Let suppose that in a World A there’s 2 000 kg of gold. All gold is circulating as money. If somebody is in possession of 1 500 kg of gold in money the rest of the world will have 500 kg of gold (of course this is exagerated for illustration purposes). Imagine that this person had discovered or invents something, but need to produce it to purchase services (work) and goods for 1 500 kg of gold, the money will go from him to the rest of the world in exchange of good and services. At the end he will have his invention and will look to sell it with profit of course, but due to the limitation of total gold supply his profit are limited to 500 kg of gold.
The question is how to deal with the limitation of gold supply in regard to any business which first reason is to earn “money” i.e. bring profit that means bring more money than it has expensed. Inflow > outflows.
The simple answer is to use something else other than gold as money, there are substances with similar properties to gold that are significantly more rare than gold and humans do not use them as money. There are also substances that are more common like silver and copper that people use as money also. It is just that through out human history, the various peoples have used gold, silver and copper more often than any other forms of money. The Austrian position on a form of money is to let the markets for various forms of money sort that out. Those who supply forms of money most demanded by consumers will receive profits and those whose money forms are not will incurr losses. In other words, there is nothing magic about money, it would be just like any other commodity. Maybe fiat paper money will be the form chosen as best through the mutually beneficial exchanges between producers and consumers, but I doubt it.
There is no apriori limit to how much psychic profit he might attach to any weight of gold. And also, this is just an example of scarcity that all human beings must contend with. Gold is scarce, it is not limitless, just as are all physical goods.
why limit yourself to just Gold as money? there are other commodities that are valueable too and can be just as efficent as gold…Remember, Austrian economics doesn’t just say ‘‘Gold as money’’ we say let the market decide what money is…
I think the flaw here is assuming the value of gold to be the same before and after his invention.
If there is only 2,000 kg of gold in the world, and assuming that people will only use gold as money [for otherwise your problem is solved, as other posters have noted], then those 2000 kg are able to buy everything in the world. When the inventor unleashes his ware to the world, those 2000 kg will buy everything that exists, plus all of his new invention. Which means the value [=purchasing power] of gold has gone up. So he may only make 500 kg of profit, but that 500kg is worth more than it was before.
I think that the last post can describe the possible economic response. The point was how to deal with the idea of profit which is by defintion extra-money in a situation were the money (gold, silver, platinium what else we can imagine) is a finished quantity
In my example I presented a economic “snapshot”, a frozen situation at a given moment, but gold (money) flows constantly so even if the inventor ask some profit (let assume less than 500 kg of gold) he will of course cash it but he will also spend this money so the gold will go back to the rest of the world and could be use once more to buy the invention and so on etc… etc… in between cycles (inventor → rest of the world → inventor) the value of gold will change, signifying that other inventors or producers of goods will have reduce their price to “make” room (i.e. compete for the same “gold”) for the product/invention present on the market, because if the product is really innovative/revolutionnary people will search to redirect their money flow, from the old products to the new one, this in the most drastic case should lead them to disappear from the market.
The limited supply of money (gold) is in such a situation a strong absolute selection mechanism only the products that are really responding to a demand will survive because people will have to make a choice what should they buy? (because they cannot have both - due to the gold limitation).
If the new invention is a car, then buggies might disappear from the market, bevause there is no longer any demand for them. But if a new car is invented, people still will like, say, chewing gum. As long as they want it, they will buy it.
Now you might argue that they may want it, but won’t be able to afford it. The thing is, though, that a new invention cannot possibly cause more poverty in the world, by Say’s law. So that people will have more purchasing power than before. The gold will have to be able to buy all it did in the past, plus a litte more.
You might argue that there is not an economic, but a technical problem, that the gold cannot make the rounds fast enough to give everyone time to buy what they need. The vendor of popsicles at a hot stadium will have his wares melt before he can sell out, etc. But I think we can agree that such a situation is only a problem in extreme cases, where the money supply is really really small. And what will happen then is that, in order to get round the inconvenience of barter, some new commodity with intrinsic value will arise spontaneously as money [as happened in Iraq with bottled water]. In other posts, I have suggested the use of those dollar sized whiskey bottles.