The Extreme Inefficiency Of Wealth Production

In my book, "The Patterns of New Ideas", I discussed the idea of what I called "fluff" in economic terms (see the idea "Power at the Center"). Fluff is what I termed the tens of millions of people who work hard every day at jobs that often require a great amount of skill and education but produce no wealth at all. The very idea of labor (labour) is to create or increase wealth.

The reason that so many workers produce no wealth at all is not any fault of their own but to the inefficient nature of the economic system itself. I should state now that this article is not political in nature and is no endorsement of either right or left, conservative or liberal. Accepting that the whole idea of working is to create or increase wealth, it does not seem to me that many workers are doing it just for fun, the thing that I find absolutely shocking about society is that so very few workers actually produce any wealth in their daily work.

A downside of a free economy that we tend to ignore is the drift toward the creation of jobs that do not produce any wealth themselves but make it possible for others to create the wealth needed for the society to survive. Have you ever stopped to wonder how many people actually create any wealth while doing their jobs? My guess is that it is probably no more than about 15%.

I have divided all workers into four categories. 1) Those that make things. 2) Those that fix things. 3) Those that move things. 4) Those that run things.

Of these categories, the only workers that actually create wealth is the first and second categories, but the first is more important than the second. Keeping in mind that many jobs fall into more than one category, the vast majority of workers, at least in the western countries, fall into the third and fourth categories, which produce no wealth at all.

Suppose a new island was discovered and the best workers in the world from a variety of occupations was chosen to build a society on the island. Chosen were the best judges, lawyers, police officers, firemen, mailmen, sales people, politicians, soldiers, cashiers, customs officials and, security guards. What would happen?

The answer is, of course, that they would all starve because none of them is producing any wealth. It is the wealth produced by a few workers that the entire society depends on and the others, no matter how capable they may be, are only in a support role. This is a fact that I have noticed we tend to lose sight of as society gets more and more complex. In fact, I would say that the proportion of support workers in the economy is proportional to the complexity of the economy.

In a simple farming village of centuries past, almost everyone is producing wealth. But as the economic sphere grows in geographic size, an increased proportion of workers is required to be moving things rather than making things, thus decreasing the economic efficiency. The problem with a more complex economy is that the complexity must be managed by labor (labour) and brainpower, thus diverting workers away from the primary task of wealth creation.

The increase in complexity was most likely brought about by improvements in technology and the fact we tend to ignore is that the management of the new economic complexity diverts workers from actual production and thus hinders the improvements in production brought about by the new technology. A free economy really opens up the creativity of individual workers but lacks the oversight to control the drift toward the inefficiency that comes from having so few workers actually producing wealth.

The picture is not quite this simple. It is great to have the maximum number of workers actually producing wealth but all wealth is not created equal. I have divided the wealth that is actually produced into "necessary wealth" and "artificial wealth". In fact, in my economic theory I define artificial wealth as a lesser form of fluff. Although it is usually preferable to have workers producing some kind of wealth than no wealth at all, we do not want overproduction of any kind.

The most obvious examples of necessary wealth are food, clothing, shelter and, education. I do define information as wealth and so it is being created by these writings. An example of artificial wealth is cars. We need cars but only because society has been set up so that cars are required. Wealth can be defined as artificial if the need for it could have been avoided and as necessary if it could not.

In the world today, there is so much knowledge and so much potential for productivity yet so much poverty. Part of the reason is the incentive factor in markets that are less than free but the other part is that in free markets, there tends to be a very limited number of the total workers actually producing any wealth. Complexity must be managed by labour (labor) and brainpower so the more complex the society, the lower will be the proportion of workers actually producing any wealth. One flaw of free enterprise that usually gets overlooked is that it takes no account of this.

There is so much talk of "creating jobs" and that is all well and good, but jobs doing what? When jobs are created, how much wealth is being created? Some degree of central oversight of the economy can reduce the unnecessary complexity of the economy to divert more workers and brainpower to actually creating wealth.