[ndriscoll]

The point is profit is not a measure of wealth creation. It's neither necessary nor sufficient to create wealth.

My university recorded a bunch of lectures for remote students a decade ago when I was there. They could release them to the public (in fact, while I was there, anyone could go view them for free in person in the library) at essentially no cost, creating a large amount of wealth but no profit. But they haven't and likely won't.

In 2020, the government artificially tanked interest rates, causing asset holders (e.g. homeowners) to profit greatly without creating any wealth.

Anyway, the other poster's point was that profit generating activity is not the only activity or the most important activity. And in this very moment you and I are doing that with our discussion. There are other benefits to having a good communication network, and it makes sense to measure the coverage and capacity of the network, not the amount of money people make using it, which is just one small part of its use.

[czl]

> The point is profit is not a measure of wealth creation. It's neither necessary nor sufficient to create wealth.

Profit is the difference between the cost of some activity vs the benefit of that activity. How else can you measure wealth creation?

> My university recorded a bunch of lectures for remote students a decade ago when I was there. They could release them to the public (in fact, while I was there, anyone could go view them for free in person in the library) at essentially no cost, creating a large amount of wealth but no profit. But they haven't and likely won't.

Have you considered that the university may fear getting sued?

https://news.ycombinator.com/item?id=26136320

> In 2020, the government artificially tanked interest rates, causing asset holders (e.g. homeowners) to profit greatly without creating any wealth.

To explain why the above statement is nonsensical it would take a couple paragraphs but I expect most readers will not need that. It speaks for itself.

> profit generating activity is not the only activity or the most important activity.

To spend and benefit from wealth you have to create it and profit is a measure of wealth creation. How did you read my words and reach the conclusion that I think profit generating activity is “the only activity or the most important activity”?

> And in this very moment you and I are doing that with our discussion.

Yes, we are enjoying leisure time because of activities that generated surplus wealth (including knowledge) by millions / billions of individuals now and in history. Without surplus wealth our lives might be more like those of our relatives in the animal kingdom.

[ndriscoll]

If getting into the weeds, I don't think you can accurately measure wealth creation since any reasonable definition of "wealth" is going to be dependent on utility metrics that vary from person to person. Whether an action net creates or destroys wealth is not even going to be consistent.

Profit, as in dollars in minus dollars out, is much easier to calculate, but only tangentially relates to wealth.

Whether a regulation may prevent it doesn't change the fact that they could generate massive wealth with no one profiting or incurring a loss by distributing it. For the purposes of the thought experiment, assume it already had captions for the remote students for whom it was recorded.

What do you think is nonsensical? That the government (or the Fed under the direction of the government) intentionally pushed down interest rates with a policy of QE? That lowering rates increased the price of existing assets, generating a profit for the owners? Or that this was just inflation, not wealth creation?

In any case, when rates dropped, first thing I did was buy a house, which almost immediately went up by 30% (based on comps). So apparently the reasoning at least had some predictive power. I also made some large stock gains going 100% into the market, but was too timid to use margin to multiply that.

The original comment that you quoted and responded to was criticizing the article for implying that profit generating activity is all that matters (and hence the metric to measure instead of e.g. network deployment), ignoring non-profit activity which is arguably more important.

[czl]

> any reasonable definition of "wealth" is going to be dependent on utility metrics that vary from person to person

Yes any reasonable definition of "wealth" will depend on utility metrics that vary from person to person. Despite these differences there is ample evidence that societies are able to measure wealth just fine using conventional currency units such as dollars, shekels, euros, ... These units can be exchanged back for things that depend on utility metrics that vary from person to person. It is these utility differences that drive the modern economy. If two parties have the same value for a good or service why would they transact with each other? Always there must a difference in value for a voluntary transaction to happen.

>That the government (or the Fed under the direction of the government) intentionally pushed down interest rates with a policy of QE? That lowering rates increased the price of existing assets, generating a profit for the owners? Or that this was just inflation, not wealth creation?

By design currencies lose value and they are meant for short term holding. When a ruler shirks all the measurements using that ruler are larger was there wealth created? Obviously not. Wealth is "stuff": factories, power plants, roads, cars, houses, farms, ... The amount of currency may double and prices of everything double but wealth can be unchanged.

> In any case, when rates dropped, first thing I did was buy a house, which almost immediately went up by 30% (based on comps). So apparently the reasoning at least had some predictive power.

A lotto winner shares their "system" with you, do you believe "its predictive power"? So let's consider your logic: When zoning restrictions or lots of immigration causes a housing shortage so a few houses sell for double the price does that mean the wealth in all houses has doubled? What do you think will happen to cost of housing if populations decline? Are populations due to decline anywhere? What happened to price of oil when there was too much of it during COVID?

> I also made some large stock gains going 100% into the market, but was too timid to use margin to multiply that.

So next time maybe you and certainly others like you will be tempted to use leverage causing valuations to climb ever higher pulling in others to do the same thing and how do you think this will end when the price bubble pops? Do you think price bubbles create wealth? They create the illusion of wealth because people think the paper wealth is wealth but paper wealth is not wealth. When Telsa stock price doubles in a day it is unlikely that the amount of Tesla stuff has doubled in a day. What happened is a few shareholders changed how they feel about Tesla and stock prices represent those feelings rather than wealth. This is true about all bubbles including housing.

> Profit, as in dollars in minus dollars out, is much easier to calculate, but only tangentially relates to wealth.

Surplus value can also be measured in heads of cattle, pork bellies, bushels of wheat, gallons of oil, units of energy, hours of labor, ... all of which convert to universal currency units based on supply / demand for these goods.

> The original comment that you quoted and responded to was criticizing the article for implying that profit generating activity is all that matters (and hence the metric to measure instead of e.g. network deployment), ignoring non-profit activity which is arguably more important.

Yes, I asked "Can an activity be sustainable without involving profit or depending on profitable activities? Please share examples."

Notice so far I have yet to get any examples.

I also said that "When transactions are informed and voluntary and there is profit in a competitive market that is wealth created."

So what is the purpose of those who deploy communications networks? Create wealth? Spend wealth? If spending wealth is the purpose then profits do not matter. If wealth creation is the purpose, how else to judge success if not by whether the benefit is more than costs (aka there is a profit)? Why do it otherwise?

[ndriscoll]

Societies don't really agree on measures of wealth though. That's why the inflation rate is controversial (we have a pretty good idea of how many dollars there are; the controversy is how much wealth they represent). The disagreement is large enough that it's not particularly uncommon to find people who believe the government is so far off that they must be lying about the numbers.

I explicitly used covid inflation as an example where wealth was not created. Asset owners made large profits not because they created anything or provided any value, but simply because the unit of account changed to their benefit (notably here, the government did not report increased inflation for almost 2 years after it happened. Anyone looking at asset prices saw it immediately).

I gave an example of a highly valuable activity one can do using a network which generates no revenue and has no cost (keeping in mind the original statement being criticized was purely about revenue from services that use the network, not the network itself): having 1:1 video chats with your loved ones. It neither spends nor creates wealth, but it can nonetheless contribute to our notion of "success" in creating the network.

The purpose of a communication network is to enable communication. There are plenty of non-commercial reasons to do that. In fact the Internet originally had rules against commercial use.

[czl]

> The disagreement is large enough that it's not particularly uncommon to find people who believe the government is so far off that they must be lying about the numbers.

You're absolutely right that there is often disagreement and controversy around how to properly measure inflation and the real purchasing power of money over time. Reasonable people can disagree on the right methodology. That said, I don't think the disagreements are so large as to render inflation measures meaningless. There are established economic principles and data sources used to estimate inflation (CPI, PCE, etc.), and while imperfect, they do provide a useful gauge. The Fed and other economic authorities put a lot of work into getting the numbers right, even if some will inevitably dispute them.

> I explicitly used covid inflation as an example where wealth was not created. Asset owners made large profits not because they created anything or provided any value, but simply because the unit of account changed to their benefit (notably here, the government did not report increased inflation for almost 2 years after it happened. Anyone looking at asset prices saw it immediately).

Do you think that when the amount of money in circulation doubles and prices double this creates “large profits” for those selling at the doubled prices? You seem intelligent so I am struggling to make sense of your comment above.

Certainly tax laws should be changed so that citizens do not pay capital gains taxes due to gains that are due to government money printing and inflation. This is controversial because the wealthy would benefit far more from fixing this.

> The purpose of a communication network is to enable communication. There are plenty of non-commercial reasons to do that. In fact the Internet originally had rules against commercial use.

I did not ask what the purpose of a communication network is. I asked “what is the purpose of those who deploy communications networks?” Do you see the difference this makes? Governments may deploy them for reliable communications during war as was the purpose of the early internet - what matters is robustness and performance and profit is an alien concept for such projects since they are funded by taxes. When communications networks are built by sellers of communication services however (potential) profit is the number one concern to make sure the business is sustainable.