If I eat 100 meals on a credit card, it explicitly means that i recognize i haven't created 100 meals of value, and intend to work to produce the value of those 100 meals later, and pay a fee (the interest rate) for eating my meals before i produced for them.
Net destruction/consumption, BEFORE actually producing its equivalent.
ie. a net loss, that is only promised to be returned in the future.
Clear, thank you! Very useful
That’s not always true, especially today where there is an incentive to use credit cards (cash back) even if you have the cash (value created) to pay for the goods and services in the present.
I understand the idea you’re trying to get across, which is that there is a risk of default when lending/borrowing. Describing consumption as destruction can confuse people. They are different things.
Is'nt the *incentive to use* credit cards just a lower true interest rate or a longer payback window?
There are different incentives, but the most obvious one imo is cashback and other perks, especially when you have the money and don’t need the credit.
I see - just use the card, collect the cash back, then always pay it off at the end of the month? Then this isnt actual credit - never pay interest, correct
It’s still credit, but yes, ideally you pay it off before the interest is charged.
But consumption is the process of destruction, even if balanced properly. It is the “using up” of goods as opposed to the production of new goods. What is inaccurate about that in your thinking?
It’s not tho. Setting a house on fire is destroying the house. Consuming the house by living it is not destruction.
Destruction implies that the good is rendered unable to provide value to the owner. I can use (consume) a house for a decade and then sell it to someone else that can continue to consume it. This is not true if I destroy the house.
Maybe this is more so the case for perishable goods like food, but even then I would draw a distinction. When milk or butter is recalled by Costco and they have to destroy the product, this is not the same as people consuming the milk or butter. Destruction is wasted or lost value while consumption is delivers value and fulfills a human need/want.
Aren’t all homes depreciating from the moment they are built? Doesn’t living in a home cause some of it to wear and break down faster?
I can’t think of anything created that ultimately doesn’t have an expiration date.
Sure it’s over longer time scales than a fire but it seems the principle seems the same.
Yes things get worn out and require maintenance. That is different from destroying a good in which case value is not derived. Value is extracted from consumption. The same is not true about destruction.
Scrapping a pair of shoes at the factory because they didn’t meet quality controls is not the same as someone using the shoes for 2 years and deriving value from it, even though at the end of the 2 years, they both will end in the same landfill.
The principle is the same, but I think it’s worthwhile to point out that in one instance value is derived and in the other it is not. Especially since a lot of people won’t get there on their own.
