Wealth

Wealth, etymologically the condition of well-being, pros - perity in its widest sense. The word does not appear in Old English, but is a Middle English formation, welthe, on the 0. Eng. wela, well-being, from wel, well, cognate with Dan. vel, Ger. wohl. The original meaning survives in the Prayer for the King's Majesty of the English Book of Common Prayer, "Grant him in health and wealth long to live," and in "commonwealth," i.e. good of the body politic, hence applied to the body politic itself.

In economics, wealth is most commonly defined as consisting of all useful and agreeable things which possess exchange value, and this again is generally regarded as coextensive with all desirable things except those which do not involve labour or sacrifice for their acquisition in the quantity desired. On analysis it will be evident that this definition implies, directly, preliminary conceptions of utility and value, and, indirectly, of sacrifice and labour, and these terms, familiar though they may appear, are by no means simple and obvious in their meaning. Utility, for the purposes of economic reasoning, is usually held to mean the capacity to satisfy a desire or serve a purpose (J. S. Mill), and in this sense is clearly a much wider term than wealth. Sunshine and fresh air, good temper and pleasant manners, and all the infinite variety of means of gratification, material and immaterial, are covered by utility as thus defined. Wealth is thus a species of utility, and in order to separate it from other species some dif f erentia must be found. This, according to the general definition, is exchange value, but a little reflection will show that in some cases it is necessary rather to contrast value with wealth. "Value," says Ricardo, expanding a thought of Adam Smith, "essentially differs from riches, for value depends not on abundance but on the difficulty or facility of production." According to the well-known tables ascribed to Gregory King (1648-1712), a deficiency of a small amount in the annual supply of corn will raise its value far more than in pro - portion; but it would be paradoxical to argue that this rise in value indicated an increase in an important item of national wealth. Again, as the mines of a country are exhausted and its natural resources otherwise impaired, a rise in the value of the remainder may take place, and as the free gifts of nature are appropriated they become valuable for exchange; but the country can hardly be said to be so much the wealthier in con - sequence. And these difficulties are rather increased than diminished if we substitute for value the more familiar concrete term "money-price" - for the contrast between the quantity of wealth and its nominal value becomes more sharply marked. Suppose, for example, that in the total money value of the national inventory a decline were observed to be in progress, whilst at the same time, as is quite possible, an increase was noticed in the quantity of all the important items and an improvement in their quality, it would be in accordance with common sense to say that the wealth of the country was in - creasing and not decreasing.

So great are these difficulties that some economists (e.g. Ricardo) have proposed to take utility as the direct measure of wealth, and, as H. Sidgwick has pointed out, if double the quantity meant double the utility this would be an easy and natural procedure. But even to the same individual the increase in utility is by no means simply proportioned to the increase in quantity, and the utility of different commodities to different individuals, and a fortiori of different amounts, is proverbial. The very same things may to the same individual be productive of more utility simply owing to a change in his tastes or habits, and a different distribution of the very same things, which make up the wealth of a nation, might indefinitely change the quantity of utility; but it would be paradoxical to say that the wealth had increased because it was put to better uses.

We thus seem thrown back on value as the essential characteristic, allowance being made for any change in the standard of value; but there are still difficulties to be overcome. Some things that undoubtedly possess value or that can command a price are immaterial, e.g. the advice of a lawyer or physician or the song of a prima donna, and, although perhaps the skill of a workman (in any grade of the social scale) might be considered as attached to the man, as a coal mine is attached to a place, it is more in accordance with popular usage to consider skill as immaterial, whilst at the same time it seems equally natural prima facie to confine the term wealth to material things in the common sense. Again, the credit system of a country is a product of great labour and sacrifice, it is most closely connected with the production of its material wealth in the narrowest sense, and it certainly commands a pecuniary value, and yet credit is more generally held to be a representative rather than a part of wealth, owing apparently to its insubstantial character. Apart from the question of materiality some writers have insisted on relative permanence and possibility of accumulation as essential attributes of wealth, and have thus still further narrowed the scope of the definition.

There can be no doubt that it is on many grounds desirable in economics to use terms as far as possible in their popular acceptations; but this rule must always be subordinate to the primary object in view. In nearly every department of know - ledge in which popular terms have been retained it has been found necessary either constantly to use qualifying adjectives where the context is not a sufficient guide, and in some cases, when analysis discloses very different elements, to make a selection. Sometimes it has been found convenient to use a term with some variation in the definition according to the branch of the subject in hand. 1 Applying these rules to the definition of wealth, perhaps the best solution is that which is generally connected with German economists (e.g. Adolf von Held). Wealth consists of utilities, and in the first great department of economics - the consumption of wealth - it is utility with which we are principally concerned - the idea of value, for example, being overshadowed. The most general law of the consumption of wealth is that successive portions of any stock give a diminishing amount of utility when consumed. Then in the department of the production of wealth the most important characteristics are the labour and sacrifice necessary to put the utilities desired into the things and to place the things where they are wanted. The idea of value is again secondary and subordinate. We can readily see the part played by nature, .labour and capital respectively in the production of any commodity without con - sidering the effects on its value of the various factors; we can understand the principles of division of labour and of the relative productiveness of large and small industries without entering into questions of value except in the most general manner. In the department of the distribution of wealth the fundamental conception is the right of appropriation; and accordingly J. S. Mill very properly commences this part of his subject by an account of the relative advantages of the socialistic and individual systems of property. It is quite possible under the former to conceive of all the distribution being made without any exchange and with reference simply to the wants or the deserts of the members of the society. Thus it is not until we arrive at the department of the exchange of wealth that the characteristic of value becomes predominant, although of course value is closely connected with utility and labour and sacrifice.

1 On the uses and difficulties of definitions in political economy compare H. Sidgwick's Principles of Political Economy, bk. i. ch. ii., and J. N. Keynes's Scope and Method of Political Economy.  Usually, however, it will be found that in most cases anything which can fairly be classed as wealth in one department is also wealth in the others, and thus the definition is reached that wealth in general consists of all "consumable utilities which require labour for their production and can be appropriated and exchanged." It only remains to add that "utilities" may be divided into "inner" and "outer" (to translate the German literally) - the "inner" being such as are simply sources of personal gratification to their possessor, e.g. a good ear for music; the "outer" utilities again may be divided into "free" and "economic," the former, as a rule, e.g. sunlight, not being the result of labour and not capable of appropriation or exchange, and the latter as a rule possessing each of these marks. It is these "economic utilities" which constitute wealth in the specific sense of the term, although its use may be extended by analogy to include almost all utilities.

See A. Marshall, Principles of Economics (1907) J. B. Clark, Philosophy of Wealth (1886) and Distribution of Wealth (1899); W. E. Hearn, Plutology (1864); F. A. Walker, Political Economy  (1888); and J. S. Nicholson, Principles of Political Economy  (1903). (J. S. N.)