"BobR" wrote in message
news:938db78c-73b5-4a78-822d-
On Dec 1, 4:10 pm, DerbyDad03 wrote:
If your net worth did indeed increased by $35 after cleaning the yard,
please tell us where the money came from. There has to be a debit
someplace to offset the credit, unless you printed the money yourself
Had I paid an idiot like you to do my yard for me, then my net worth
would have been reduced by the $35.
Clear foul. Sigh. Derby's not an idiot and frankly, it's pretty sad to see
someone not only be dead wrong about something, but rude to people who are
simply trying to educate him.
$35 dollars saved is $35 dollars earned.
No, it's not. Bob, I'm kind of feeling bad for you. Have you ever taken an
economics or bookkeeping course? It doesn't sound as if you have because
aside from Ben Franklin homilies, earning and saving are two completely
different economic activities, as people have been trying to explain to you.
When you do something like mowing the lawn yourself, you're not earning
money. (In fact, you're spending money for gas and for the wear and tear on
the equipment and more.) But just to make it simple, we'll say you're not
spending that money mowing your own lawn. In fact, no money appears
anywhere in the economic event of YOU mowing the lawn.
What you are spending is your time. If you could be making $100 an hour
consulting but instead mow the lawn for $70 an hour, are you still making
$70 or are you losing $30?
http://en.wikipedia.org/wiki/Opportunity_cost
"Opportunity cost is the cost of any activity measured in terms of the value
of the best alternative that is not chosen (that is foregone)"
If you chose to mow your lawn yourself, you can no longer use that time to
work extra hourse at work, do consulting, or break into your neighbor's
garages to steal their tools, if that's your thing.
If your time had no other possible value, then maybe you could feel that you
earned $70, but even then it wouldn't be true. To make or "earn" money in
the first place, you have to increase your net worth, not just conserve it.
Mowing the lawn yourself means you haven't spent money, but it certainly
doesn't mean you made any. That would happen only if you mowed your
neighbor's lawn, too AND they paid you for it.
Way back when Venice was the merchant capital of the world, they invented
double-entry bookkeeping, which has become the very cornerstone of modern
accounting. For every debit, there is a credit and vice versa.
http://en.wikipedia.org/wiki/Double-...keeping_system
This approach is also called as the American approach. Under this approach
transactions are recorded based on the accounting equation, i.e., Assets =
Liabilities + Capital
Your assets have stayed the same by mowing your own lawn. While you see
that as a gain of money, your financial position has not IMPROVED by mowing
your lawn, it's simpy held its own.
It's easy to understand why you believe that money you can keep in your
pocket is a net benefit to you, it just seems to be common sense. But
consider this. When you mow for yourself, you aren't being paid, there's no
new money coming in and you have to pay for the tools, the gas, the
insurance, the damage if you throw a rock and crack you neighbor's car
window, etc. You can't engage in any other activity during that time, and
if you're a professional earning a good rate, you could come out at a net
loss. You'll really lose money if the mower runs over your foot and
cripples you. That's a fairly large risk you previously offloaded to your
groundskeeper.
Sadly, based on HeyBub's "understanding" of how wealth is created,
transferred and destroyed, I have to conclude that a lot of people just
haven't been exposed to the basics. You wouldn't tell me that a "2 by 4" is
actually 2 inches by 4, would you? Somewhere along the line you acquired
the knowledge that what started out as a 2" by 4" is now a LOT smaller. It's
just one of those things you learn along the way.
Saving money is not the same as earning it although it sometimes seems that
way. A lot of us here in AHR are skinflints like me that would rather
repair something 10 times than buy a new one and just burn at the thought of
paying someone $100's for something they could do themselves with a little
research.
I didn't *make* any money installing my own sump pump, but I did save
$100's. Fortunately, saving $100's has great spousal approval (when I do
things right) so there are what economists call "blue sky" or "good will"
values to things to complicate the picture.
I had a stay-at-home mom who lived through the 1929 Depression. She made
the Scots and the Jews look like spendthrifts. She could save like nobody's
business. But without my dad's weekly paycheck, eventually she would have
saved all she could and then would have run out of money. That's why saving
isn't earning. Without dad's income there's was no NEW money entering the
family, just less money going out.
Now, if like Huck Finn, you can *trick* somebody into working for you AND
you used the time to make ivory carvings that you sell, you might well have
"made" some money. But you would have also made some enemies when they
realize they've been played.
The correct economic choice is to spend your time on things that bring you
the greatest financial return.. Most people, however, spend their time on
things that all bring the most satisfaction. Unless you neighbor said "Hey
BobR, your overgrown lawn looks like crap and I am trying to sell my house
so I'll pay you $35 to mow it" you aren't making any money mowing your own
lawn. You may be *saving* $35 cash if you do it yourself, but you're
spending your time. This is something that's essential to understanding
capitalism and how businesses typically grow.
As for calling someone trying to explain something an idiot, my feeling is
that "friends come and go, but enemies accumulate." You owe DD an apology.
He is an intelligent and honorable man and he happened to be exactly right
in this case. Calling someone an idiot when *you've* got the facts wrong is
a double self-insult. The only remaining question is: are you big enough
to admit when you made a mistake?
--
Bobby G.