Monday, 27 Sep 2021

Understanding the Definition of Wealth

Wealth is defined by Wikipedia as “the excess of all human goods.” By the way, what is considered wealth to one person may not be viewed as so to another. In essence, the definition of wealth changes with time and with individuals who are defining it.

Wealth to me is not about acquiring things. Rather, it is about the ability to accumulate and turn those possessions, financial or otherwise, into an accumulation that will eventually create a net worth. For most people, wealth means having material possessions. We can agree that money is wealth, but it is also possible to have material possessions without spending money.

There are many ways to define wealth. For most people, it is probably all the material possessions that they can afford to purchase. If the national wealth continues to diminish while everyone continues to acquire more possessions, then what happens to the original definition of wealth as the accumulated value of all the assets in existence? What happens to the net worth of societies in general as they become more wealthy, but also more depleted of national wealth?

Consider, for example, that the two major poles of modern society, technology and health, are now valued at about two-thirds of the gross domestic product in most advanced countries. This has been reflected in political debates where candidates vie to increase the value of these two categories through the expansion of health care and scientific research. Technological growth is probably the determining factor behind the increasing value of health goods. And, while it is impossible to eliminate the role of technology and its impact on overall living standards, there surely is room to strengthen both in our educational system and in the economy.

However, it is difficult to attach a number to the value of these two categories in the overall evaluation of wealth. Most of the time, wealth is evaluated by means of stock-market statistics that are influenced by supply and demand. One could say that wealth is a combination of the two, but it would not make much sense to simply attach a value to stock-market wealth because it does not take into account the purchasing power of money in terms of savings and investment. It only takes the expansion of the technology in areas such as computerization, telecommunications, and other areas over the last 50 years that have made possible the movement of goods and services that were previously carried in real terms, along with the creation of a large number of complex financial instruments, to bring us to a stage where there is now a large measure of wealth in stock-market terms.

When it comes to gauging the level of wealth in a society, the concept of wealth should be understood not as something that are automatically accumulated through the accumulation of assets, but rather as something that is the result of the accumulation of services and goods over an extended period of time. This concept of social wealth is actually an extension of the more traditional concept of private wealth, which relates to the individual possessions of an individual. Social wealth encompasses more than material assets, and it is likely that this will become a much more important concept as the world continues to age and modern life inevitably becomes more challenging for individuals.

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