Wealth... interesting...

I think there's a bundle in of interlinked, but definitionally separate issues here.

What does wealth mean?
What does the manifestation/storage/ownership of wealth look like?
What about generation of wealth?
What about extraction/exploitation of wealth?

Owning land is a way of storing wealth, because land is one of the most obvious "finites."

The land can generate wealth because it generates or contains things that sustain life or improve the quality of life. e.g. Food, Raw Materials, Energy.

Food and raw materials cannot (so far) be generated from energy alone.

Knowledge is how you turn land into food, or the raw materials from land into increased quality of life.

So I agree at that level with your categories.

Another one came up in a discussion with friends the other night though.

Complexity, or maybe Sustained Complexity.

You can maybe subsume this under knowledge, but not entirely.

Some part of the wealth of the UK vs, say Somalia is the sustained complexity of our institutions. We have government, companies, civic societies, charities.

This is arguably more than just "tacit knowledge" it's a semi-tangible social construct that facilitates turning Land, Energy and Knowledge into "improved quality of life."

(And also, managing human social interactions to sustain quality of life.)

If we are wealthier than we were a 100 years ago it's partly because we've exploited energy sources more, but also because we built a more complex system that allows us to do various things more efficiently and/or do things we couldn't otherwise do.

HP reminded me of this - the market cap of HP is clearly not, in the fluctuations, simply related to "wealth" but there is a store of wealth in the sustained complexity of organisation that is the large corporation called HP. If you dismantled HP overnight, overall we'd have less capacity to turn Land, Energy, Knowledge into improved quality of life.

Market Cap itself is really complex - because as Mig has diaried, you can't meaningfully sell a large number of shares in a company at the current share price... so in some ways, it's always an overstatement of value.

But one can borrow against the market cap, so it's not all illusory...

"Wealth," at its simplest, is the ability to command or create, in a timely and convenient manner, the material objects that make human life survivable, comfortable and enjoyable.

HP's market cap, discounted by the price of it being relatively illiquid, is wealth for any individual shareholder, but not for society as a whole - while it enables individuals to command the necessaries and conveniences of life, it does not enable society as a whole to create or command them. Wealth capture is not wealth creation. On the other hand, HP's organisation, plant and so on are wealth for society as a whole, but not for individual shareholders, since individual shareholders have no effective control over any of those aspects of the company.

If the securities markets behaved the way they behave in the textbooks (or at least in the majority of those books, the majority that curiously omit the capitalists from their analysis of the capitalist economy), HP's market cap - the wealth that it represents for individuals - would be roughly correlated to the wealth that HP represents for society. In that case, the textbook answer to the original question would be "the wealth didn't disappear - it was never there to begin with, and the instrument of measurement just caught up to this fact." (Or, alternatively, "the wealth is still there, but the instrument of measurement is broken." But suggesting that the instrument of measurement, the securities market, is broken - rather than just sluggish to react - is a heresy against the official religion of The West^TM, so that explanation is rarely preferred.)

But of course, the securities markets don't, so the market cap isn't. What actually just happened is that the shareholders got poorer and everybody else got richer, because the shareholders' claims to command of the necessaries and conveniences of life were reduced. Of course, this sudden loss of wealth may lead the shareholders to do something stupid and destructive that will impair HP's actual operations in a way that reduces the wealth it supplies to society, in order to salvage the wealth that HP's market cap provides shareholders. When a lot of shareholders and creditors do that at the same time, you get a serious business depression...

- Jake

Our way of life is a lot more negotiable than the laws of nature.

What something is and what it is measured in (or to, or against) is two - or more ;-) - things.

1.  Mathematically we know the measurement of the coast line of Britain depends entirely on the length of the measuring stick used to measure it.  The smaller the measuring stick, the longer the coastline; as the measuring stick gets smaller the nearer the closer the measurement of the coastline approaches infinity.  Yet, while the "length of the Coast Line of Britain" has more to do with the measuring device than the length of the coastline of Britain, we can approximate the length to a 'good enough' figure and let the numbers in the mantissa go hang themselves.

2.  From physics we know the units of measurement of phenomena is arbitrary.  As long as the 'essence' of distance/time is preserved the Force of Gravity can be measured in light-years/millennium or microns/femtominutes; we use meters/sec because it's convenient.  

If you never fail, you're not trying hard enough.

You guys have got it all upside down.
Wealth is... LOVE.

It is a state of mind, realizing that this process called life is very brief for all individuals, that you're lucky if you're short on $/luxuries but not on basics like air/oxygen, that no one knows what's REALLY GOING ON, or as we used to say in my pot smoking days, What Is Reality ?!, not even us gung-ho scientists. If you're blogging at ET, chances are, you are wealthy whether you realize it or not.

I love the smell of roast chicken in the morning!

If so, where did that wealth go?

That was the question, referring to H.P.'s recent $14 billion decrease in capitalization.

The best answer is: "Down the hype hole!"  Following Nitzan and Bichler from Capital as Power:

Capitalization, at any point in time, is the Expected Earnings, in perpetuity, divided by the discount rate:

K_t = EE/r.

But the expected earnings cannot be accurately known in  the present. So Expected Earnings are decomposed into Earnings at this time multiplied by H, the coefficient of hype, where hype can range from 0 to infinity, but, ideally is 1:

K_t = EH/r.

Of course this is for the simplified situation where a constant stream of earnings can be assumed. :-)

So what likely happened is that H.P. lost control over the coefficient of hype. Hopefully, insiders sensed this in time to sell and then sell short their stock - without triggering any alarms at the SEC, which seems to have the alarm threshold set high to prevent false alarms.

A good CEO, such as Steve Jobs, will be able to turn up the hype until there is feedback, and then will play the stockholders a tune.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

If we switch to thermodynamics... Knowledge, of course, has its own non-Newtonian dynamics - while the knowers and thinkers are well fed. Ditto money - while the valuers are in comfort.

What got lost with HP's decapitalization is a portion of future expectations. The world got some billions of illusions poorer.

Wealth is a social construct whereby particular social signifiers help social elites maintain a relative monopoly on high-value goods, whatever those may be.

Wealth is enabled by power.  In exceptionally stable systems governed by law with a high degree of social obedience to that law, wealth may be used to gain power.  More typically, though, power is used to gain wealth.  Lack of power = lack of wealth.

I'm late to the game but it interests me that someone who has abstracted a concept like wealth into its component parts would then reduce that knowledge into a reductive metaphor about cabbage and rabbits, a metaphor that allows no access for knowledge into more productive space/locations. In other words, his argument about knowledge/energy/space enacts the exact opposite dynamic that he hopes to get across.

Yes, I've always been a formalist.