What is the difference between wealth creation and capital formation?

Capital formation typically refers to the accumulation of fixed capital (equipment, buildings, tools, etc.), whereas wealth is the difference in value of total assets and total liabilities (or net worth). Fixed capital is one kind of asset and land, gold and retirement plans are others, for example.

Wealth creation involves any kind of improvement in net worth. Of course, at the aggregate level, capital formation and investment are the most durable forms of value-add.

Going forward, however, the value of information is increasing in its role of wealth creation and value-add. Quora is a great example! This creates all kinds of measurement challenges (among others) but that’s a separate issue.