Wealth Creation

Wealth Creation as Rational Economic Action

Valuable assets may be consumed in the present, or they may be stored for future consumption, or they may be invested to create an additional quantity of valuable assets called wealth. Wealth creation is a rational economic activity when the benefits of increasing valuable assets exceed the costs of doing so. This approach to wealth creation implies a choice, and the most often used economic method to make this choice is a costbenefit analysis that compares the investment costs with the value of wealth likely to be created.

Cost-benefit analysis only gives incomplete guidance, though, because benefits and costs may not be distributed fairly, and the ethical dimensions of wealth creation are not likely to be captured in its measurement techniques. More than 2,000 years ago, for example, the Greek philosopher Aristotle distinguished between pecuniary and socially desirable goals of wealth creation and warned that if money and profit are the only goals then there is no natural limit on greed and corruption.

Important considerations for the ethics of wealth creation include the economic system with which a society creates wealth, the sustainability of these activities for use by future generations, and the justice in the distribution of the wealth that is created.

Economic Systems for Wealth Creation

One reason that productive assets are valued is that they are scarce, and people who believe they can create the most value from them have an incentive to bid up their value until the cost absorbs all the wealth that can be created from them. A system of voluntary exchange contracts between self-interested buyers and sellers informed by market prices is one economic system that enables this wealth-creation process. This market system to create wealth depends, in part, on the trustworthiness of the exchange parties, on government regulations to maintain stable market functions, and on judicial protection for contracting. Advocates of market systems argue that over the long term it is the most efficient path to wealth creation. The failures of the market system to create sufficient wealth in all sectors of society, however, have led some to seek alternative economic systems.

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