Maybe a better example would be a country getting leveled in a war. All of the money is still there, but now everyone is poor and has no net worth. How does that work?
It seems kind of like losing that amount of money, even though we didn’t?
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I’m seeing a lot of economists not explaining like your 5.
If you eat a sandwich you haven’t reduced the value of the economy by one sandwich. You’ve invested that sandwich in energy that you can use to be productive or not.
The idea that a war damaged country has all the value still present is the basis of the most misleading thing about what the general public accepts as true. It’s often boiled down to a pie analogy and a war damaged country as your saying is still the same size slice of the pie.
Here’s why that’s wrong. It assumes there’s only one pie. Let’s discover why you already knew there was more than one pie. You assumed the value of the sandwich was lost because you ate it. That’s only true if you invested that energy that in no way benefited you. It was your investment and you do what you like with it. Obviously there’s another sandwich out there.
If you’re saying there’s only finite resources on this planet and that is the pie. Then it doesn’t matter who uses what or when and no one is poor because we are all ingredients in the pie.
Making more pie, how? Pies take ingredients and different pies take different ingredients. It’s up to you to find what has value.
A war damaged country has more potential than a fully functional city. The money is there you have to start making pies. In a fully functional city the pie is getting made at regular and predictable rate and the investment in the pie is low risk. People like low risk, and low effort. This is why the pie seems small. Low risk means low rewards which means low opportunity for more investment. You’ve got an inability to gather ingredients for a new pie.
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