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The modern understanding of Wealth is the abundance of valuable resources or
material possessions. This excludes the core meaning as held in the originating
old English word weal, which is from an Indo-European word stem.1 In this larger
understanding of wealth, an individual, community, region or country that
possesses an abundance of such possessions or resources to the benefit of the
common good is known as wealthy.
The modern concept of wealth is of
significance in all areas of economics, and clearly so for growth economics and
development economics yet the meaning of wealth is context-dependent. At the
most general level, economists may define wealth as "anything of value" that
captures both the subjective nature of the idea and the idea that it is not a
fixed or static concept. Various definitions and concepts of wealth have been
asserted by various individuals and in different contexts.2 Defining wealth can
be a normative process with various ethical implications, since often wealth
maximization is seen as a goal or is thought to be a normative principle of its
own.34
The United Nations definition of inclusive wealth is a monetary
measure which includes the sum of natural, human and physical assets.56 Natural
capital includes land, forests, fossil fuels, and minerals. Human capital is the
population's education and skills. Physical (or "manufactured") capital includes
such things as machinery, buildings, and infrastructure.
Adam Smith, in his
seminal work The Wealth of Nations, described wealth as "the annual produce of
the land and labour of the society". This "produce" is, at its simplest, that
which satisfies human needs and wants of utility. In popular usage, wealth can
be described as an abundance of items of economic value, or the state of
controlling or possessing such items, usually in the form of money, real estate
and personal property. An individual who is considered wealthy, affluent, or
rich is someone who has accumulated substantial wealth relative to others in
their society or reference group. In economics, net wealth refers to the value
of assets owned minus the value of liabilities owed at a point in time.citation
needed Wealth can be categorized into three principal categories: personal
property, including homes or automobiles; monetary savings, such as the
accumulation of past income; and the capital wealth of income producing assets,
including real estate, stocks, bonds, and businesses.citation needed All these
delineations make wealth an especially important part of social stratification.
Wealth provides a type of social safety net of protection against an unforeseen
decline in one¡¯s living standard in the event of job loss or other emergency and
can be transformed into home ownership, business ownership, or even a college
education.7not in citation given
'Wealth' refers to some accumulation of
resources (net asset value), whether abundant or not. 'Richness' refers to an
abundance of such resources (income or flow). A wealthy individual, community,
or nation thus has more accumulated resources (capital) than a poor one. The
opposite of wealth is destitution. The opposite of richness is poverty.
The
term implies a social contract on establishing and maintaining ownership in
relation to such items which can be invoked with little or no effort and expense
on the part of the owner. The concept of wealth is relative and not only varies
between societies, but varies between different sections or regions in the same
society. A personal net worth of US $10,000 in most parts of the United States
would certainly not place a person among the wealthiest citizens of that locale.
However, such an amount would constitute an extraordinary amount of wealth in
impoverished developing countries.
Concepts of wealth also vary across time.
Modern labor-saving inventions and the development of the sciences have vastly
improved the standard of living in modern societies for even the poorest of
people. This comparative wealth across time is also applicable to the future;
given this trendcitation needed of human advancement, it is possible that the
standard of living that the wealthiest enjoy today will be considered
impoverished by future generations.
Industrialization emphasized the role of
technology. Many jobs were automated. Machines replaced some workers while other
workers became more specialized. Labour specialization became critical to
economic success. However, physical capital, as it came to be known, consisting
of both the natural capital and the infrastructural capital, became the focus of
the analysis of wealth.citation needed
Adam Smith saw wealth creation as the
combination of materials, labour, land, and technology in such a way as to
capture a profit (excess above the cost of production).8 The theories of David
Ricardo, John Locke, John Stuart Mill, in the 18th century and 19th century
built on these views of wealth that we now call classical economics.
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