Is someone else getting poorer when I make money?

Answer by Stas Veklenko:

It’s capitalism. Capitalism is a natural extension of a human: the more money you make, the more you want. Why do you think not every country in the world is as good for living as, say, Canada or Germany? Because of limited resources. Investors invest in Canada instead of Africa because the former creates more successful businesses, and Africa gets poorer as a result. I assume that resources all over the world can be spread more equally and more fairly. What would happen if that was the case? Well, that’s what is called “socialism” – everyone is equal. Everyone is entitled to the same net worth. In perfect socialism, everyone would always have the same net worth, and no one will ever get poorer or richer.

In capitalism, when you exchange resources with someone, one party loses and another gains (not immediately, but when time passes). In socialism, no party will lose or win even with time, as there is no such thing as “market price” – everything would have same fixed price, and it would not ever fluctuate, so you can’t really get poorer or richer. Sure, when a new resource is discovered, you get richer relative to yourself, but as that resource is spread equally across the society, you don’t get richer relative to others, as you don’t get poorer either.

The Stock market might be a great example of a perfect win-lose society: it’s impossible in the stock market for every investor to win. The Stock market is a great, yet simpler projection of Capitalism. It involves market value, and instead of tons of resources which exist in the world, it involves only 1 (intangible) resource – stocks. I don’t know if cash qualifies as a resource, I don’t consider cash such, because money was made to simplify the barter, and it’s rather an entitlement to own than a real-value in and of itself. For you to win, someone has to lose. For you to buy a devalued stock, cover your short sale, and make a profit, someone has to make a loss on it by selling you the stock which devalued.

Is someone else getting poorer when I make money?

About akiramorikawa

superconnection . pattern-recognition . iDesign
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