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Law Of Conservation Of Wealth

Listed author(s):
  • Gopinath VadirajaRao Bangalore

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    Law of Conservation is a universal Law and applies to mass, energy and wealth alike. When wealth is changed from one form to the other, the value of transferee form of wealth equals value of transferor form of wealth. This leads to inferance that wealth can neither be created nor be destroyed but can be changed from one form to the other. The principle of Double Entry Method of Bookkeeping rests on this Law. We cannot create a debit/credit without corresponding credit/debit and the assets and liabilities in a balance sheet should match. All classical economic theories and laws are based on this law. Law of Equilibrium and Law of Conservation are inseparable. One is the cause and the other is the effect. The words 'value in exchange' in the definition of wealth are to be deleted. Loss, depreciation and goodwill may/may not have value in exchange but they are expressed in units of wealth. They are added/subtracted to/from other forms of wealth.

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    Paper provided by EconWPA in its series General Economics and Teaching with number 0502068.

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    Length: 10 pages
    Date of creation: 18 Feb 2005
    Handle: RePEc:wpa:wuwpgt:0502068
    Note: Type of Document - doc; pages: 10. Matter, energy and wealth have two properties in common. Law of Conservation and Law of Equilibrium apply to all three. Economics is pure material science.
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