A quick primer of the basic economic concepts that often get referenced in Verboten’s Capitalism series. Profit comes from choice and that requires critical thinking.
The Economy is a nebulous summation of all activity involved with capital production and trade. A Boodle of capital is ones accumulated body of wealth generated by capitalizing successfully. Capital is anything which can grant one power in an economy. Production is any process of growing ones boodle by transforming dead capital into living capital through creative reinvestment or forming original capital. This is accomplished through capitalization including application of voluntary labour and trade to device then development, manufacturing, sales, and distribution. Capacity applied to Opportunity tends toward production.
Money buys capital because it’s an IOU from a Market which is backed by its large boodle. Money holders will collect said boodle if the Market defaults. Money is no more valuable than the capital it represents. A Labourer works a day in your factory for money only because later that money can be traded for good and services of greatest personal value. Barring fraud or incapacity the consumers of goods and services tend to know what they want and are grateful for getting their money’s worth.
Gratitude is a universal currency.The Opportunist exploits opportunities consuming more than they produce along the way. Beware such capital creatures. Since they don’t contribute to production through either fruitful trade or labour they at best complicate markets for more productive players and at worst destroy opportunity for everyone altogether. Too much opportunism in any market spells disaster and usually signals larger problems like lazy producers and the diminished quality they offer. Not to be mistaken for Entropy which is a far more powerful and elemental force driving disarray and decay. Or the Profiteer feeding on the weak and unfortunate.
Labour contributes toward capital production either in whole or in part. Depends on time, talent, market potential, personal debt, assumption of risk, etc. Maintaining capital rights of device. Successful producers learns to work for themselves and this often comes from many years of learning to work well with and for others.
Employment is a highly convenient common stock which earns small reliable return of money on investment of scheduled work or capital exchange. Note carefully, however, that it includes transfer of all capital claims. Jobs and careers are stable income but they come at that long term cost. All capital rights go to the employer. While this is often a perfectly acceptable condition to some it can be unbearable to others. Usually considered by the type of capital produced. Employment should graduate to Partnership in a more collaborative Enterprises wherever possible.
Traders are the retailers and shop keeps who earn money bartering capital for capital or capital for money (commodity) or money for capital, or money for employment or money for labour or capital for labour. Depends on inventory, marketing, overhead costs, talent pool, retail conditions, rights requirements, etc. From Pawn shops to Boutiques there is no end to the variety available thanks to capital diversity.
Pioneers produce new capital leveraging independent freedom and natural opportunity with unique vision. Generally producing the highest quality but also most unpredictable capital. Farms, cities, and nations. These are your artists and master artisans who only come to town a few times a year and otherwise have no need for anyone or anything. But generations are carried in their wake. Entire markets built from their examples. Sustainable Homesteaders, inventors, artists… builders of the ideas you see all around you.
The best way to honour the past is by producing a future worthy of its investment.At their most inspiring Marketeers labour to make fresh markets the way Pioneers labour to break wild earth as they tame new territory. In either case “civilizing” has its consequences for the industrialists, explorers and beyond. An Economy is too complex to control directly as it isn’t really a single construct to be controlled. Trying to reduce many Economies into one simply destroys opportunity and likewise syncing all Economies with a market utility has its limits as well.
With rational approaches based on Freedom and voluntary exchange any Economy ultimately overcomes entropy with creativity. As a consequence a productive Economy pays dividends for all who work within it. Value for those who come before and those who have yet to discover the wonders established in their absence.
Next Up: Is There Such Thing as the Irreplaceable Employee?