This is the typical kind of question for which the answer seems to be so obvious that we never bother to ask.
In a very straight forward definition, wealth are goods and services. When we produce a good or we provide a service, we are creating Wealth; When we purchase a good or we hire a service, we are consuming our wealth; and the more goods we can acquire or the more services we can consume,the wealthier we are.
It is such a basic and elemental concept that it may seem pointless to clarify it, but as they say "the devil is in the details" and if we overlook this concept, we may end up overlooking some more important and relevant factors, and that is why I took the time to explain it.
As an example, the same amount of money has a very different purchase power depending in the geographic region you are spending it, and therefore you would be more or less wealthier depending where you are planing to spend your money. Similarly, the same good we produce or service we provide, would represent more or less money for us, depending the geographic region in which we are selling it.
A simple application for an individual of this concept would be to go to the university in a country where you could get a high quality education at a very reasonable price, then move to work in a country where you can maximize your income during your professional life, and lately retire and move to a country where you could get the most for each dollar spent. Of course there are many other personal factors to consider in order to take such decisions, but if someone want to focus in maximizing his or her wealth, it definitely will be something to consider.
The same concept is applied for a company when deciding to outsource part of its operations to a foreign country, where the cost of labor is cheaper; or with exactly the same reasoning, when a worker decides to move to a foreign country where the cost of labor is higher.
As we can see, the concept of wealth is a very intuitive one but it is also a very important concept to understand and to have a clear understanding of it.
Hugo Novaro
Disagree with the high quality education part.
ReplyDeleteHigh Quality and reasonable price should not be included together.
If you want a high quality education, you are going to end up lowering your wealth level to obtain it. You need to work, save money, lower your expenses (consume less goods and services). Using utilitarian thinking, you will only lower your wealth to a point where you see its the bare minimum trade-off between you going to a local school and getting a decent job, and going to a foreign higher quality school and getting a great job.
Its an investment within wealth.
Do you lower your wealth standards that you are accustomed to to possibly (considering you even get into the school you have been saving for) or do you accept that you could live a comfortable life attending a local school with a decent education and a local job that pays half of what you would make at the higher educational school.
-Patrick May
Hello Patrick
ReplyDeleteThanks for reading my post and taking the time to express your dissent with some aspects of my comments. Dissent is the only way of having an interesting discussion about any subject…And it pushes us to learn new thinks.
What I was trying to illustrate in my post is that there are significant differences in prices, at a global level, for almost any product you could think about; therefore my suggestion was for someone that already has a defined education goal, to go and get it at the lowest price possible as a way to maximize his wealth.
I recognize that sometimes is difficult to compare education quality among different countries and different universities, but I wasn't advocating for any institution in particular.
The example came to my mind because lately I was reading about the challenges of some students that have to pay back big student loans, but have poor job opportunities in the current economic environment; I know that there are many very good universities overseas that could offer a similar level of education for a fraction of the cost some people is paying for it.
Education definitely has an important role in the process of creating wealth and I promise that I will discuss it again in a future post.
Cheers
Hugo