What’s it called if I buy something like a sandwich, then consume it, and the net worth of society has now shrunk by 1 sandwich? Versus buying something that keeps its value.

Question

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?

In: 3475

Answer 1

If you want to think of it this way, the value of the sandwich is “added” to you as a person.

If you engage in economic/productive activity, that consumed sandwich is the fuel that generates positive economic value.

Think of it as purchasing a tank of gas/petrol for a vehicle. If that fuel is used unproductively, that society’s total welfare has reduced but if it is used to generate even more value, then society’s total welfare has increased.