''Wealth, Virtual Wealth and Debt'' is a 1926 book by the Nobel Prize–winning chemist
Frederick Soddy
Frederick Soddy FRS (2 September 1877 – 22 September 1956) was an English radiochemist who explained, with Ernest Rutherford, that radioactivity is due to the transmutation of elements, now known to involve nuclear reactions. He also prov ...
on monetary policy and society and the role of energy in economic systems. Soddy criticized the focus on monetary flows in
economics
Economics () is the social science that studies the production, distribution, and consumption of goods and services.
Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics analyzes ...
, arguing that real wealth was derived from the use of energy to transform materials into physical goods and services. Soddy’s economic writings were largely ignored in his time, but would later be applied to the development of
ecological economics in the late 20th century.
[Eric Zencey]
"Mr. Soddy’s Ecological Economy"
''The New York Times'', Opinion Section, April 12, 2009.
Real wealth and virtual wealth
In this book Soddy points out the fundamental difference between real wealth (consumables such as buildings, equipment, energy, food) and virtual wealth, in the form of money and debt. Soddy contends that real wealth is subject to
entropy
Entropy is a scientific concept, as well as a measurable physical property, that is most commonly associated with a state of disorder, randomness, or uncertainty. The term and the concept are used in diverse fields, from classical thermodynam ...
and will rot, rust, wear out, or be consumed over time, while money and debt (as artificial accounting devices) are subject only to the laws of mathematics, not the laws of
thermodynamics
Thermodynamics is a branch of physics that deals with heat, work, and temperature, and their relation to energy, entropy, and the physical properties of matter and radiation. The behavior of these quantities is governed by the four laws of th ...
. As debt compounding at some rate of interest, virtual wealth will grow effortlessly over time and without limit, instead of diminishing with use as does real wealth. Soddy uses actual occurring examples to demonstrate what he considers a major flaw of prevailing economic theory.
See also
*
Bioeconomics
References
External links
* {{FadedPage, id=20140873, name=Wealth, Virtual Wealth and Debt: The Solution of the Economic Paradox
''The Role of Money'', Frederick Soddy (George Routledge & Sons Ltd, 1934. Internet Archive Gutenberg)
Books about wealth distribution