to be so) condition brought about entirely by our remarkable ability to think about past and future and imagine different outcomes, has given us a chance, possibly fleeting, to ponder the systems we have created for allocating assets, and ask whether they are delivering the results we want, and if not, how they could be modified.