A feedlot. It uses as inputs feeder cattle, feed grains, veterinary drugs, labor, management, feed supplements and expertise. It produces fed cattle, ready for slaughter.

The feeder cattle, if left on the ranch that produces them, would begin to loose value. The wealth that the ranch has represented in the cattle cannot realize any of that return if they stay where they are.

According to our friends here (that think that only goods produce wealth), these are the only “product”. But, unless they are shipped by a trucker, they actually loose wealth for their producer. So, the trucker, rendering only the “friction” of a service, increases the value of the cattle (hence, the wealth of the producer).

Once at the feedlot, the manager feeds the cattle a carefully blended ration to maximize gain, treats the cattle for any illness or injury, and manages their progress, with the help of the labor employed at the feedlot. Their operation consumes various things in the process. They do not “produce” cattle. They only provide the service of very efficiently feeding the cattle to their prime for meat.

The feedlot manager watches the fed cattle cash market and its futures market in real time on monitors, tick-for-tick.

At the end of the feeding cycle, the manager watches for the moment when the market is most advantageous, and accepts a buyer’s offer. If he waits too long, the cattle will pass their prime, but will continue to consume inputs every hour, costing the operation wealth.

Has the feedlot operation…which is ONLY a service…consumed inputs? Of course. Has it created wealth? Again, of course…the fed cattle are worth more than they would be without the service of feeding and caring for them to market.

Now, another trucker…providing only a service…takes them to a slaughter house. If the trucker does not come, wealth will be destroyed. The cattle are still there (the goods), but those goods can become less valuable with each passing hour. You can have goods that essentially have no value…can produce no wealth…in a given location. Moving them to another location creates wealth.

Who else created wealth? Everyone at the feedlot. And they all share in the created wealth in the form of their wages, commissions or bonuses. Nobody pays wealth in exchange for “friction”. We all pay wealth for wealth, and wealth is created by our labor, skill, inputs, talent, and knowledge.

Example:

Great coach teaches and motivates basketball team really well. They go to the Final 4. He’s getting millions of dollars for his services to the team/university. A bad coach would not get all that money. Additionally, the team’s major sponsor – Toyota – receives larger than expected exposure & interest from corporate clients. Their orders go up. Assembly plants and component production plants then receive more business, the workers work more hours, and the plants hire a few more people.

Intangible assets and the provision of services have value and assist in the creation of wealth.

It measure the flow of money… and they SAY that then equates to the exchange of goods and services… but they are still measuring money.

What would you prefer? Wealth has to be expressed in some terms. Would moon-units be more to your liking?

And, again, GDP is the measure of wealth creation, not money exchanged. Much of created wealth has never been sold or purchased, and its value is calculated in situ.

But you never answered my question; what authority do you have for your notion that WEALTH = only goods?

But please… continue to quote those same economists who have created the house of cards that America has become… it amuses me…

Two answers there: Thomas Sowell, one of the eminent free-market thinkers of our time, created the house of cards?

And: No. I think I’ve demonstrated that you are, like your wing-man, obdurately stupid. Trying to educate you is a vacuous exercise.

But, for the larger thread, I think we now know who does NOT know what they are talking about.

Thank you for your participation in our little demonstration.

Ragspierre on July 21, 2009 at 8:52 PM

Excuse, me, but I did not “admit that my definition of the GDP” was incorrect. Go look at how the stinkin Gross domestic procuct calculated. It measure the flow of money… and they SAY that then equates to the exchange of goods and services… but they are still measuring money.

The exchange of money measures just that… the exchange of money.

As to Britain in the 1700/1800s? They were able to cheaply get raw materials from their colonies, and ship them to folks who needed those materials. Add in that this was the start of industrialization, so they could mass produce goods cheaper?… so they had cheap materials, cheap manufacturing, and economical transport.

Holland is more problematic as they were primarily a trading entity… but they were able to buy raw materials in foreign ports, and transport them cheaply to those who needed them…. they were a link in the chain of creating GOODS (which, if you bothered to read what I wrote before, is a needed friction on the system… but a friction none the less). However, they essentialy TOOK money from both the folks who produced the raw materials, and the goods, to fund their transportation services… they created no wealth, they made money as a middle man for transportation.

But please… continue to quote those same economists who have created the house of cards that America has become… it amuses me…

The GDP is a very poor measure of the economy, as it counts even total DRAGS on the economy, as positives.

OK. Now we are getting somewhere. You admit that your definition of GDP was wrong.

Now, you claim that it is “a very poor measure”.

You also claim that all services are “drags” on the “real” wealth (only goods).

But you didn’t tell me where you got these concepts.

Let’s change your weird “two people do laundry” example slightly. Say that one person does laundry, one cooks food, and another finds food. Each provides a service. Are their standards of living (wealth) increased by this exchange? Yes. If not, they would not make that arrangement.

According to your definition of wealth as only manufactured goods, tell me how Britain and Holland became wealthy via trade (which far exceeded their production of goods) in the 1700-1800s?

If America produced nothing but services, and the world sent us its goods in exchange for our services, would American then be impoverished?

Where did you find the proposition that wealth consists only in some tangible thing?

Ragspierre on July 21, 2009 at 8:16 PM

Example.

Two people do each others laundry, and charge each other for it. This totaly useless action is COUNTED in the GDP.

If they used credit cards to pay each other, then the credit card fees would actualy mean they make LESS money than the pay their counterpart.

The GDP is a very poor measure of the economy, as it counts even total DRAGS on the economy, as positives.

Did you know that ACORN funding, totaly worthless, counts towards the GDP? (as government funding is counted in the GDP?)

If the balance of Service to Production in an economy gets whacked… as it is now in America… then you will have a high GDP without the creation of the underlieing goods creation to sustain that economy.

As I said earlier, if an economy is consuming more goods than it creates, then it will eventualy fail as it buys those goods elsewhere…. UNLESS you can be trading your services to those other economys… which we cannot (hard for a hairdresser in Michigan to cut the hair of a chinese auto plant worker).

No wealth is created when you do someones laundry, or cut someones lawn

Where do you get this BS?

When you pay someone for a service, you are exchanging your wealth for something you value. They are increasing their wealth via the expenditure of their effort, skill, talent, whatever.

Where did you find the proposition that wealth consists only in some tangible thing?

and

“Just as national income does not refer to money or other paper assets, so national wealth does not consist of these pieces of paper either, but of the real goods and services that such things can buy…most serious long-run studies measure output and wealthy in real terms, taking into account price changes over time.”

Basic Economics, Thomas Sowell, pages 249-250.

As Indigo Montoya said, “I do not think that means what you think it means…”

GDP is a measure of goods and services created by a national economy during a given year. WEALTH.

Ragspierre on July 21, 2009 at 7:27 PM

Heres where we have to disagree…. Services are NOT WEALTH generators.

Services may be needed for an economy to work, but they are intrinsic drains on true WEALTH (goods) creation.

No wealth is created when you do someones laundry, or cut someones lawn… and if you as an economy can LIMIT the friction (cost) of those services, then more capital is available to create better goods.

The problem with the American economy is that since we measure success by moving money (GDP) and not goods creation… the Gov has created policies that give an advantage to Service industies… and created impediments to Production of goods.

Thus, wealth CREATION (goods) has moved overseas, while we try to sustain an economy with service industries…

Its like 2 people trying to get rich by taking in each others laundry…

False. Economists DO NOT give great emphasis to money. GDP is a measure of the creation of wealth.

Please refer to Basic Economics by Thomas Sowell. Argue with him.

Ragspierre on July 21, 2009 at 6:25 PM

Uh, Gross domestic produce is a measurment of capital flow within a system. It measures the flow of MONEY, not the production of an economy.

When you have 8% of GDP on average being created by the BANKING and CREDIT markets… ie… 8% of GDP not producing a dang thing… except moving money and debt… how can you say its a measurment of PRODUCTION?

Banking is a needed support mechanism for the creation of goods (wealth), but it is a friction on the system.

When that Friction becomes the driver of policy, especily when it is bailed out to the tune of TRILLIONS of dollars… then the tail is starting to wag the dog.

We have an unsustainable economy, as we consume more than we produce, and thus send our wealth to other economies.

I challenged what you wrote. That is the issue at hand. You ran.

I very much doubt you will see me going anywhere. So, read a book (not google). Learn.

Then we can debate on parity.

keep the change on July 21, 2009 at 6:36 PM

GDP is a measure of goods and services created by a national economy during a given year. WEALTH.

It has NOTHING to do with the money created in the economy…

else all a poor nation need do to become a wealthy nation would be to produce money.

Stupid.

I can readily accept that your understanding of economics derives from Google.

Even IF those bikinis aren’t made in America,I believe the filler is made here!

And nothing gross about that national product!!!

If you feed them they reproduce. Give it a try I bet if you feed him Peter_Griffin will show up.

DFCtomm on July 21, 2009 at 6:43 PM

This is why registration is not always open. But trolls do wait by the gate to get in.

Not going to feed the troll.

keep the change on July 21, 2009 at 6:40 PM

If you feed them they reproduce. Give it a try I bet if you feed him Peter_Griffin will show up.

Not going to feed the troll try to answer the challenge.

Excellent. A much better use of your time is to order a book on economics, so as to know your ass from a cypress stump.

They sap wealth and resources, both material and human, while producing nothing tangible for the nation’s balance sheet.

Well, I was right. Too stupid to live.

So, it is your assertion that there is no such thing as service products that produce wealth?

Only manufactured goods produce wealth?

A-freaking-mazing….

Ragspierre on July 21, 2009 at 6:22 PM

Being wrong is one thing, but being an asshole and wrong, takes special talent. Since you are new to Hotair, you better learn the ropes or you won’t be long for this site.

What you describe only applies consumers within a nation, not the interests of the nation within a world competing with other nations. We are not interested in what is best for some “world” market of Chinese and Indians and Russians, we care only what benefits the US.

False. Economists DO NOT give great emphasis to money. GDP is a measure of the creation of wealth.

100% false. If I have to explain that to you, I won’t bother. Google it.

Everything else… banks, roads, even the government are just support for this basic movement.

Exactly. All that employment is parasitic. All those people consume wealth, but none of them produce it. They are overhead, at best. Unfortunately, the percentage of American workers who are now employed in overhead, rather than production, is far too high as the US workforce is now weighed more toward financial services and health care than good old industrial production and agriculture. Services, whether it be financial or medical, or even house painting, are overhead. They produce not one cent of wealth for the nation. They sap wealth and resources, both material and human, while producing nothing tangible for the nation’s balance sheet. High levels of employment in those sectors is an unsustainable luxury. The piper will be paid.

Yet our economists are all concerned with the GDP, which is the MOVMENT OF MONEY… not the creation of wealth (goods).

False. Economists DO NOT give great emphasis to money. GDP is a measure of the creation of wealth.

Please refer to Basic Economics by Thomas Sowell. Argue with him.