“How is Wealth Created”

Thoughts on a Free Market Economy…
“How is Wealth Created?”
By Phyllis Hunsinger
January 1, 2020

As the 2020 New Year is welcomed in, many people will formulate New Year’s resolutions which will run the gamut from developing better health habits to better financial habits with a myriad of other resolutions in between. Most individuals desire to improve their financial health, whether it is through better money management or earning more money. Understanding how wealth is created may help people with their financial resolutions.

In the book, Wealth of Nations, Adam Smith identified that wealth was not the accumulation of commodities or in the resource reserves that a nation may happen to possess. He said wealth exists in the productive knowledge of its people. According to Smith, the ability to efficiently transform resources into desired goods and services represents the true source of a nation’s wealth. Physical and human capital represents the true embodiment of wealth.

The observation that Adam Smith made about nations can be applied to individuals as well. As individuals we vote with our dollars. People are financially rewarded based on the value others place on their productive outputs. This applies to hourly workers, salaried workers, and manufacturers of products.

Contrary to popular belief, the economy is not stagnant. One individual making more money than someone else does not take money out of anyone else’s pocket. The economy continues to grow when individuals and businesses succeed with ideas, products, and services and accept the risks in taking advantage of these opportunities in the hope of earning a profit. Individuals who live in a nation with a growing economy have increased money in their pockets and more access to goods and services to make their life better.

There are several key elements that must exist for you, individually, or the nation, as a whole, to create wealth. Private property rights, protected by the rule of law, and the freedom to make decisions about products, services, and trade will create more income for individuals and nations.

One of the most important New Year’s resolutions might well be to insure these freedoms are protected because through them is the only known way to increase overall prosperity.

https://www.free-dom.co.us, Phyllis Hunsinger © 2013 All Rights Reserved

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