Around 1560, an Italian couple, the Bernacottis, made the foreground of the modern wood-coated pencil. Their concept was to hollow out a cylinder out of juniper wood and insert a stick of graphite. In 1858, the American Hymen Lipman received the first patent to attach a pencil eraser.

Leonard Read, founder of the Foundation for Economic Education, wrote an essay titled me pencil in 1958. He tells of the complexity of creating a pencil and that no individual could “make a pencil”. It requires many components (wood, lacquer, graphite, pumice, wax and glue) and many people, from loggers and miners to the factory janitor and the sailor guiding the expedition to the port.

The point is, when you buy a pencil, you are paying for a long and complicated chain of value-added services. Once you have purchased the pencil, you have now ‘invested’ in something that will provide ‘productive value’ because by using it – whether you are doodling or writing a symphony – you are creating some value, even if not. is not necessarily a monetary value. .

This is important to note. Something can have productive value even if it is not the “end” of a productive added value chain. I have a fairly large smooth river rock that I found while walking near the Wawa Dam that has great productive value for me as a paperweight.

Almost everything we buy is for its productive value. The opposite is “speculative value”, that is, making money. You buy a pair of shoes for productive value. You are buying a shoe manufacturing business for its speculative value. Sometimes there can be a mixture of the two.

You buy a house to live in, but in the future you can gain speculative value from it by selling it to another person for a higher price than what you paid.

However, these things which we call “investments” are in almost all cases for the purpose of acquiring speculative value. But we also need to understand that even an investment can have productive value for an economy as a whole.

The siomai the kiosk franchise you purchased is part of a long, value-added production chain, from the pigsty to the mall. But you bought this business for speculation, to make money. However, by its nature — paying employees and taxes — it provides productive value to the economy.

Some investments like the stock market and cryptos are universally and almost exclusively created to provide speculative value. The origins of the stock market – of the ownership of artisanal cooperatives in ancient Greece – were never to buy low / sell high.

The money you spend to buy stocks, except on an initial public offering, creates little or no productive value (other than the broker’s commission) for the economy. Ultimately, converting shares into cash can have a positive economic effect.

The problem the world is currently facing is that the pursuit of “speculative value” is far more important than the desire for “productive value”. The part of the economy that creates jobs (productive value) collapses and burns even as the stock market (speculative value) reaches historic highs.

Global governments have spent trillions of dollars (and yen, euros, renminbi) to support and strengthen the speculative economy. Why do you think Musk, Bezos, and Zuckerberg earn a million times more than their lowest employee?

Ayn rand, Atlas shrugged his shoulders, 1957: “When you see that in order to produce, you have to get permission from men who don’t produce anything…. You may know your company is doomed.

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