Earlier we called “the entire sum of goods at a person’s command” his property. The entire sum of economic goods at an economizing individual’s command we will, on the other hand, call his wealth. The non-economic goods at an economizing individual’s command are not objects of his economy, and hence must not be regarded as parts of his wealth. We saw that economic goods are goods whose available quantities are smaller than the requirements for them. Wealth can therefore also be defined as the entire sum of goods at an economizing individual’s command, the quantities of which are smaller than the requirements for them. Hence, if there were a society where all goods were available in amounts exceeding the requirements for them, there would be no economic goods nor any “wealth.” Although wealth is thus a measure of the degree of completeness with which one person can satisfy his needs in comparison with other persons who engage in economic activity under the same conditions, it is never an absolute measure of his welfare, for the highest welfare of all individuals and of society would be attained if the quantities of goods at the disposal of society were so large that no one would be in need of wealth.
These remarks are intended to introduce the solution of a problem which, because of the apparent contradictions to which it leads, is capable of creating distrust as to the accuracy of the principles of our science. The problem arises from the fact that a continuous increase in the amounts of economic goods available to economizing individuals would necessarily cause these goods eventually to lose their economic character, and in this way cause the components of wealth to suffer a diminution. Hence we have the queer contradiction that a continuous increase of the objects of wealth would have, as a necessary final consequence, a diminution of wealth.
Suppose that the quantity of a certain mineral water available to a people is smaller than requirements for it. The various portions of this good at the command of the several economizing persons, as well as the mineral springs themselves, are therefore economic goods, and hence constituent parts of wealth. Suppose now that this medicinal water should suddenly begin to flow in several brooks in such abundant measure as to lose its previous economic character. Nothing is more certain, than that the quantities of mineral water that were at the command of economizing individuals before this event, as well as the mineral springs themselves, would now cease to be components of wealth. Thus it would indeed be the case that a progressive increase in the component parts of wealth would finally have caused a diminution of wealth.
This paradox is exceedingly impressive at first sight, but upon more exact consideration, it proves to be only an apparent one. As we saw earlier, economic goods are goods whose available quantities are smaller than the requirements for them. They are goods of which there is a partial deficiency, and the wealth of economizing individuals is nothing but the sum of these goods. If their available quantities are progressively increased until they finally lose their economic character, a deficiency no longer exists, and they move out of the category of goods constituting the wealth of economizing individuals—that is, they leave the class of goods of which there is a partial deficiency. There is certainly no contradiction in the fact that the progressive increase of a good of which there was previously a deficiency finally brings about the result that the good ceases to be in short supply.
On the contrary, that the progressive increase of economic goods must finally lead to a reduction in the number of goods of which there was previously a deficiency is a proposition that is as immediately evident to everyone as the contrary proposition that a long continued diminution of abundantly available (non-economic) goods must finally make them scarce in some degree—and thus components of wealth, which is thereby increased.
The above paradox, which was raised not only with regard to the extent of objects of wealth but in an analogous manner also with regard to the value and price of economic goods, is therefore only an apparent one, and is founded upon a misinterpretation of the nature of wealth and its components.
We have defined wealth as the entire sum of economic goods at the command of an economizing individual. The existence of any item of wealth presupposes, therefore, an economizing individual, or at any rate one in whose behalf acts of economizing are performed. Quantities of economic goods destined for a specific purpose are therefore not wealth in the economic sense of the word. The fiction of a legal person may be valid for purposes of legal practice or even for purposes of juridical constructions but not for our science which decidedly rejects all fictions. So-called “trust funds”18 are therefore quantities of economic goods devoted to specific purposes, but they are not wealth in the economic sense of the word.
This leads to the question of the nature of public wealth. States, provinces, communities, and associations generally have quantities of economic goods at their disposal in order to satisfy their needs, to realize their ends. Here the fiction of a legal person is not necessary for the political economist. Without calling upon any fiction, he can observe an economizing unit, a social organization, whose personnel administer certain economic goods that are available to it for the purpose of satisfying its needs, and direct them to this objective. Hence no-one will hesitate to admit the existence of governmental, provincial, municipal and corporate wealth.
The situation is different with what is designated by the term “national wealth.” Here we have to deal not with the entire sum of economic goods available to a nation for the satisfaction of its needs, administered by government employees, and devoted by them to its purposes, but with the totality of goods at the disposal of the separate economizing individuals and associations of a society for their individual purposes. Thus we have to deal with a concept that deviates in several important respects from what we term wealth.
If we employ the fiction of conceiving of the totality of economizing persons in a society, each striving for the satisfaction of his special needs, and driven not infrequently by interests opposed to the interests of others, as one great economizing unit, and if we further assume that the quantities of economic goods at the disposal of the separate economizing individuals are not applied to the satisfaction of their special needs but to the satisfaction of the needs of the totality of individuals composing the economy, then we do, of course, arrive at the concept of a sum of economic goods at the disposal of an economizing unit (here, at the disposal of society) that are available for the purpose of satisfying its collective needs. Such a concept could correctly be designated by the term national wealth. But under our present social arrangements, the sum of economic goods at the disposal of the individual economizing members of society for the purpose of satisfying their special individual needs obviously does not constitute wealth in the economic sense of the term but rather a complex of wealths linked together by human intercourse and trade.
The need for a scientific designation for the sum of goods just mentioned is, however, so just, and the term “national wealth” for that concept is so generally accepted and sanctioned by usage, that we would serve this need badly if we were to drop the existing term as we become clearer about the correct nature of the so-called national wealth.
It is, then, only necessary that we guard against the error that must arise if we pay no attention to the distinction discussed here. In all questions where the issue is merely the quantitative determination of the so-called national wealth, the sum of the wealths of the individuals of the nation may be designated as national wealth. But when inferences running from the magnitude of the national wealth to the welfare of a people, or when phenomena resulting from contacts between the various economizing individuals, are involved, the concept of national wealth in the literal sense of the term must necessarily lead to frequent errors. In all these cases, the national wealth must be regarded rather as a complex composite of the wealths of the members of society, and we must direct our attention to the different sizes of these individual wealths.