A common charge leveled at the modern economy is that “we don’t make anything anymore.” True, while services have accounted for a greater share of GDP since around 1911, our natural inclination is to think of wealth as the creation of goods, rather than the provision of services, trade, banking, or other financial services. Of course, wealth really has not so much to do with what is produced (good, service, or the completely intangible), but is more or less a reflection of the values people place on these whats. All that being said, we often have difficulty identifying new forms of wealth as being valuable. Consider this quotation from the great 18th century economist Francois Quesnay regarding the creation of wealth or value in what was then an economy slowly shifting from agriculture to manufacturing and commerce.
“Those who make manufactured commodities do not produce wealth, because their labour increases the value of commodities only by an amount equal to the wages which are paid to them and which are drawn from the product of landed property. The manufacturer who makes cloth, the tailor who makes clothes, the cobbler who makes shoes do not produce any more wealth than do the cook who makes his master’s dinner, the worker who saws wood, or the musicians who give a concert. They are all paid out of one and the same fund, in proportion to the rate of reward fixed for their work, and they spend their receipts in order to obtain their subsistence. Thus they consume as much as they produce; the product of their labour is equal to the cost of their labour, and no surplus wealth results from it. Thus it is only those who cause to be generated from landed property products whose value exceeds their costs who produce wealth or annual revenue.”
It would appear that before complaining that “we don’t make anything anymore” people floated concerns about workers not growing things anymore. One can only imagine what we will hear form the pundits of the future, “we just don’t consult anymore?”
P.S. I have not drawn this quote in order to bash Quesnay. He was one of the finest economists of his time and exerted incredible influence on Adam Smith. However, the quote both illustrates the fallacy that only tangible things have value, and testifies that great thinkers past and present still don’t quite get everything right.
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