You see this in the weirdest places (government data processing, for instance) and I suspect this will continue to grow until there are some high profile data leaks at such SaaS providers. Way too many important eggs in single and often badly secured baskets.
Not necessarily as overhead operational costs are lowered with the SaaS model and that's not true 'rent'. Licensing fees would be considered 'rent' but obviously necessary as a motivator for production.
Isn't that a case of "get everyone hooked then raise the prices"? How much is pricing currently subsidized by VC and early access promotions (like GCP, AWS, Uber) which will go away over the next ~10 years.
AWS is currently minting money. Amazon and Google don't offer no subsidies, Amazon at least, invests all its profits back into the business, which is def not a subsidy in any sense of the term.
As the competition heats up and providers become more efficient, I actually expect prices to go down even further.
I agree with the "not necessarily" part, but one thing that concerns me is in seeing large, critical institutions, like large hospitals and universities, outsourcing critical infrastructure off-premises.
If you look at operational costs per se, and licensing fees in a scenario like that, you're missing a huge proportion of the most threatening costs. Consider hospitals, for example, and recent problems with ransoming electronic health system data.
What concerns me with SaaS is that the biggest costs are very catastrophic or serious risks (like lock-in dependencies, or hacking due to monocultures--by the way, is that a formal, modeled concept in computer security, like it is in agriculture? The vulnerability of a market to "infection" due to monocultures?) that are maybe high probability over a very long-term period, but very low over a short-term period, and hidden.
By default, I'd guess, no. But I feel it can and, often enough, is. Many SaaS companies will raise prices year over year without providing any additional value. That increase seems to fit the definition here.
Can someone care to enlighten me on how SaaS can qualify as rent extraction? I'm sure there is a lot of fudge, but the US is a "capitalist" society—in that I mean you're not required to continue paying for a SaaS product if you deem it's not worth the money. How is this 'rent extraction'?
Assume for a moment you have 10 000 employees and 10 years worth of business correspondence in Gmail, Outook.com or similar. Now for email, there is usually at least one or two open apis for getting that data (pop/imap) - but even so, migration is a costly affair.
You could move all new correspondence to a new (eg: on premises) system - but you'd have to keep paying to retain the same access to your business history.
Take any of the many business/crm-apps, where there's no clear migration path (you'd want both history and business process rules) - and it's easy to see how SaaS might easily facilitate "rent extraction"?
As others have mentioned the problem isn't unique to SaaS - but with an on premise solution, you might be able to move some terabytes of data by simply moving some physical drives - or at least have local access via you SAN. With a cloud provider, many businesses would struggle to get at the data at a higher rate than 100mbps even with the help of the SaaS provider.
And there's often no option to keep access to "old" system/data without paying rent, unlike some on premise solution (keep the old system, on it's own network segment, ticking along for historical records (or: in a VM).
No because on-premise software has not been regulated by SaaS providers. Customers are choosing SaaS.
SaaS is indicative of greater concentration and the possibility of oligopoly, though. I think it's only a matter of time before the cloud platforms begin coordinating price rises beyond the value they provide.
If they try to regulate on-premise software then it's time to break the glass.
You're making good points but the nice thing about capitalism is that if a business finds switching costs too high, then another business will come up with a cheaper technology and kick the older businesses' ass. What we really need is to ensure that in these scenarios, the older business doesn't use its power and resources to stifle the upstart. That is one purpose of AntiTrust laws, I believe.
That's an effect of competition, not capitalism. As mentioned in the feature article, capitalism itself has a tendency to create monopolies and extract rents since that produces a much higher ROI than engaging in competition to produce useful goods.
True, but bandwidth and lack of "raw" access (eg: b/w limited api) might make some types of migrations extra hard with SaaS.
Good luck getting 1-10 Gpbs data transfer from most public SaaS to your own datacenter without having to pay over and above your current fee for Internet access (eg: have a look at what it costs to get just a TB data out of S3 -- on any budget (or prime) dedicated provider, 10-50 TB of data would be included - per month.
Maybe if you're an economist. If you're an accountant, categorizing Saas as OpEx (vs CapEx) certainly also make it seem that way.
However, as a software developer, calling it rent-extraction glosses over architectural differences and value derived from not having servers tucked away in an office closet. Flexibility and capacity on the server-end, as well as huge benefits of software distribution over web-browser reducing support costs. I derive a ton of value in never having to drive to a data-center and paying EC2 by hours-used seems reasonable since there is actually a server (albeit virtual) running for my money.
However, it's certainly rent-extraction when the only thing thats going on via the Internet is a licensing check.
Adobe Photoshop switched to the cloud model, so graphic designers now pay 30-$70/month for the entirety of their career. Yeah it's always an up to date version, but before the shift to a SaaS model, it was some $600 but it would keep working for years if you couldn't scrape together the cash for the latest version.
Well, non-rent model would be you buy the software(forever, if you want you can pay for updates), and in a click of a button you get hosting+backups etc, with some very cheap monthly rent(which is a more realistic representation of that part of the work). And you own that bundle of software + data.
Hardly. I mean it does look that way at first, but as long as there are good competitors around, the price of SaaS products won't be exorbitant. Besides, technology seems to have a very cyclical progression: we went from time sharing computing on big vendors' computers, to personal computing, and now back to hosting with big vendors, via cloud. I'm gonna go out on a limb and say that future progress would once again make having one's data with oneself more attractive.
"as long as there are good competitors around"--that's the key, and not something I necessarily trust to be the case. Net neutrality, for example, would be a non-issue if there were good competition, but there's not.
> Crony capitalists seek to generate profits without producing anything of value.
If they are generating profits, then they are doing something valuable. Are they sucking cash out of the government? Maybe, but it's valuable to somebody. You want to fix it? Don't try to fix the entrepreneurs, fix the goddamn government.
Most of these Comcast-type rent-seekers are complete and total assholes, I agree, but I'm not about to hold my breath waiting for them to stop going where the money is.
> Don't try to fix the entrepreneurs, fix the goddamn government
Did you read the article, because that's its point. Last sentence:
Let's hope legislators can put aside the rancor of this hyperpartisan age and work to end the favoritism that gives well-connected businesses an unwarranted advantage.
Kind of reminds me of that episode of Always Sunny in Philadelphia where Danny DeVito's character comes out of retirement to save his former company.
"So what do we make here, Frank?"
"What d'you mean? We make money."
"Right, yes, but what do we actually create?"
"We create wealth."
"Okay, but like, what do we produce, what do we manufacture, what do we design?"
"Manufacture? Leave that to the c&$%^s, we produce profit!"
Incidentally, starting to order parts a few hundred at a time from places like Taobao for various projects, I'm noticing that there are a lot of companies who just do that and slap a 500% markup on Amazon. Want a 6-pack of $0.15 mini-breadboards or a few dozen $0.05 jumper wires? Sure, $5.99 with prime shipping. What a steal!
Alternatively, I am willing to pay a very small amount in absolute terms for the convenience of not ordering 500 breadboards :).
Bulk ordering has always been an accepted way to pay less in unit costs, but it helps move the risk from the manufacturer/wholesaler to the buyer. If you want to take the inventory risk, then you charge the customers for doing so, and the wholesaler cuts you a deal for reducing their risk in a concomitant way.
Me too, but there are services for ordering off of Taobao in Western nations which will collect your orders somewhere on the mainland, send you pictures of each item and allow you to return things that don't match, and then package them into a single shipment. You pay a ~10% commission and a bit more on shipping, but it still comes out to much much less money, if you're okay with waiting a week or two.
I wonder if anyone has written software that takes Amazon Prime listings and copies them to eBay with a tiny markup then automates the payment transfer.
I do not know if it was automated, but two eBay sellers I purchased from were doing this with their Amazon Prime accounts - the items were shipped to my address by Amazon. I was upset because the reason I shop on eBay instead of Amazon is to purchase from independent resellers and vendors.
It takes 2.5 weeks minimum to get the product from Taobao in the USA. The extra money is for getting it in 2 days.
Also, remember that most of that "markup" is for shipping, Amazon fees, and taxes. You can't ship those items for less than $2 even with Amazon FBA (remember, with Prime its the seller whos paying for shipping, not magic Amazon elves). The Taobao guy paid $0.18 to ship the same from China (there's a long story about how that happened too).
After paying all that, the guy selling that stuff for $6 probably made $0.40 on the deal. A steal indeed.
You can't get $10k to start a hot dog stand but you can get billions of dollars with literally no plan for profit if you're already rich or seeking VC. But want to start a normal business? No capital for you! And your taxes will pay for the banks and VCs when they screw up.
1. There are plenty of US Government (i.e. tax payer funded) programs to help people get "normal" ideas off the ground. From grants, to loans, the money is there. It's hard to imagine someone destined for success being stopped by not being able to raise $10k. $10k in credit card debt is nothing for the average american.
2. Success breeds success. If you're rich, you may already have your own skin in the game, or you may have proven yourself capable of using capital effectively.
Above what they carry is irrelevant. American's can get themselves on average up to 5-7k of debt[1], it's reasonable assumption that if one was determined, they could get $10k in credit.
> 1. There are plenty of US Government (i.e. tax payer funded) programs to help people get "normal" ideas off the ground. From grants, to loans, the money is there. It's hard to imagine someone destined for success being stopped by not being able to raise $10k. $10k in credit card debt is nothing for the average american.
You've obviously never tried this. It would be a full-time job for a year to even have a shot at these supposed grants. The money is absolutely not there the way you claim.
The younger you are the less credit history you have which makes getting loans almost impossible unless you already have collateral to pledge against the loan.
Oh and $10k is often not nearly enough capital to start a business since you need to pay your own bills while you bootstrap the business. We get away with it in tech often because we have the luxury of working after-hours as a side-project to start with. A customer-facing business can't do that.
When companies hoard profits, they really serve no purpose and no-one but to perpetuate their control and to reduce and eliminate the ability of others to compete. The massive access to capital is akin to a super power. Well, superpower can be used by for better or for worse.
Just as anti-trust laws are necessary, there will be drives for measures to encourage and even force companies to put their cash piles to use. Cash is the life of an economy, it needs to flow and flow.
>"Because it’s just a transfer from one person to another, rent doesn’t necessarily make an economy less efficient -- it’s just often unfair. "
I would argue that "rent" does make the market more inefficient. The more rent these companies can extract from consumers the larger their lobbying budget and the more campaign donations they can make at all level of government.
Political lobbying is the biggest and most effective tool used by crony capitalists.
Although privileges granted by the State to "crony capitalists" excarberates issues, I do not consider it the root of issues, and to me, capitalism would have the same issues even without a government, or with minimal government. I think we're fixing the wrong part of the bottleneck by arguing for a completely free market.
we don't have capitalism in US we have corporationism. free market would have been a good thing before automation and AI, but it won't work for the future. but you can't convince people to go toward socialism in this country. but left and right agree that problem is crony capitalism ! let's start from there and do something!!!
because in a society when most of people don't need to work because there is nothing to do for them. you can't compete by working, you can compete by the amount of your capital.
for example if you use robots to produce X, the only way I can compete with you is having more or better robots (there would be still competition on building better robots as long as people making robots and AIs not AIs generating more AIs). in such a word most of people don't contribute to the economy, allocating resources based on amount of work or capital is going to leave most of society without any resources!
free market is still going to be helpful in making AI and Robot owners compete, but they shouldn't be the sole benefactor of robot's work!
Rent is traditionally seen not so much as a cause of inefficiency, but the effect of inefficiency. Rent can almost be seen as wasted efficiency. It's the efficiency (or surplus) taken off the table by the monopolist.
But your point about further concentrating power and enabling further regulatory capture, and hence, more rents, is an important one.
It's not just that. The more rent a party obtains, the less fluid that market is. There's an opportunity cost for everything. If I pay 10% more for your product because you're a monopoly, I could have spent that 10% on other goods and services.
There is a theory that all above market profits are generated by government granted monopolies.
So, for instance, software is protected by patents, oil and gas is protected by mineral rights, drugs are protected by patent law, entertainment is protected by IP rights, and so on.
In so far as there is competition, it often arises when the rent-seeking motivates people to disrupt the government protection by making it useless.
In software, people have lived with that since the beginning because it moves so fast. But even in slow moving fields like energy, we see new tech rendering the old protections less important.
I am not saying society has not paid a steep price for rent seeking behavior but that it has been part and parcel of all capitalism forever, and not unique to the American experience.
Lots of innovation in tech happened despite patents because of ideologues like Stallman and the gpl/open source movement which left lots of software which could be used to disrupt monopoly. Not because it moves fast. If people were playing that game companies like Google would not exist or at least be much much slower in growth and what they have been able to accomplish.
That's because they're what people _believe_ - their politics - an act of faith not dissimilar from religion. The set of econ axioms people espouse demonstrates their own world view - what they stand for.
In a previous age, these would be moral principles and social norms - now it's political beliefs.
This is an interesting point, and I've been giving this a great deal of thought. The United States is surprisingly religious for a developed Western Nation, and my theory is that if people can be brainwashed into accepting things "on faith", then that can be extended to other things as well, such as facts. Maybe that can explain the huge numbers of climate change deniers, anti-abortionists and other anti-intellectuals in the US?
Because the monopolies have exerted pressure on public education, including universities, to churn out advocates for the corporations bottom line.
With no basis in reality, we've brainwashed people to believe the bottom lines of the elite are to be protected. That's the outcome sought of our educational system.
It fascinates me how, on the one hand, we complain about how lazy people are. How much inducement the proles need. "Oh they're just lazy. Push em harder."
If we need to push people that hard, perhaps "economy of effort" is built into the species. It's a weird cognitive dissonance.
"They want something for nothing! But I want to maintain my elite status built upon your efforts!"
But that challenges the basis of elite power. If we all quit producing for them, they lose. So we're "induced to produce" under the constraints they define: no food, shelter, healthcare.
This is unfortunately too close to the truth. One thing I would like to add though is that despite the fruits of labor accruing disproportionately to the elite, the system has managed to lift up everyone else as well, right? So the system does work, and I wonder what would happen if it was changed to be more egalitarian....
Its true, but I'm not sure whether I would choose to be born in a Cholera ridden mid 1850's London or the Ghettos of Inner-City Houston today. We've solved some problems and now face others of course, but my question is whether the earlier problems were of a different kind...
One thing I would like to add though is that despite the fruits of labor accruing disproportionately to the elite, the system has managed to lift up everyone else as well, right? So the system does work [...]
That really depends on the definition of »works«. If one is satisfied with the people doing the heavy lifting being a bit better off while a few overseeing everything are extremely better off, yes, then it works.
Sure, but that's not a unique byproduct to this system. In fact, I think an argument can be made that it's a designed byproduct. We could uplift many more, but we don't. A little bit of uplift, but not too much, or the wheels come off for the power brokers.
There are a other systems that we have at least some historical evidence to show will produce even better outcomes for the majority.
The problem is those are undermined almost as quickly as they are brought up. See post about brainwashing people to protect the bottom line.
People point to places like Venezuela and USSR as examples of socialism not working, for example. While ignoring that both those states were not managed by the working class (as classical socialism typically calls for), but elite masters, their bank rollers, and external forces pushing them to abandon their ways for western capitalism (economic sanctions, cutting off access to necessary trade).
> Because the monopolies have exerted pressure on public education, including universities, to churn out advocates for the corporations bottom line.
Not only that, we fail to realize the continuing incentives for them to act in that way, even when acting as "researchers". Here is a highly relevant Propublica investigative piece on academic economists as consultants: https://www.propublica.org/article/these-professors-make-mor...
Yes. Macroeconomics is secular theology. The global economy is so vast and interconnected that basically none of the theory can be scientifically tested.
Apparently at Renaissance Technologies they love hiring astronomers because as an astronomer you are used to modelling systems that are completely beyond human scale based on data from observations that cannot be repeated.
No one would argue that astronomy isn't a science. Traditional university macroeconomics is a different beast. Comparison with astrology is apt.
"There is a story that has been going around about a physicist, a chemist, and an economist who were stranded on a desert island with no implements and a can of food. The physicist and the chemist each devised an ingenious mechanism for getting the can open; the economist merely said, 'Assume we have a can opener'!"[1]
Yanis Varoufakis, after the drama surrounding his (very) brief term as Greek's Minister of Finance describes[2] the problem simply and plainly: "Understanding economics well impedes an understanding the economy." His continued explanation why [ibid] might be the ultimate example of how easy it is to sell bullshit as long as you dress it up properly with the trappings of math/stat/logic.
The goal of a capitalistic government is still unfortunately to have a wholly predictable economy. There is competition, but only until a winner is declared, i.e. a monopoly is granted. After this the rents that the winner charges can be raised and lowered freely, but in a controlled manner, in order to manage where and when the value is actually generated.
This gets weird with software businesses as these companies tend to insulate from losses relatively well. This coupled with the fact that in some markets there is no way to generate additional value without a huge public investment happening upstream (utilities) is why a lot of VC goes so crazy for it. Keeping the cash flowing is the only way to avoid being taxed profusely – All you can do in some situations is raise rents and spend hastily, for better or for worse.
That perspective is whole ignorant of the consequences of not having a mechanism for protecting people's outputs and value. Are you incented to work if someone else gets paid for that work? Why would you think that is any different with regard to patents, copyrights, and trademarks, etc.
I get that there are abuses and even grotesque distortions, but that theory is fully and clearly false. Yes, you should have protection, no you should not have abusive protecting as it exists right now in basically every single field and sector.
No, you should not be allowed to lease mineral rights and then just sit on them for free. No you should not be able to copyright something essentially forever. No, patents should not even be awarded for basic inevitable things that a corporations simply had the financial ability to copyright first. No, you should not be able to keep exponential gains from the value and environment a society created without also paying exponential taxes to compensate and contribute due to that success. But there has to be a fundamental right and ability to keep the value from what one has earned and created. That may seem an anathema to the recent generation infested by communism and ideologically subverted by islam, but the alternative is the collapse of society.
Software isn't protected by patents - it's just IP laws as well. You can't patent software in general. Maybe the look and feel of your product, but not the functionality.
Maybe it ought to be this way, but it's clearly not. MP3, GIF, patent trolls, and the Eastern District of Texas are all well-known examples of software patents.
In the US methods of doing things can be patented. That includes software. Look up MP3, LZW compression, or perhaps IBM's 2100 algorithm patents over the fifteen years from 2001 to 2016.
It's being narrowed, but it still exists. Until rather recently many courts would recognize "do well understood process X, but on a computer" as patentable.
Maybe it's just me, but as far as my experience goes, the App store and Google Play, and to a much lesser extent Steam have done much, much more killing my ability to make a profit on software than patents ever have.
The only way this will end is limits on campaign contributions and other kinds of bribery. The returns on lobbying are astronomical compared to the returns on productivity improvements.
I think the linchpin is actually our voting system. It strongly encourages the existence of only two parties that are always trying to split the difference, and that's the scenario which is very friendly to institutional bribery and regulatory capture.
mostly, they're not talking about tech entrepreneurs. they're talking about established industries like: ISPs, pharamecuticals, patent trolls and patents in general and various other monopolies.
If someone has to violate the law to produce value, then it is likely that they haven't really "produced" any value. More likely they are simply stealing from the commons.
> If someone has to violate the law to produce value, then it is likely that they haven't really "produced" any value.
Imagine you created an app that allowed Gay and Lesbian couples plan their wedding, and you operated in states that haven't legalized same-sex marriage.
Are you stealing from the commons?
Just because a law exists on the books, doesn't mean it's a just law.
"Crony" is so often followed by "capitalism", but it's really just cronyism that's the issue. You can find it in capitalism and you can find it in government. But they go best hand-in-hand. I'd argue that most crony capitalism is made possible only because they can leverage the monopolistic power of their crony allies in government for mutual gain.
I hear frequently the argument that crony capitalism is not really capitalism. And how "real capitalism" would work wonderfully.
That always remember me, how, when you argue with a communist, frequently those examples that you bring to the conversation are never "real communism".
Does it seem to anyone else that the finance industry is increasingly distracted from actually matching up capital to fundamentally productive companies, especially new companies?
Looking at the stock market, there are few IPOs, and after IPO, being public only provides access to limited access vis issuance of new stock...
Some capital flows to VCs, but it seems the more capital flows to large VC funds, the more the criteria becomes look for a sure thing and filter more for large scale opportunities - all while small scale fundamental development receives poor access to the vast amount of capital sloshing around (and settling in places like unused real estate...).
To me it seems that investment in direct development of productive tech and/or process is competing against profitability of short term financial manipulation - and causing a drop in overall delivery of new productivity improvements to the general economy. But even further, the very financial industry isn't really creating or maintaining a channel for money to open opportunities to develop that kind of company - certainly not a large scale needed or possible today.
>Does it seem to anyone else that the finance industry is increasingly distracted from actually matching up capital to fundamentally productive companies, especially new companies?
This is somewhat controversial to posit, but I believe the corruption in the financial industry is extraordinarily entrenched because of the Fed. Before you call me a lunatic, smart and good people from Aaron Schwartz to Sanders have said things like this: that it should be eliminated, or that it is nothing more than socialism for the rich while hurting the poor.
The most obvious problem with it is that it creates astronomical moral hazard by protecting and guaranteeing the big banks.
After the Fin Crisis Krugman was talking a lot about making banking boring again, and run like utility companies. You can still have VCs, hedge funds, or whatever you want--but it's not funded by and guaranteed with anything other than the money you put in it, and it's separated from vanilla banking, ie Glass Steagall.
But then we had Dodd Frank and sometime after Krugman never went back to talking about that again.
Unfortunately, the dogma about the Fed is so entrenched in mainstream economics--so much so that speaking against it is immediately written-off.
Nearly 1.5 centuries ago, all the banks were actually betting against Lincoln to lose his war. So he used the constitutionally-granted right to print the nation's own currency, and won the war with it. The point is, there's no reason we can't do this if we really wanted to (and if you care about poor and working class, and eliminating cronyism from the world, you should want to).
The first part is sarcastic. It's a shame that you have to resort to "preventive self-denigrating" when voicing valid concerns about the FRS, which is basically a facade for a bunch of crooks who usurped the control over US money supply.
Corruption in the financial industry is extraordinarily entrenched because of deregulation, not because of the Fed.
Allowing banks to merge and become huge conglomerates, the elimination of Glass-Stegal (which eliminated the distinction between normal banks and investment banks), and lax regulation of derivatives / dark money are all very direct causes.
However while you may not agree the Fed is a problem, unfortunately the Fed and central banking has an aura of group think around it that is usually only available for religious groups. I mean the fundamental concept of the fed's mandate: price stability and employment targeting--yea they sound great, but at what point do you question the ability to create value out of thin air just by playing with money. It is by definition financial alchemy.
And yes, I'm already familiar with Keynes' arguments in his General Theory, which is the historical work that set the precedent for this.
You're saying we should get rid of the financial industry? What, because we're all so good at managing our own money?
Guaranteeing the big banks can't fail is how we keep the economy going. If a bank fails, everyone that is owed money by that bank fails too. Is that acceptable? Would you be fine with your employer going belly up because the bank they rely on can't pay out money?
Guaranteeing the big banks can't fail is a source of moral hazard, removing the cost of being wrong from those taking the risk and transferring it to the general public. Make the banks responsible for the negative consequences of their actions with no potential for bailout, and watch their behavior change.
Just to address the above poster: vanilla banking could still be guaranteed. By contrast, in essence the Fed is guaranteeing the banks' risky investments.
It's useful to stop and ask yourself what exactly do central banks do that is so harmful.
The US situation of those bailouts and "too big to fail" is certainly problematic, but most people pushing that line are really against fractional reserves, but those don't really seem to have the effects people attribute to them. (And if they do have that effect, it's the central bank that sets their fraction, so it's entirely a matter of policy, not structure.)
Most of the damage the Fed causes is due to artificial manipulation of interest rates, disrupting the time coordinating function they would serve when driven by natural market forces. This time discoordination is the source of the boom-bust cycle.
The Fed doesn't have the power of setting any useful interest rate, and even the one they do set they seem to follow the market instead of setting it. (What seems to repeat on every country, because the market has more money than the central bank, and the later must avoid bankruptcy.)
Central banks do have the power of controlling the amount of money in circulation on most countries, what does indirectly impact important interest rates. But the US is an exception here, as the Fed decided long ago to let fractional reserves run as low as the banks are deciding the fractions on practice, thus abiding from any control.
Schwartz said verbatim the Fed should be eliminated. Sanders has said much negative on the Fed, specifically that it's 'socialism for the rich, and rugged individualism for everyone else,' and variations along the lines of 'fix the Fed,' but Schwartz is who said to completely end it.
I think this is something of a serious issue, but I was thinking more of problems in the operation of our financial markets in a straightforward legal sense.
You're not limited to stock. You can purchase options or futures, or play around with foreign exchanges. IPOs show up more rarely because it's SUPPOSED to be hard to start a new business. You can approach companies to try and buy into their model by investing your cash - nothing is stopping you.
As for VC companies controlling the cash, that's not the whole picture. Being dependent on "free cash" from VC's is a pretty poor way of conducting business. It isn't all about the money - it's the product. VCs don't want to invest in junk just because one person is ecstatic about their idea. They really do want more sure things. A TON of VCs were hurt back in the early 2000's because companies were producing NADA and IPO-ing all the time. A lot of trust was lost.
My point is once the stock on the exchange, all the churn, the purchases and sales, the futures and options have an increasingly tenuous link with encouraging capital to select for better fundamental productivity. Worse, by the time a company is publicly traded, you're really often just in the 'execution' phase of expanding an already established process. This isn't terrible, it's useful - but my main concern is capitalization of fundamental improvements in our economy at an earlier stage than a stock is 'bottlenecked' at the moment and so the financial market has a limited set of options of truly productive places to apply excess capital.
Part of that is large companies (with a handful of exceptions) perform optimization focused on accounting measurements and predictions to maximize their existing margins. This makes perfect logical measurable sense, except that over multiple decades of refined MBA practices, it makes almost all them good some local optimization, and increasingly bad at new ventures(or fundamentally changing their approach to existing ventures). Then to break out of that local optimization, some increased investment is required that large companies are punished for if/when their profit margin drops.
So local optimizations are explored to a endpoint, and capital starts chasing higher returns - we get rentier behivior, or capital flows into bubble assets that pop up or get chased around the world in various categories - all while produtivity and growth slowly flatlines... or at least misses its potential.
This has been recognized for a while w.r.t large companies, and so the generally accepted approach is for many of them to acquire new companies to get new capability. So we get to VCs. They don't want to invest in junk, but when VCs apply quantitative filters to because they want a sure thing investment - but moving the same quantitive model to uncertain ventures just moves that some of same 'large company' problem to an earlier stage. I'm not saying to get rid of VCs, they perform a reasonable function now, but something feels off.
I'll leave off a whole discussion of where new companies can come from outside of VCs, but there are some factors holding that back (and others helping), but in general it think that's in decline and that our larger markets depended on that creation more than they realize.
So to me, it feels like the overall financial system is missing opportunities - and that part is possibly hinted at in data, at least at the gross productivity growth falloff of the economy.
Lawsuits aren't always rent seeking sometimes they are necessary economic activities. Economic models can be poor when they (implicitly) define redress for illegal actions as rent-seeking behaviour, and cutting a competitors cables as valid economic activity -- for example the lawsuit against Comcast that alleges driving a competitor out of business with malicious construction.
It's interesting to me how this article frames crony capitalism as a use or abuse of government by corporations, almost as if the government is a victim. But it's the government that has all of the power in this context. There's something to be said for corporate money influencing elections, but even there it's elected officials who are deciding on policies after getting there, and if they are making decisions based on how to most easily keep their job (ex. take corporate money for reelection campaign), that's their unethical doing, not the corporations.
Indeed, this is even outlined in the infamous Powell memo: "Business must learn the lesson ... that political power is necessary; that such power must be assiduously cultivated; and that when necessary, it must be used aggressively and with determination—without embarrassment and without the reluctance which has been so characteristic of American business." [1]
I think that the lesson to learn here is: nevertheless the system, government or not, capitalism or not, the powerful always take all they can. It's the duty of the less powerful to fight for more of the pie for the majority.
What is more worrying is that all the suggestions in this article are that either government needs to grow, or "just needs to change". More tax. And generally more.
More tax, of course, will worsen this problem as government spending on large companies only is exactly the problem.
I think the great problem of our time is that the challenges get easier to solve every day but we mostly spend our time making rent. And not the kind of rent mentioned in the article - just plain old fashioned too-much-month-not-enough-money kind of rent. When we’re desperate, we grovel and do whatever work we need to to survive. This is akin to how researchers spend inordinate amounts of time applying for grants rather than, you know, saving the world and all that. This is because any free capital in the economy gets vacuumed up by a few large players who only divvy it out through "sanctioned" channels that most people no longer have access to.
In the olden days, the main force balancing this was taxation. Even if you look at it as a purely zero-sum game, any money paid by the very wealthy had to go somewhere, and that somewhere was the masses. This didn't sit right with the very wealthy and they rigged the system to such a degree that I've never seen an appreciable tax increase in my lifetime, even in the face of trillion dollar deficits and the loss of the middle class in the US. Mathematically, trickle-down economics has given us just exactly the system it was designed to. I mourn for the millions (billions) of people left out, but for whatever reason a lot of people don’t even see them.
Maybe the great problem of our time is ignorance..
Or simply, our means of production have become so efficient that it didn't matter whether you were right or wrong, things would still hum along and the profits would continue.
In the agricultural age, if you fucked up a harvest, you and your family could starve.
Before agriculture, if you fucked up a hunt, your whole kin-clan could starve.
Nowadays, if you fuck up the housing market, and millions of people go bankrupt, nothing gets broken enough to turn a concern into a crisis, so we never fix anything, and nothing ever changes.
Many people have proposed variations of this as the reason civilizations collapse. They are destroyed by their success. They gain so much surplus that it completely isolates them from any kind of feedback mechanism, over time causing them to completely rot from within. Eventually the core becomes so rotten that the whole system falls apart. This can be sudden.
I think an intuitive grasp of this is why so many conservatives have a natural disdain for welfare. But I think their disdain for welfare at the individual level is misplaced. The isolation of the most powerful and largest scale systems from consequences at the macro level is a far larger problem than the isolation of individuals from consequences at the micro level. Welfare can indeed become addictive and lead to a "welfare class," but these are largely powerless and relatively poor people who may be somewhat of a burden on society but do little damage otherwise. The real danger is a rich powerful professional welfare class that makes big ugly mistakes and is isolated from the consequences of these by power and abundance.
This is about right. Think of the F35 as welfare, a big ugly mistake isolated from consequences yet employing and profiting a professional welfare class.
The F35 is indeed welfare, but it's not the most damaging kind. Things like that represent waste but do little in the way of active harm, and sometimes they can even have side benefits like funding the development of advanced technologies that can find more productive use elsewhere.
The real active harm comes when you get a professional class that does very bad things. These can be mistakes, like the total collapse of the economy in 2008, or they can be intentional crimes. Either way if there are no consequences then no correction gets applied and the problem gets worse.
A large scale wealthy civilization can absorb a tremendous amount of official incompetence and misconduct.
Agreed. However, in addition to viewing the F35 as welfare you can also see it as Too Big To Fail. I think there are side benefits to defense spending. Silicon Valley was built on that [1]. But there's tremendous risk with large (and doomed) projects when they fail (which they will).
Uber is going to fail. The F35 is going to fail. Throwing good money after bad will stave off that day of reckoning but then only make it a worse accounting.
At some point though, if major world powers never go to war with each other, then the F35 can't really fail insofar as it will never actually see combat.
It reminds me of the sci fi novels Dread Empire's Fall, in which the galactic civilization's ship fleet has never fought a battle in thousands of years, so nobody can actually know how to do it, and they don't know if a certain tactic, ship, etc is really a failure or not.
Historical anecdote: at the start of the U.S. Civil War, only two sitting Union generals had ever seen combat (back in the Mexican-American War 20 years back), and the top general had gotten so fat by then he couldn't even ride a horse.
For some context, the document http://www.history.army.mil/html/books/075/75-1/CMH_Pub_75-1... indicates on page 50 that in December 1860, "on the Eve of War", the army had a total strength of 18k men, of which 1k were commissioned officers, of which four were generals.
A different source ("Armies South, Armies North" by Alan Axelrod, also author of the more compellingly-named "Generals South, Generals North") provides more detail, including names: Winfield Scott, William Harney, David Twiggs, and John Wool. This and other sources also include Joseph Johnston, then quartermaster general of the US Army, as a fifth general. There were also two more brevetted generals: Albert Johnston (no relation to Joseph) and Newman Clarke.
Maj. Gen. Winfield Scott (the commanding general of the US Army) was 74 years old and indeed unable to ride a horse.
However, all seven of the generals had seen combat. In particular, four served in the War of 1812, all served in the Mexican-American War, and all served in the Indian Wars. With the exception of Joseph Johnston, all of them even served in war as generals (at least brevet, but usually full).
Alternatively, because being a functional and happy member of modern society is predicated on full time employment (for health care, if nothing else), then there is enormous pressure to create these employments for people.
If we were to engage in universal welfare, we'd remove a false feedback signal and allow ourselves to focus on what actually creates value rather than what pays rent, food, essential health care and education.
I don't think there is much debate that not giving people access to those things is bad. But we seem strangely averse to just making them part of the core of our society.
It is not that we are so efficient, but that a priviledged tiny cabal have learned how to push the consequences of their mistakes to the rest of the population.
To borrow your example: In agricultural age, if you fucked up harvest your family starves. Today, if you fuck up the housing market, thousand of families end up in bankrupcy, and tens of thousands of small investors loose their savings... but you do not personally know any of them, so you wont even feel shame when you cash-in that million dollar yearly bonus.
There's historic precedent for that kind of divorce between actions and consequences, and it is not pretty. There's a certain French doctor you should google: his name's Josheph Guillotin.
> There's historic precedent for that kind of divorce between actions and consequences, and it is not pretty. There's a certain French doctor you should google: his name's Josheph Guillotin.
I'm not sure what analogy you are going for. Guillotin did not invent the guillotine, and only advertised it as a more humane way of execution. He was opposed to the death penalty.
They're referring to the French Revolution, and then the Terror. One of the causes of the revolution was the poor being fed up with the massive wealth imbalance. An economic depression was making the masses starve in the streets, while the wealthy 1% enjoyed lives of comfort and luxury enabled by the rigged aristocratic land-owning system. So the peasants had their bloody revolution, killed a lot of the aristocrats using Dr. Guillotine's invention, and now we have modern France.
(This is, of course, a gross oversimplification of a complex historical topic. Please feel free to correct me.)
I am well aware of the French revolution and its causes, thank you. As I said, Guillotin did not invent the machine. He did not like death penalty, but if it had to be done, he would rather have had it done by a machine than by axe or sword (for the nobility) which occasionally did not kill in one hit, or by hanging (for the ordinary populace).
The actual inventor of the guillotine is one Antoine Louis [1].
I agree with the first two paragraphs but Guillotin is not good example.
A better example would be the decision to go to war in Iraq. The people who made that decision didn't have to send their own children and they could enact large tax cuts for themselves in addition at the same time. So they got their war but didn't feel any consequence.
Agreed on the Iraq example. One of the things that ancient European nobility got right was to put their own children in the front lines as low or middle level army officers. The rank lieutenant literaly comes from the French for "land owner". That way, if it came to the worst, peasant and lord may mourn together; the social fabric remained (mostly) unharmed.
Which is what I expected to hint the the mention of Guillotin: the French Revolution. That did not happend because of social injustice. No human society has ever been 100% fair, -and probably none will, ever,- and most people is able to accept that without making a fuss about it. The problem with the Ancien Regime back then, -which is the same problem with financial elites nowadays,- is that they have become increasingly detached from the realities of their decisions for the rank and file, even to the point of cluelessness.
taxes in the US are far more progressive than they used to be. there are however many new avenues to follow to increase wealth. those below a certain income level are more likely to get eaten up by embedded taxes, regulatory fees and government service fees.
then throw in we are bombarded every day continuously to buy this,buy that, go here, do that. We get told every day of wonderful stuff available for pennies or dollars a day. we have tv shows and advertisements implying status for owning certain products.
besides managing their money we fail to teach kids in school just how well marketing manipulates them into believing what is needed to have them spend money.
still regulation has become the go to tool to prevent competition and when that doesn't work the fear of exploitation of the poor or under privileged is brought to the foreground.
the simple fact is we have too much government for it to be effective for the regular person, it only serves those who can afford to operate on its level
Really? Could you be more specific on how regulatory fees and government service fees are a bigger problem than massive, gaping wealth inequality and the power differentials that go along with it?
And what's the solution? Deregulation? Wouldn't that just make consumers even more vulnerable to the predations of the powerful? In fact, it seems that powerful interests generally lobby for more regulation, not less, so I'm not really sure what your point is here.
And your statement about "too much government" is vague and abstract. How exactly is "too much government" contributing to wealth and power inequality. Historically, it has been government intervention that has acted as a counterweight to concentrated power.
In fact, people who have been complaining about too much government became influential in public policy about the EXACT time a lot of these trends in wealth inequality started (the late 1970s).
Sorry to be so critical, but I think a major contributor to our problems is people who make blanket statements about that are vague and imprecise and do not articulate any real policy goals.
In response to your first question, my go to answer would be the government's favorite rent seeking apparatus: parking enforcement. Parking tickets are a regressive form of taxation that disproportionately affects the poor. I'm not talking about exceeding your time at the meter. I'm more referring to Street Sweeping violations on a weekly basis, when they hardly ever actually send a street sweeper down your block.
Another example is how LA Sanitation continued to charge myself and thousands of other apartment dwellers the monthly flat rate, despite our landlord hiring a private service, and the fact that the city collected our cans and the city trucks didn't collect trash. They refused to refund my money, citing a City Council Resolution on the matter. The city was eventually sued and this policy was repealed. If I refused to pay, since DWP does the billing for Sanitation, my electrical service would have been terminated.
Don't even get me started on CA's solution to Sacramento's refusal to curtail spending by passing a $.20/gallon gasoline tax. CA residents already pay more gas tax than most other states.
And last but certainly not least, CA Senate Bill 18/2017 which thankfully was crushed by activists. This "Children's Bill of Rights" did not increase safety nor the welfare of children in general. It did however insinuate the State of California as your child's new parent, whilst mandating a new level of services to be provided by the billionaire author of the bill, Jim Steyer (Common Sense Media). Funded by your tax dollars, of course.
because tax rate on income is meaningless when they don't have income and when tax rates were high their incomes vanished. that is the true history and true facts
Post I responded to said, "taxes in the US are far more progressive than they used to be."
A progressive tax rate is one that increases as the taxable amount increases.
So, I could be missing something, but I don't see how your post addresses my response. Saying it's meaningless doesn't change the definition of a progressive tax rate.
The "top marginal rate" means very little by itself. What matters is the effective rate which takes into account the credits/deductions that are allowed, the other lower tax rates, etc. For example, the top 10% paid 49% of taxes in 1980 and paid 70% in 2014. (http://www.ntu.org/foundation/page/who-pays-income-taxes)
A lot of that tax money goes to pay interest payments on government bonds which are owned by the rent collector class. The more money the government borrows to pay for health care and such, the more money the rent collectors make. They've effectively hijacked the progressive impulse to create a way for their vast wealth to earn interest. The regular bond markets would never be able to soak up such enormous amounts of money and pay risk-free interest on it.
China creates their own debt free money as needed. The U.S government must borrow it. You ever notice how economic pundits have been predicting an economic crash in China for the last 30 years that never seems to come? It's because the government just endlessly bails out the economy in a debt-free way that never sticks the taxpayers with the bill.
> China creates their own debt free money as needed. The U.S government must borrow it. You ever notice how economic pundits have been predicting an economic crash in China for the last 30 years that never seems to come? It's because the government just endlessly bails out the economy in a debt-free way that never sticks the taxpayers with the bill.
That's.... not how it works. USA consumers purchase lots of imports from China, which causes massive flows of capital from the USA to China. China uses these capital flows to purchase treasuries from the USA which (in part) funds the federal deficit.
At no point is China just "creating debt-free money".
The exact same thing happens in other countries with large trade surpluses. Part of the reason for the Greek crisis was that Germany exports a lot of goods to Greece. This capital flow drives down the price of money (the interest rate) in Frankfurt and drives up the price of money in Athens. The Germans, seeing that they could get 1% at home or 7% in Greece (in the early 00's) then used the capital flows to purchase securities in Greece, such as bonds, CDOs and CDSs.
- There is plenty of free capital in the economy. More than ever really. To the point that the "capital glut" is a regular topic of discussion in economic news.
- I don't know how old you are but both Clinton and Obama significantly increased taxes on the rich. Federal tax receipts as a % of GDP are fairly constant going back to WW2.
First that graph shows a huge range of rates. Just 2000 vs 2004 is a 22% drop, but even that's just federal rates. Total government spending is the only meaningful metric when state, local, and federal funds are all taken out of your paycheck.
Further, not being static does not mean it was ever meaningfully increased. The rate from 1982 was higher than either Clinton or Obama rates. And 1982 was below the rate from 1932 to 1981. Compare US GDP growth and a high top marginal rate seems to promote growth, though there are many ways to slice and dice these numbers.
1) I expect that if we included state and local taxes the story would be much the same, though I don't have a graph handy. You could be right I suppose.
2) I think we mostly agree here. There have definitely been meaningful changes both up and down (on the order of 20%) over the years depending on both economic and political changes. However, when you look over a 50 year timespan (everything post WW2 basically), you don't really see a meaningful longitudinal change. To me this refutes the OPs point about taxation being meaningfully different in the "olden days."
My understanding is that those top marginal rates didn't matter as much as you might think because they mostly shifted forms of compensation. The data we'd really want to investigate this question is what % of taxes were paid by various income groups (top .1%, 1%, 5%, 10%) over time. See how much that share has changed with various policy changes.
I can't seem to find a relevant graph on fred.stlouisfed.org though. :(
ntu.org has some recent data. In general, federal income tax has gotten more progressive since the 50s. For example, the top 10% paid 49% of taxes in 1980 and paid 70% in 2014. http://www.ntu.org/foundation/page/who-pays-income-taxes
>...Further, not being static does not mean it was ever meaningfully increased.
The tax burden has basically gone opposite of what you imply. For example, the top 10% paid 49% of taxes in 1980 and paid 70% in 2014. (http://www.ntu.org/foundation/page/who-pays-income-taxes) The "top marginal rate" means very little by itself. What matters is the effective rate which takes into account the credits/deductions that are allowed, the other lower tax rates, etc.
>...Compare US GDP growth and a high top marginal rate seems to promote growth,
Those high marginal rates of the 1950's did not bring in some giant windfall to the government or somehow promote growth of GDP. Most economists are opposed to very high marginal tax rates due to the inefficiencies they introduce - compensation being moved to non-salary, money wasted on CPAs, lawyers and lobbying congress for special deductions, dead weight losses for economic activity that isn't done, etc.
Top 10% made 20% of all income in 1980, they now make 50% of all income. So, going up to 70% is actually a drop in their tax rates.
Further, the top marginal tax rate has little to do with the top 10% of all incomes.
PS: Yes, in theory they where a bad idea. However, in practice they seem to have been a net benefit. Either though reducing the rent seeking behavior of capital, or alternatively because the middle class's spending is mass producible. (You can scale iPhones, you can't scale 50,000+$ watches because they are not intended to be scaled.)
What is the source of your data? According to the world bank and the OECD, from 1986 to now the income share held by the top 10% has been in a range from 27 - 31%.
>...Further, the top marginal tax rate has little to do with the top 10% of all incomes.
As I have tried to explain in the previous comment, the top marginal rate means very little.
>...Yes, in theory they where a bad idea. However, in practice they seem to have been a net benefit.
In reality, they were a bad idea. It should be a hint that you don't see mainstream economists suggesting we return to them. Politicians find them a good talking point since everyone likes the idea of someone else paying more taxes, but you don't see economists suggesting it.
>...Either though reducing the rent seeking behavior of capital, or alternatively because the middle class's spending is mass producible. (You can scale iPhones, you can't scale 50,000+$ watches because they are not intended to be scaled.)
How exactly does a confiscatory rate reduce the rent seeking behavior of capital - that seems like a different issue. In reality, high rates encourage money to be spent in non-productive ways to influence congress to carve out special tax deductions/credits. Enough loopholes were in the old tax code that some politically well connected wealthy people sometimes paid no taxes - this is why the AMT was created.
If you want to debate the numbers, there are 4 big options. Do you use households or individuals? Do you include capital gains or just realized income. Who do you exclude from the measurements ex: military, prison population, etc? And do you look at pre or post tax numbers?
So, yes you can get rather different looking charts from what I said. But, honestly I don't feel like getting into a debate about this stuff.
Tax receipts are largely on income flows, but capital (wealth) itself is much more imbalanced than even the gilded age.
Economic inequality has collected a huge amount of capital into very few hands that ultimately don't seem to know how to apply it productively over the whole system.
While wealth is more concentrated in the US, access to capital is probably at an all time high. Interest rates on loans are tiny and equity markets have never been deeper.
And why isn't productivity increasing if capital required to develop enhancements is available? And a related question if capital and access to it is at an all time high, then why do we have stagnant economic growth?
That is definitely one of the big mysteries of the modern era. Personally I subscribe to the hypothesis that we're just running out of low-hanging fruit. As humans developed better knowledge of biology, chemistry & physics there were a whole host of relatively easy to invent items from the steam engine, to antibiotics to air travel to the transistor and modern electronics.
These were world changing.
But now we're mostly done doing that and are now in the refinement stage on most technologies where we spend an enormous amount of effort to get, for example, 5% more fuel efficient airplanes. Physics is tough.
Maybe we'll have some sort of revolutionary breakthroughs in the future that lead to another era of rapid invention but until that happens we'll continue plodding along building a slightly more efficient world instead of a transformative one.
This is really just one hypothesis though. The real answer is that no one really knows for sure.
Agreed, it's quite believable that the threshold of capital required to develop a given improvement is increasing. That's one reason that individual entrepreneurs are likely making fewer impacts on starting of new companies. Well that and there is a double whammy of labor being paid less of a margin of productivity so individuals and even small businesses are more squeezed of their own capital accumulation. In other words, the Wright brothers today would have a hard time not only because it's harder to develop a competitive aircraft, but because their bicycle business isn't going to yield a sufficient margin to even invest in the development in wind tunnels, motors, etc that they did originally. The thing is, it's individuals that would make the 'crazy' investment without a cut-and-dry ROI, without a calculable guaranteed result - and I think we suffer from their absence in terms of end growth overall.
But I also somewhat discount that the rising difficulty level is really why more breakthroughs aren't happening, if that were the case one would see larger and larger accumulations of ventures committing capital and failing (or at least operating). I think the real reason is that not enough capital even tries to attack these problems because they're longer term and difficult to quantify the return. The irony is that I suspect that we get a smaller overall growth by routing capital to mostly knowable investment returns over a larger proportion going to "crazy" non-calculable investments. So, we end up waiting for the die-rolls to match up people like Elon Musk with sufficient fortunes for truly big advancements, and an economic system that mucks around with financial engineering instead of relentlessly and systematically advancing a wide range of real-world applied engineering on big problems.
The simple alternative explanation is that we're not supply-limited ... we're demand-limited. (Note that demand is what you want AND are willing to pay for, by it's economic definition)
My guess is that we're turning everything into little services and few people understand the big picture.
By squeezing pennies out of lots of things, we miss the dollars that could make positive change.
Look at corporate IT as The gold standard of fail. We design complex systems to allow them to be sourced out (is ITIL/ITSM), and then are surprised when we have built a monstrosity that doesn't really work.
You see this type of thinking everywhere. I had an ancient popcorn popper called the "Whirly Pop" that I got in the 90s, which was basically an aluminum pan with a wood handle and metal gear for swirling popcorn on the stove. It recently broke and I bought a replacement -- a product inferior in every way with a plastic handle that will burn your hand, a plastic gear that will melt, and a metal pan and cover so thin that bent it while cleaning with a sponge.
What about the other elephant in the room ? We appear to be in a second demographic transition. This time instead of going from high birthrates to low, we're going from replacement birthrates to shrinking population.
This then results in the need for increased scale, increased productivity, and indeed, the need for innovation disappearing altogether.
That's not really true at all. Many companies, especially medium sized businesses are starved for capital as banks are consolidated and are largely out of many types of lending.
I had a friend who ran a successful manufacturing company who was forced to shut down production... not because of competition or cost but because of the inability to get working capital. As the regional banks in our region got swallowed up, the local bankers who understood cyclical businesses went away.
You and the parent post are both right. There's just 2 things:
1) we regulated that banks have access to capital (ie. we created the FED that will loan almost unlimited amounts to them. And of course we bailed out "too-big-to-fail")
2) we outlawed that banks loan money to anyone but the government, or very big companies. After all, since they always lost the money, we've imposed more and more rules about who they can lend to. (always lost it, I might add, by lending it to government or big companies when we're talking large amounts, but that is conveniently ignored of course).
Of course who they can lend it to means effectively not you or me.
As long as you don't have high capital gains tax or at least at the same level as income tax the wealth will keep flowing to the very rich. As richer you are the lesser tax you pay percentage wise on your wealth gain every year.
any money paid by the very wealthy had to go somewhere, and that somewhere was the masses
What? The size of gov't has only increased over time. That's money being pulled out of the economy through taxes. If anything redistribution has drastically increased over time.
Your own link disproves your claim that it's now higher than ever before. It was much higher than now up until Reagan neoliberal era that we're still in now.
Post WW2 the US took over from the UK as the world's empire and a muscle man. That has significant additional costs. If you're arguing that we should cut military spending by 90% to decrease the tax burden, I'm in agreement.
I totally agree with the statement about wealthy individuals pouring money into very few narrow channels.
Wealthy people don't think outside the box enough, they just invest money with their friends who are probably already wealthy themselves. This widens the class gap and is bad for the economy.
The concept of "crony capitalism" is a misnomer. "Crony" is not a type of capitalism, it's the antithesis of capitalism. It's enabled by giving too much power to government.
For example. When insurance companies jack-up rates or impose customer "unfriendly" terms, they are not acting within the "free market." They are exploiting "crony'esque" rules that limit competition by restricting insurance companies from competing across state-lines.
Crony capitalism is not a misnomer, its the endgame of all capitalists. When people have the resources to buy a regulatory advantage, of course they are going to do so; that's just capitalism at its 'finest'.
It's not the endgame of all capitalists. Actual capitalists, limited in number as they are, prefer free markets (e.g. no cronyism) because they'll make more money that way over time.
Opportunists are the ones who thrive when things are rigged. They can't survive on their own.
But yes, many capitalists (and non-capitalists alike) "buy" regulatory advantages.
Some leverage their dollars (buying)
Some leverage their numbers (voting)
These groups enable eachother. Motives range from "defense" (virtuous) to "offense" (sinister).
You will find no practical solution to this problem other than starving the beast (decentralizing power away from government).
Disagree. It is our current system, which increasingly empowers opportunists over capitalists, that will create "corporate fascism."
Current system:
1) Big companies pay minimal or negative taxes. Small companies are taxed at the individual rate (and increasing). If Company A pays 0% at top bracket, and Company B pays 50%, Company B is unlikely to out-compete Company A.
Read: our tax system creates "monopolies."
2) Our current system allows big companies to write or shape gov regulations, making compliance only possible for the largest companies. Prohibiting health ins cos from selling across state lines is an example.
Read: overreaching laws and regulations create "monopolies."
3) Our current system provides a safety net to large companies, who have leveraged #1 and #2 above in order to become "systemic." This gives them a greater tolerance for risk, "counterbalancing" regulations notwithstanding.
Read: death spiral
Want to fight "corporate fascism?"
Shrink a "corporate fascist's" source of power.
Their power comes not from creating superior products or services, and delivering these at a superior price. It comes from their ability to manipulate corrupt or dumb politicians, bureaucrats, and voters.
Again, you will find no practical solution to this problem other than starving the beast.
1. Half true. Competition drives down prices, but not necessarily profits. For example, you can lower your prices using innovation, by achieving economies of scale, etc.
2. Over long-term, probably true. In short-term, not true. Often monopolies are formed and initially sustained by keeping prices aggressively low.
3. If you said stock investors look to maximize profits, i'd agree. Short-term? Not necessarily. Value investors like Warren Buffet are not motivated by short-term profits.
4. Stock investors offer a premium for profitable companies who can protect themselves against "threats." Government protection is one such way, I guess. Building sustainable competitive advantage is another (merit-based).
5. Your thesis rests on a premise that the government doesn't intervene in the stock market? Really? Have you heard of quantitative easing?
If you don't like the fact that big companies have a lot of power, I suggest you spend time thinking about why they have so much power, before you randomly proscribe solutions.
I'm not arguing that bad government regulations and rules don't create monopolies, but monopolies are also created through natural means and that still doesn't change my general premise.
stock investors are offering a premium for monopolistic companies and rational companies management will combine companies to eventually become a monopoly to maximize profits and stockholder value.
My basic argument is the only reason companies don't more aggressively try to become monopolies is because government regulation(anti-trust laws) deter it.
Am I arguing for more corporate welfare absolutely not. Am I arguing for more regulation generally no. more effective regulation yes. More enforcement of current regulation yes. Both of which require more qualified effective people, which usually involves investment.
For having such a good understanding of market economic your solution is a little half baked.
The problem with this country everyone wants more or less taxes when the focus should be on more effective, transparent use of the countries funds.
There are somethings you can't just throw money at and it will fix it. Well, that's true in the negative as well.
Any actor that gets powerful enough to influence the government will seek to influence the government to its advantage, such as passing new regulations to prevent competition. If the government is too weak to be of any use the powerful corporate actor, then that corporation is now a de-facto government, and the "government" is merely a rubber stamping government by name only.
I would argue all corporation are rent seekers. Markets which enable assets to be traded buy all and expose assets true value to all participants. corporations hide assets behind private contracts.
So a doctor who decides to solve the problem of <x-disease>, and proceeds to raise $500 million over the next 15 years to develop a solution, get it approved, and commercialize it...
> Yes the rational choice model is well-established to be false.
Citation? I hear this a lot, and it seems to stem from a misunderstanding of the word "rational" in this context, which I believe is supposed to mean "perceived" - how else would you objectively define rational?
Is it rational for a thirsting person to prefer gatorade to water (it is for them, if that's the choice they want to make)? Do you have more perfect information to justify your opinion on the matter as more "rational"?
Rational choice theory holds that actual behavior will be that which maximizes utility (in it's simple form), and expected (in the Bayesian probability sense) utility (in the more complex version addressing uncertainty.)
“Rationality” refers specifically to this mathematical optimization.
Not native english speaker here. My comment is probably of very limited value, but mostly for my personal improvement :).
When I read "the wrong kind of entrepreneurs flourish in America" it surprises me to not see: "the wrong kind of entrepreneurs flourishes in America". I understand that "kind" should be the subject of the sentence, not the entrepreneurs. I have seen this construct several times (e.g. "this type of errors are very common", etc) and I'm wondering if it's correct, or simply one of these errors that are so common that they become the de facto rule.
You are correct, "kind" is the subject of the sentence and the right conjugation would be "flourishes". You are also correct that it's a very common error that has generally just become acceptable.
"The wrong kind of entrepreneur flourishes in America" would probably be the better title. The article describes a single kind of behaviour. "The wrong kinds of entrepreneur flourish in America" would better describe an article where multiple kinds/distinct groups of behaviors were present.
I think you're right. To me, the sentence should either be "the wrong kinds of entrepreneurs flourish..." or "the wrong kind of entrepreneur flourishes..." But this is a common error, and most people probably don't notice it.
A related thing I've noticed is that in British English, they refer to companies as plural. For example: "Google are going to acquire company X", whereas in American English, you usually see: "Google is going to acquire company X."
Both constructs are now allowed in French. The singular follows more the grammar rule, the plural conveys more the meaning and is often a little bit more natural, so it got allowed.
Many of our regulatory bodies have been utterly captured by biggest companies that they are supposed to regulate, and they are tamping down innovation (which creates jobs), increasing prices, and decreasing quality. Both the Democrats and Republicans have been engaging too heavily in crony capitalism for decades, and this is the result.
How it works: Regulations that are supposed to protect the public end up being a cudgel with which to beat down small companies that can't afford to deal with an onslaught of often unjustified demands for regulatory compliance. When the only companies who can afford to comply are the big ones, it squeezes out new market entrants. This decreases competition. It's bad for all but a handful of people.
How it should work: Generally (not always), there should be a direct relationship between company size and the amount of regulations which apply (i.e. more regulations as you get bigger, fewer if you're small).
We need a heavy injection of honesty into our regulatory agencies. Restoring balance to the system would unleash a wave of economic growth.
When I was shilling for Senator Sanders in 2015 and 2016, I often said that I was equally excited for both his policies and the fact that he would make a lot of good appointments, which would clean a lot of crap out the rent-seeking regulatory system, which would be great for the economy.
Unfortunately, we're going to have to wait. But I hope this gets on more people's radars as one of the reasons why the middle class has been shrinking and real incomes going down for four straight decades.
Regulatory capture, advertently or inadvertently, is one of the elephants in the healthcare room. I'm tired of all the discussion (on both sides) totally ignoring this issue.
Healthcare is a vehicle to serve another agenda. That is the problem.
It doesn't matter if insurance is private or public if the costs of healthcare are too high. I don't see why there is no compromise. It's very bad for the future of this country.
> and they are tamping down innovation (which creates jobs)
If you're going to go from the jobs angle - let me pose a question:
Today - in 2017 - not 100 years ago, not 40 years ago, but today - now.
Does unregulated innovation create more, better jobs then it destroys?
Do you draw a distinction between regulatory 'innovation' (Miscategorizing employees, breaking laws to increase your margins, skirting training or safety requirements, introducing conflicts of interest), and actual innovation (We can make more, or better stuff)?
Do you think they are equally valuable?
What is the ratio in market cap between these two kinds of innovations?
I think that these issues are getting a lot of attention recently. A lot of people feel that their jobs are not meaningful anymore and that they cannot find any meaningful work that pays well.
Most of the jobs that pay well are zero-sum games. Finance, tech, law. Even medicine and pharmaceuticals are becoming zero-sum games (e.g companies boosting drug prices because it's easier than inventing new ones).
People have become cynical and distrustful towards each other and the system. We have lost touch with our old values.
I'm surprised that society can continue to function under these conditions.
In this zero-sum economy, we are all enemies of each other.
They should go to India, or China, or Vietnam, or Nigeria, and, with a straight face, tell people there that we've become stagnant over the last century.
That's actually a very good point. Globalization has been great for developing countries and terrible for developed countries. People from developing countries have a much better life outlook as a result.
As a westerner, I am much worse off than my parents were and so my perception of life is very cynical. The lifestyle that I had in my childhood and the idea of life which my parents projected onto me was so much better than today's reality. It's quite a depressing feeling.
OK, let's assume you're 30 and your parents were ~30 when they had you. That means your parents spent their 15-30's during the 1970's. What were the 1970's like in the US (yes, I'm assuming you're American)?
Absolute crap.
Post-Vietnam with everyone wondering whether or not the US was done as a superpower. A humiliating withdrawal from a war that killed 50,000 Americans. Stagflation, with inflation in the teens and unemployment 3x what it is today. Want to buy a house? Sign on the dotted line for a 17% mortgage. Oil embargoes/energy crisis and line ups for gasoline. "General Malaise". Serious crime problems in cities and a decaying inner city. Race riots in recent memory. Watergate scandal and a disgraced President who relinquishes office.
I think it's silly to think our parents had it better.
Good idea. Weak article. The HBR article cited [1] is an obituary for William Baumol. Baumol is associated more with the "cost disease" problem - high productivity industries shrink over time, as their market saturates. Agriculture and manufacturing in the US have great productivity, and are constantly shrinking employment while increasing output. US manufacturing output is at an all-time high, but is down to 8.1% of the labor force. Agriculture is at 1.4%.[2] So business growth has to be in low-productivity sectors, with low wages. That's cost disease.
If you want to read about rent seeking, read Peter Theil's "Zero to One". It's a manual on rent-seeking. It's all about how to create a monopoly.
Changing Government policy to reduce rent-seeking is very tough politically. Successful rent-seekers are the biggest political contributors. They pay to not have their income stream cut off.
But cost disease can, at most, account for growth in prices that follows the growth in salary paid to the most productive professions, no? Because if so the price increase of health care and college (which is the two big expenditures) _cannot_ be explained by cost-disease alone, as they have both grown much higher than salaries.
I find the juxtaposition of productive and capitalism odd. The entire point of capitalism is to slush money around. That is the definition of productivity in capitalism but somehow some people got the money part mixed up with "value" and now they need fancy mental gymnastics to explain how the system working as intended is in fact not working.
Basic system theory 101 says if you work with and optimize a proxy instead of the true metric then you will always deviate from your true and intended path. Money is only a proxy for value and some people did not get the memo. You need some second and third order correction terms if you use proxies.
> Sometimes the government allows companies to get a certain amount of rent -- for example, the royalties from patents, which we protect in an attempt to encourage innovation.
This is the classic, maybe the reason given to justify patents. The implication being that no one would bother innovating if patents didn't grant them rent for a time.
But I wonder if the reality is merely that different people, and different kinds of people, would innovate in a patent-free world.
The problem is not the concept, but the current application. And that is not even a construct of the law as written, but the courts application of said law.
Patents started out as a 20 year protection on mechanical mechanisms or chemical processes as long as what was protected was publicly documented in full. Thus once the patent had run out, anyone could replicate it from the patent document.
But then the chemical process side used to argue for a quasi-software patent in court, because the patent described a computer monitored mixing process. And thus the ball got rolling.
Thing is though that 20 years is a very long time when we are talking software. By the time the RSA patent ran out, the algorithm described was largely obsolete.
On top of that we have gotten a mass of patents that are so generic in terminology, that even if they describe something mechanical they can potentially be applied to something done in software.
Not that patents have not been a problem even before computers. Serious refinements of the steam engine for example didn't happen until after the initial patent ran out.
Similarly Smith and Weston sat on their refinements for the Colt revolver until the patent ran out.
> Patents started out as a 20 year protection on mechanical mechanisms or chemical processes as long as what was protected was publicly documented in full.
1) Patents are not an American invention. England had them before, and the Romans before that.
2) I'll assume you implied U.S. patents. The Founders regarded patents so highly that they wrote them into the U.S. Constitution. It was written generically and not limited or fixed to only "mechanical or chemical" but rather "to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries".
> Thing is though that 20 years is a very long time when we are talking software. By the time the RSA patent ran out, the algorithm described was largely obsolete.
RSA patent expired nearly 20 years ago yet RSA is still used today. For example, the public key used to secure https://news.ycombinator.com is RSA.
> Not that patents have not been a problem even before computers. Serious refinements of the steam engine for example didn't happen until after the initial patent ran out.
>
> Similarly Smith and Weston sat on their refinements for the Colt revolver until the patent ran out.
The myth is that patents block innovation. The reality is that blocking someone from doing something incentives them to find another way to do it. Afterall, if all you want to do is copy then how is that "blocking innovation"?
and we keep finding that outside of the labor theory of value (and he may not even have been wrong as much as overstating the importance of labor) ol' Marx was right on the money...
This just read like a bunch of "I think" and "it might" instead of "I know" and "it will." So, stating that crony capitalism is hurting regular capitalism doesn't do anything except make people attack an idea instead of facts.
And focusing on the financial industry might make you feel good because it's easy to say "wall street..." and everyone joins in on the bitch fest. It's a ton of conjecture and hypothesizing as to why business is failing, but to make it sound like one industry is just banking cash while providing nothing, is a disservice to all the people that work in that industry.
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[ 3.3 ms ] story [ 296 ms ] threadAs the competition heats up and providers become more efficient, I actually expect prices to go down even further.
If you look at operational costs per se, and licensing fees in a scenario like that, you're missing a huge proportion of the most threatening costs. Consider hospitals, for example, and recent problems with ransoming electronic health system data.
What concerns me with SaaS is that the biggest costs are very catastrophic or serious risks (like lock-in dependencies, or hacking due to monocultures--by the way, is that a formal, modeled concept in computer security, like it is in agriculture? The vulnerability of a market to "infection" due to monocultures?) that are maybe high probability over a very long-term period, but very low over a short-term period, and hidden.
You could move all new correspondence to a new (eg: on premises) system - but you'd have to keep paying to retain the same access to your business history.
Take any of the many business/crm-apps, where there's no clear migration path (you'd want both history and business process rules) - and it's easy to see how SaaS might easily facilitate "rent extraction"?
As others have mentioned the problem isn't unique to SaaS - but with an on premise solution, you might be able to move some terabytes of data by simply moving some physical drives - or at least have local access via you SAN. With a cloud provider, many businesses would struggle to get at the data at a higher rate than 100mbps even with the help of the SaaS provider.
And there's often no option to keep access to "old" system/data without paying rent, unlike some on premise solution (keep the old system, on it's own network segment, ticking along for historical records (or: in a VM).
SaaS is indicative of greater concentration and the possibility of oligopoly, though. I think it's only a matter of time before the cloud platforms begin coordinating price rises beyond the value they provide.
If they try to regulate on-premise software then it's time to break the glass.
Look at Oracle.
And that's not a problem specific to SAAS.
Good luck getting 1-10 Gpbs data transfer from most public SaaS to your own datacenter without having to pay over and above your current fee for Internet access (eg: have a look at what it costs to get just a TB data out of S3 -- on any budget (or prime) dedicated provider, 10-50 TB of data would be included - per month.
However, as a software developer, calling it rent-extraction glosses over architectural differences and value derived from not having servers tucked away in an office closet. Flexibility and capacity on the server-end, as well as huge benefits of software distribution over web-browser reducing support costs. I derive a ton of value in never having to drive to a data-center and paying EC2 by hours-used seems reasonable since there is actually a server (albeit virtual) running for my money.
However, it's certainly rent-extraction when the only thing thats going on via the Internet is a licensing check.
Adobe Photoshop switched to the cloud model, so graphic designers now pay 30-$70/month for the entirety of their career. Yeah it's always an up to date version, but before the shift to a SaaS model, it was some $600 but it would keep working for years if you couldn't scrape together the cash for the latest version.
If they are generating profits, then they are doing something valuable. Are they sucking cash out of the government? Maybe, but it's valuable to somebody. You want to fix it? Don't try to fix the entrepreneurs, fix the goddamn government.
Most of these Comcast-type rent-seekers are complete and total assholes, I agree, but I'm not about to hold my breath waiting for them to stop going where the money is.
The point is whether it grows useful economic activity, or whether it actively slows useful economic activity.
Did you read the article, because that's its point. Last sentence:
Let's hope legislators can put aside the rancor of this hyperpartisan age and work to end the favoritism that gives well-connected businesses an unwarranted advantage.
Starting out with a completely unsupported assertion, eh? Bold strategy!
"So what do we make here, Frank?"
"What d'you mean? We make money."
"Right, yes, but what do we actually create?"
"We create wealth."
"Okay, but like, what do we produce, what do we manufacture, what do we design?"
"Manufacture? Leave that to the c&$%^s, we produce profit!"
Incidentally, starting to order parts a few hundred at a time from places like Taobao for various projects, I'm noticing that there are a lot of companies who just do that and slap a 500% markup on Amazon. Want a 6-pack of $0.15 mini-breadboards or a few dozen $0.05 jumper wires? Sure, $5.99 with prime shipping. What a steal!
Bulk ordering has always been an accepted way to pay less in unit costs, but it helps move the risk from the manufacturer/wholesaler to the buyer. If you want to take the inventory risk, then you charge the customers for doing so, and the wholesaler cuts you a deal for reducing their risk in a concomitant way.
Also, remember that most of that "markup" is for shipping, Amazon fees, and taxes. You can't ship those items for less than $2 even with Amazon FBA (remember, with Prime its the seller whos paying for shipping, not magic Amazon elves). The Taobao guy paid $0.18 to ship the same from China (there's a long story about how that happened too).
After paying all that, the guy selling that stuff for $6 probably made $0.40 on the deal. A steal indeed.
Edit: But you're right, of course. I do still buy those packs when I want them soon.
1. There are plenty of US Government (i.e. tax payer funded) programs to help people get "normal" ideas off the ground. From grants, to loans, the money is there. It's hard to imagine someone destined for success being stopped by not being able to raise $10k. $10k in credit card debt is nothing for the average american.
2. Success breeds success. If you're rich, you may already have your own skin in the game, or you may have proven yourself capable of using capital effectively.
https://www.valuepenguin.com/average-credit-card-debt
You've obviously never tried this. It would be a full-time job for a year to even have a shot at these supposed grants. The money is absolutely not there the way you claim.
The younger you are the less credit history you have which makes getting loans almost impossible unless you already have collateral to pledge against the loan.
Oh and $10k is often not nearly enough capital to start a business since you need to pay your own bills while you bootstrap the business. We get away with it in tech often because we have the luxury of working after-hours as a side-project to start with. A customer-facing business can't do that.
How bad do you want to start a business?
How long do you think startup founders work before having something that is worthy for seed funding?
Just as anti-trust laws are necessary, there will be drives for measures to encourage and even force companies to put their cash piles to use. Cash is the life of an economy, it needs to flow and flow.
>"Because it’s just a transfer from one person to another, rent doesn’t necessarily make an economy less efficient -- it’s just often unfair. "
I would argue that "rent" does make the market more inefficient. The more rent these companies can extract from consumers the larger their lobbying budget and the more campaign donations they can make at all level of government.
Political lobbying is the biggest and most effective tool used by crony capitalists.
Can you elaborate on this? I am curious to hear why those two things - a free market and AI are mutually exclusive.
But your point about further concentrating power and enabling further regulatory capture, and hence, more rents, is an important one.
Compare that to scam-preneurs behind startups like Theranos or uBeam, or vc-hustle-preneurs behind is-this-satire startups like Juicero, June, etc.
https://skeptics.stackexchange.com/questions/22335/are-there...
So, for instance, software is protected by patents, oil and gas is protected by mineral rights, drugs are protected by patent law, entertainment is protected by IP rights, and so on.
In so far as there is competition, it often arises when the rent-seeking motivates people to disrupt the government protection by making it useless.
In software, people have lived with that since the beginning because it moves so fast. But even in slow moving fields like energy, we see new tech rendering the old protections less important.
I am not saying society has not paid a steep price for rent seeking behavior but that it has been part and parcel of all capitalism forever, and not unique to the American experience.
"First, let's assume the cow is a sphere".
It is worse than that, because at least physics is validated by experimental data.
Much of (macro in particular) Economics is a set of axioms that are seldom predictive.
In a previous age, these would be moral principles and social norms - now it's political beliefs.
With no basis in reality, we've brainwashed people to believe the bottom lines of the elite are to be protected. That's the outcome sought of our educational system.
It fascinates me how, on the one hand, we complain about how lazy people are. How much inducement the proles need. "Oh they're just lazy. Push em harder."
If we need to push people that hard, perhaps "economy of effort" is built into the species. It's a weird cognitive dissonance.
"They want something for nothing! But I want to maintain my elite status built upon your efforts!"
But that challenges the basis of elite power. If we all quit producing for them, they lose. So we're "induced to produce" under the constraints they define: no food, shelter, healthcare.
By some measures, all of which fail to account for the fact that relative deprivation is a substantial source of experienced disutility.
That really depends on the definition of »works«. If one is satisfied with the people doing the heavy lifting being a bit better off while a few overseeing everything are extremely better off, yes, then it works.
There are a other systems that we have at least some historical evidence to show will produce even better outcomes for the majority.
The problem is those are undermined almost as quickly as they are brought up. See post about brainwashing people to protect the bottom line.
People point to places like Venezuela and USSR as examples of socialism not working, for example. While ignoring that both those states were not managed by the working class (as classical socialism typically calls for), but elite masters, their bank rollers, and external forces pushing them to abandon their ways for western capitalism (economic sanctions, cutting off access to necessary trade).
Not only that, we fail to realize the continuing incentives for them to act in that way, even when acting as "researchers". Here is a highly relevant Propublica investigative piece on academic economists as consultants: https://www.propublica.org/article/these-professors-make-mor...
No one would argue that astronomy isn't a science. Traditional university macroeconomics is a different beast. Comparison with astrology is apt.
"There is a story that has been going around about a physicist, a chemist, and an economist who were stranded on a desert island with no implements and a can of food. The physicist and the chemist each devised an ingenious mechanism for getting the can open; the economist merely said, 'Assume we have a can opener'!"[1]
Yanis Varoufakis, after the drama surrounding his (very) brief term as Greek's Minister of Finance describes[2] the problem simply and plainly: "Understanding economics well impedes an understanding the economy." His continued explanation why [ibid] might be the ultimate example of how easy it is to sell bullshit as long as you dress it up properly with the trappings of math/stat/logic.
[1] https://en.wikipedia.org/wiki/Assume_a_can_opener
[2] https://www.youtube.com/watch?v=L5AUAIzciLE#t=1355
This gets weird with software businesses as these companies tend to insulate from losses relatively well. This coupled with the fact that in some markets there is no way to generate additional value without a huge public investment happening upstream (utilities) is why a lot of VC goes so crazy for it. Keeping the cash flowing is the only way to avoid being taxed profusely – All you can do in some situations is raise rents and spend hastily, for better or for worse.
I get that there are abuses and even grotesque distortions, but that theory is fully and clearly false. Yes, you should have protection, no you should not have abusive protecting as it exists right now in basically every single field and sector.
No, you should not be allowed to lease mineral rights and then just sit on them for free. No you should not be able to copyright something essentially forever. No, patents should not even be awarded for basic inevitable things that a corporations simply had the financial ability to copyright first. No, you should not be able to keep exponential gains from the value and environment a society created without also paying exponential taxes to compensate and contribute due to that success. But there has to be a fundamental right and ability to keep the value from what one has earned and created. That may seem an anathema to the recent generation infested by communism and ideologically subverted by islam, but the alternative is the collapse of society.
It's being narrowed, but it still exists. Until rather recently many courts would recognize "do well understood process X, but on a computer" as patentable.
http://blogs.gartner.com/doug-laney/patents-for-algorithms-h...
https://news.ycombinator.com/item?id=8310084
http://www.legalmatch.com/law-library/article/what-cant-be-p...
You Hit the nail right on the head. I believe, this is the root of all the problems mentioned in this thread.
I have a hard time imagining tech entreprenuers are the "wrong kind."
They may disrupt by circumventing the law, but I don't buy the argument that they're not producing something of value in return.
Imagine you created an app that allowed Gay and Lesbian couples plan their wedding, and you operated in states that haven't legalized same-sex marriage.
Are you stealing from the commons?
Just because a law exists on the books, doesn't mean it's a just law.
That always remember me, how, when you argue with a communist, frequently those examples that you bring to the conversation are never "real communism".
Looking at the stock market, there are few IPOs, and after IPO, being public only provides access to limited access vis issuance of new stock...
Some capital flows to VCs, but it seems the more capital flows to large VC funds, the more the criteria becomes look for a sure thing and filter more for large scale opportunities - all while small scale fundamental development receives poor access to the vast amount of capital sloshing around (and settling in places like unused real estate...).
To me it seems that investment in direct development of productive tech and/or process is competing against profitability of short term financial manipulation - and causing a drop in overall delivery of new productivity improvements to the general economy. But even further, the very financial industry isn't really creating or maintaining a channel for money to open opportunities to develop that kind of company - certainly not a large scale needed or possible today.
This is somewhat controversial to posit, but I believe the corruption in the financial industry is extraordinarily entrenched because of the Fed. Before you call me a lunatic, smart and good people from Aaron Schwartz to Sanders have said things like this: that it should be eliminated, or that it is nothing more than socialism for the rich while hurting the poor.
The most obvious problem with it is that it creates astronomical moral hazard by protecting and guaranteeing the big banks.
After the Fin Crisis Krugman was talking a lot about making banking boring again, and run like utility companies. You can still have VCs, hedge funds, or whatever you want--but it's not funded by and guaranteed with anything other than the money you put in it, and it's separated from vanilla banking, ie Glass Steagall.
But then we had Dodd Frank and sometime after Krugman never went back to talking about that again.
Unfortunately, the dogma about the Fed is so entrenched in mainstream economics--so much so that speaking against it is immediately written-off.
Nearly 1.5 centuries ago, all the banks were actually betting against Lincoln to lose his war. So he used the constitutionally-granted right to print the nation's own currency, and won the war with it. The point is, there's no reason we can't do this if we really wanted to (and if you care about poor and working class, and eliminating cronyism from the world, you should want to).
You're very close to being a lunatic and conspiracy theorist, sir.
"This is somewhat controversial to posit, but I believe the corruption in the financial industry is extraordinarily entrenched because of the Fed."
After TARP and bailouts it's not controversial at all.
Allowing banks to merge and become huge conglomerates, the elimination of Glass-Stegal (which eliminated the distinction between normal banks and investment banks), and lax regulation of derivatives / dark money are all very direct causes.
However while you may not agree the Fed is a problem, unfortunately the Fed and central banking has an aura of group think around it that is usually only available for religious groups. I mean the fundamental concept of the fed's mandate: price stability and employment targeting--yea they sound great, but at what point do you question the ability to create value out of thin air just by playing with money. It is by definition financial alchemy.
And yes, I'm already familiar with Keynes' arguments in his General Theory, which is the historical work that set the precedent for this.
Guaranteeing the big banks can't fail is how we keep the economy going. If a bank fails, everyone that is owed money by that bank fails too. Is that acceptable? Would you be fine with your employer going belly up because the bank they rely on can't pay out money?
Just to address the above poster: vanilla banking could still be guaranteed. By contrast, in essence the Fed is guaranteeing the banks' risky investments.
The US situation of those bailouts and "too big to fail" is certainly problematic, but most people pushing that line are really against fractional reserves, but those don't really seem to have the effects people attribute to them. (And if they do have that effect, it's the central bank that sets their fraction, so it's entirely a matter of policy, not structure.)
Central banks do have the power of controlling the amount of money in circulation on most countries, what does indirectly impact important interest rates. But the US is an exception here, as the Fed decided long ago to let fractional reserves run as low as the banks are deciding the fractions on practice, thus abiding from any control.
I believe the comment about socialism for the rich -- here is his NYT op-ed on the Fed: https://www.nytimes.com/2015/12/23/opinion/bernie-sanders-to...
As for VC companies controlling the cash, that's not the whole picture. Being dependent on "free cash" from VC's is a pretty poor way of conducting business. It isn't all about the money - it's the product. VCs don't want to invest in junk just because one person is ecstatic about their idea. They really do want more sure things. A TON of VCs were hurt back in the early 2000's because companies were producing NADA and IPO-ing all the time. A lot of trust was lost.
Part of that is large companies (with a handful of exceptions) perform optimization focused on accounting measurements and predictions to maximize their existing margins. This makes perfect logical measurable sense, except that over multiple decades of refined MBA practices, it makes almost all them good some local optimization, and increasingly bad at new ventures(or fundamentally changing their approach to existing ventures). Then to break out of that local optimization, some increased investment is required that large companies are punished for if/when their profit margin drops.
So local optimizations are explored to a endpoint, and capital starts chasing higher returns - we get rentier behivior, or capital flows into bubble assets that pop up or get chased around the world in various categories - all while produtivity and growth slowly flatlines... or at least misses its potential.
This has been recognized for a while w.r.t large companies, and so the generally accepted approach is for many of them to acquire new companies to get new capability. So we get to VCs. They don't want to invest in junk, but when VCs apply quantitative filters to because they want a sure thing investment - but moving the same quantitive model to uncertain ventures just moves that some of same 'large company' problem to an earlier stage. I'm not saying to get rid of VCs, they perform a reasonable function now, but something feels off.
I'll leave off a whole discussion of where new companies can come from outside of VCs, but there are some factors holding that back (and others helping), but in general it think that's in decline and that our larger markets depended on that creation more than they realize.
So to me, it feels like the overall financial system is missing opportunities - and that part is possibly hinted at in data, at least at the gross productivity growth falloff of the economy.
It's fine to have a moral code. It's fine to be a capitalist. Just don't expect capitalism to always fit in a moral code.
I think the article's main unspoken gripe is about bad actors (folks acting in a non-altruistic way) in human society in general.
The corporations aren't blameless here.
[1] http://billmoyers.com/content/the-powell-memo-a-call-to-arms...
More tax, of course, will worsen this problem as government spending on large companies only is exactly the problem.
In the olden days, the main force balancing this was taxation. Even if you look at it as a purely zero-sum game, any money paid by the very wealthy had to go somewhere, and that somewhere was the masses. This didn't sit right with the very wealthy and they rigged the system to such a degree that I've never seen an appreciable tax increase in my lifetime, even in the face of trillion dollar deficits and the loss of the middle class in the US. Mathematically, trickle-down economics has given us just exactly the system it was designed to. I mourn for the millions (billions) of people left out, but for whatever reason a lot of people don’t even see them.
Maybe the great problem of our time is ignorance..
In the agricultural age, if you fucked up a harvest, you and your family could starve.
Before agriculture, if you fucked up a hunt, your whole kin-clan could starve.
Nowadays, if you fuck up the housing market, and millions of people go bankrupt, nothing gets broken enough to turn a concern into a crisis, so we never fix anything, and nothing ever changes.
I think an intuitive grasp of this is why so many conservatives have a natural disdain for welfare. But I think their disdain for welfare at the individual level is misplaced. The isolation of the most powerful and largest scale systems from consequences at the macro level is a far larger problem than the isolation of individuals from consequences at the micro level. Welfare can indeed become addictive and lead to a "welfare class," but these are largely powerless and relatively poor people who may be somewhat of a burden on society but do little damage otherwise. The real danger is a rich powerful professional welfare class that makes big ugly mistakes and is isolated from the consequences of these by power and abundance.
The real active harm comes when you get a professional class that does very bad things. These can be mistakes, like the total collapse of the economy in 2008, or they can be intentional crimes. Either way if there are no consequences then no correction gets applied and the problem gets worse.
A large scale wealthy civilization can absorb a tremendous amount of official incompetence and misconduct.
[1] https://steveblank.com/secret-history/
Uber is going to fail. The F35 is going to fail. Throwing good money after bad will stave off that day of reckoning but then only make it a worse accounting.
It reminds me of the sci fi novels Dread Empire's Fall, in which the galactic civilization's ship fleet has never fought a battle in thousands of years, so nobody can actually know how to do it, and they don't know if a certain tactic, ship, etc is really a failure or not.
A different source ("Armies South, Armies North" by Alan Axelrod, also author of the more compellingly-named "Generals South, Generals North") provides more detail, including names: Winfield Scott, William Harney, David Twiggs, and John Wool. This and other sources also include Joseph Johnston, then quartermaster general of the US Army, as a fifth general. There were also two more brevetted generals: Albert Johnston (no relation to Joseph) and Newman Clarke.
Maj. Gen. Winfield Scott (the commanding general of the US Army) was 74 years old and indeed unable to ride a horse. However, all seven of the generals had seen combat. In particular, four served in the War of 1812, all served in the Mexican-American War, and all served in the Indian Wars. With the exception of Joseph Johnston, all of them even served in war as generals (at least brevet, but usually full).
If we were to engage in universal welfare, we'd remove a false feedback signal and allow ourselves to focus on what actually creates value rather than what pays rent, food, essential health care and education.
I don't think there is much debate that not giving people access to those things is bad. But we seem strangely averse to just making them part of the core of our society.
A high rate / corp tax rate that's proportional to an objective inequality measure?
Trouble is taxation is avoided but it is the only thing that really stings.
To borrow your example: In agricultural age, if you fucked up harvest your family starves. Today, if you fuck up the housing market, thousand of families end up in bankrupcy, and tens of thousands of small investors loose their savings... but you do not personally know any of them, so you wont even feel shame when you cash-in that million dollar yearly bonus.
There's historic precedent for that kind of divorce between actions and consequences, and it is not pretty. There's a certain French doctor you should google: his name's Josheph Guillotin.
I'm not sure what analogy you are going for. Guillotin did not invent the guillotine, and only advertised it as a more humane way of execution. He was opposed to the death penalty.
(This is, of course, a gross oversimplification of a complex historical topic. Please feel free to correct me.)
The actual inventor of the guillotine is one Antoine Louis [1].
1: https://en.wikipedia.org/wiki/Antoine_Louis
A better example would be the decision to go to war in Iraq. The people who made that decision didn't have to send their own children and they could enact large tax cuts for themselves in addition at the same time. So they got their war but didn't feel any consequence.
Which is what I expected to hint the the mention of Guillotin: the French Revolution. That did not happend because of social injustice. No human society has ever been 100% fair, -and probably none will, ever,- and most people is able to accept that without making a fuss about it. The problem with the Ancien Regime back then, -which is the same problem with financial elites nowadays,- is that they have become increasingly detached from the realities of their decisions for the rank and file, even to the point of cluelessness.
What? Taxation in the US has never been higher, you are a fucking moron
then throw in we are bombarded every day continuously to buy this,buy that, go here, do that. We get told every day of wonderful stuff available for pennies or dollars a day. we have tv shows and advertisements implying status for owning certain products.
besides managing their money we fail to teach kids in school just how well marketing manipulates them into believing what is needed to have them spend money.
still regulation has become the go to tool to prevent competition and when that doesn't work the fear of exploitation of the poor or under privileged is brought to the foreground.
the simple fact is we have too much government for it to be effective for the regular person, it only serves those who can afford to operate on its level
And what's the solution? Deregulation? Wouldn't that just make consumers even more vulnerable to the predations of the powerful? In fact, it seems that powerful interests generally lobby for more regulation, not less, so I'm not really sure what your point is here.
And your statement about "too much government" is vague and abstract. How exactly is "too much government" contributing to wealth and power inequality. Historically, it has been government intervention that has acted as a counterweight to concentrated power.
In fact, people who have been complaining about too much government became influential in public policy about the EXACT time a lot of these trends in wealth inequality started (the late 1970s).
Sorry to be so critical, but I think a major contributor to our problems is people who make blanket statements about that are vague and imprecise and do not articulate any real policy goals.
Another example is how LA Sanitation continued to charge myself and thousands of other apartment dwellers the monthly flat rate, despite our landlord hiring a private service, and the fact that the city collected our cans and the city trucks didn't collect trash. They refused to refund my money, citing a City Council Resolution on the matter. The city was eventually sued and this policy was repealed. If I refused to pay, since DWP does the billing for Sanitation, my electrical service would have been terminated.
Don't even get me started on CA's solution to Sacramento's refusal to curtail spending by passing a $.20/gallon gasoline tax. CA residents already pay more gas tax than most other states.
And last but certainly not least, CA Senate Bill 18/2017 which thankfully was crushed by activists. This "Children's Bill of Rights" did not increase safety nor the welfare of children in general. It did however insinuate the State of California as your child's new parent, whilst mandating a new level of services to be provided by the billionaire author of the bill, Jim Steyer (Common Sense Media). Funded by your tax dollars, of course.
How do you figure? Between 1936 and 1989, the tax rate for the top income bracket varied between 63% and 91%.
https://qz.com/74271/income-tax-rates-since-1913/
A progressive tax rate is one that increases as the taxable amount increases.
So, I could be missing something, but I don't see how your post addresses my response. Saying it's meaningless doesn't change the definition of a progressive tax rate.
https://en.wikipedia.org/wiki/Progressive_tax
China creates their own debt free money as needed. The U.S government must borrow it. You ever notice how economic pundits have been predicting an economic crash in China for the last 30 years that never seems to come? It's because the government just endlessly bails out the economy in a debt-free way that never sticks the taxpayers with the bill.
That's.... not how it works. USA consumers purchase lots of imports from China, which causes massive flows of capital from the USA to China. China uses these capital flows to purchase treasuries from the USA which (in part) funds the federal deficit.
At no point is China just "creating debt-free money".
The exact same thing happens in other countries with large trade surpluses. Part of the reason for the Greek crisis was that Germany exports a lot of goods to Greece. This capital flow drives down the price of money (the interest rate) in Frankfurt and drives up the price of money in Athens. The Germans, seeing that they could get 1% at home or 7% in Greece (in the early 00's) then used the capital flows to purchase securities in Greece, such as bonds, CDOs and CDSs.
I didn't say debt free dollars. Of course China can't create dollars. I meant debt-free RMB.
- I don't know how old you are but both Clinton and Obama significantly increased taxes on the rich. Federal tax receipts as a % of GDP are fairly constant going back to WW2.
https://fred.stlouisfed.org/series/FYFRGDA188S
Further, not being static does not mean it was ever meaningfully increased. The rate from 1982 was higher than either Clinton or Obama rates. And 1982 was below the rate from 1932 to 1981. Compare US GDP growth and a high top marginal rate seems to promote growth, though there are many ways to slice and dice these numbers.
2) I think we mostly agree here. There have definitely been meaningful changes both up and down (on the order of 20%) over the years depending on both economic and political changes. However, when you look over a 50 year timespan (everything post WW2 basically), you don't really see a meaningful longitudinal change. To me this refutes the OPs point about taxation being meaningfully different in the "olden days."
PS: IMO, a ~1 to 2% AMT on all wealth per year would be incredibly beneficial. But, there is currently about zero chances of that ever happening.
I can't seem to find a relevant graph on fred.stlouisfed.org though. :(
The tax burden has basically gone opposite of what you imply. For example, the top 10% paid 49% of taxes in 1980 and paid 70% in 2014. (http://www.ntu.org/foundation/page/who-pays-income-taxes) The "top marginal rate" means very little by itself. What matters is the effective rate which takes into account the credits/deductions that are allowed, the other lower tax rates, etc.
>...Compare US GDP growth and a high top marginal rate seems to promote growth,
Those high marginal rates of the 1950's did not bring in some giant windfall to the government or somehow promote growth of GDP. Most economists are opposed to very high marginal tax rates due to the inefficiencies they introduce - compensation being moved to non-salary, money wasted on CPAs, lawyers and lobbying congress for special deductions, dead weight losses for economic activity that isn't done, etc.
Further, the top marginal tax rate has little to do with the top 10% of all incomes.
PS: Yes, in theory they where a bad idea. However, in practice they seem to have been a net benefit. Either though reducing the rent seeking behavior of capital, or alternatively because the middle class's spending is mass producible. (You can scale iPhones, you can't scale 50,000+$ watches because they are not intended to be scaled.)
http://data.worldbank.org/indicator/SI.DST.10TH.10?locations... http://www.oecd.org/els/soc/growingunequalincomedistribution...
>...Further, the top marginal tax rate has little to do with the top 10% of all incomes.
As I have tried to explain in the previous comment, the top marginal rate means very little.
>...Yes, in theory they where a bad idea. However, in practice they seem to have been a net benefit.
In reality, they were a bad idea. It should be a hint that you don't see mainstream economists suggesting we return to them. Politicians find them a good talking point since everyone likes the idea of someone else paying more taxes, but you don't see economists suggesting it.
>...Either though reducing the rent seeking behavior of capital, or alternatively because the middle class's spending is mass producible. (You can scale iPhones, you can't scale 50,000+$ watches because they are not intended to be scaled.)
How exactly does a confiscatory rate reduce the rent seeking behavior of capital - that seems like a different issue. In reality, high rates encourage money to be spent in non-productive ways to influence congress to carve out special tax deductions/credits. Enough loopholes were in the old tax code that some politically well connected wealthy people sometimes paid no taxes - this is why the AMT was created.
So, yes you can get rather different looking charts from what I said. But, honestly I don't feel like getting into a debate about this stuff.
Economic inequality has collected a huge amount of capital into very few hands that ultimately don't seem to know how to apply it productively over the whole system.
These were world changing.
But now we're mostly done doing that and are now in the refinement stage on most technologies where we spend an enormous amount of effort to get, for example, 5% more fuel efficient airplanes. Physics is tough.
Maybe we'll have some sort of revolutionary breakthroughs in the future that lead to another era of rapid invention but until that happens we'll continue plodding along building a slightly more efficient world instead of a transformative one.
This is really just one hypothesis though. The real answer is that no one really knows for sure.
But I also somewhat discount that the rising difficulty level is really why more breakthroughs aren't happening, if that were the case one would see larger and larger accumulations of ventures committing capital and failing (or at least operating). I think the real reason is that not enough capital even tries to attack these problems because they're longer term and difficult to quantify the return. The irony is that I suspect that we get a smaller overall growth by routing capital to mostly knowable investment returns over a larger proportion going to "crazy" non-calculable investments. So, we end up waiting for the die-rolls to match up people like Elon Musk with sufficient fortunes for truly big advancements, and an economic system that mucks around with financial engineering instead of relentlessly and systematically advancing a wide range of real-world applied engineering on big problems.
By squeezing pennies out of lots of things, we miss the dollars that could make positive change.
Look at corporate IT as The gold standard of fail. We design complex systems to allow them to be sourced out (is ITIL/ITSM), and then are surprised when we have built a monstrosity that doesn't really work.
You see this type of thinking everywhere. I had an ancient popcorn popper called the "Whirly Pop" that I got in the 90s, which was basically an aluminum pan with a wood handle and metal gear for swirling popcorn on the stove. It recently broke and I bought a replacement -- a product inferior in every way with a plastic handle that will burn your hand, a plastic gear that will melt, and a metal pan and cover so thin that bent it while cleaning with a sponge.
This then results in the need for increased scale, increased productivity, and indeed, the need for innovation disappearing altogether.
I had a friend who ran a successful manufacturing company who was forced to shut down production... not because of competition or cost but because of the inability to get working capital. As the regional banks in our region got swallowed up, the local bankers who understood cyclical businesses went away.
1) we regulated that banks have access to capital (ie. we created the FED that will loan almost unlimited amounts to them. And of course we bailed out "too-big-to-fail")
2) we outlawed that banks loan money to anyone but the government, or very big companies. After all, since they always lost the money, we've imposed more and more rules about who they can lend to. (always lost it, I might add, by lending it to government or big companies when we're talking large amounts, but that is conveniently ignored of course).
Of course who they can lend it to means effectively not you or me.
What? The size of gov't has only increased over time. That's money being pulled out of the economy through taxes. If anything redistribution has drastically increased over time.
That money goes straight back into the economy.
My comment was taxation is higher now than it's ever been.
https://fred.stlouisfed.org/series/FYFRGDA188S
Let's see your data?
Wealthy people don't think outside the box enough, they just invest money with their friends who are probably already wealthy themselves. This widens the class gap and is bad for the economy.
For example. When insurance companies jack-up rates or impose customer "unfriendly" terms, they are not acting within the "free market." They are exploiting "crony'esque" rules that limit competition by restricting insurance companies from competing across state-lines.
Opportunists are the ones who thrive when things are rigged. They can't survive on their own.
But yes, many capitalists (and non-capitalists alike) "buy" regulatory advantages.
Some leverage their dollars (buying) Some leverage their numbers (voting)
These groups enable eachother. Motives range from "defense" (virtuous) to "offense" (sinister).
You will find no practical solution to this problem other than starving the beast (decentralizing power away from government).
All this will lead to is dictatorship by the wealthy. I much prefer our current system, as flawed as it is, to corporate fascism.
Current system:
1) Big companies pay minimal or negative taxes. Small companies are taxed at the individual rate (and increasing). If Company A pays 0% at top bracket, and Company B pays 50%, Company B is unlikely to out-compete Company A.
Read: our tax system creates "monopolies."
2) Our current system allows big companies to write or shape gov regulations, making compliance only possible for the largest companies. Prohibiting health ins cos from selling across state lines is an example.
Read: overreaching laws and regulations create "monopolies."
3) Our current system provides a safety net to large companies, who have leveraged #1 and #2 above in order to become "systemic." This gives them a greater tolerance for risk, "counterbalancing" regulations notwithstanding.
Read: death spiral
Want to fight "corporate fascism?"
Shrink a "corporate fascist's" source of power.
Their power comes not from creating superior products or services, and delivering these at a superior price. It comes from their ability to manipulate corrupt or dumb politicians, bureaucrats, and voters.
Again, you will find no practical solution to this problem other than starving the beast.
2. Restated, monopolies earn more short term profits than companies in a competitive market.
3. stock investors look to maximize short term profits.
4. stock investors are offering a premium for monopolistic companies.
5. The stock market is rewarding this behavior without government intervention.
"starving the beast" will just feed another beast.
2. Over long-term, probably true. In short-term, not true. Often monopolies are formed and initially sustained by keeping prices aggressively low.
3. If you said stock investors look to maximize profits, i'd agree. Short-term? Not necessarily. Value investors like Warren Buffet are not motivated by short-term profits.
4. Stock investors offer a premium for profitable companies who can protect themselves against "threats." Government protection is one such way, I guess. Building sustainable competitive advantage is another (merit-based).
5. Your thesis rests on a premise that the government doesn't intervene in the stock market? Really? Have you heard of quantitative easing?
If you don't like the fact that big companies have a lot of power, I suggest you spend time thinking about why they have so much power, before you randomly proscribe solutions.
stock investors are offering a premium for monopolistic companies and rational companies management will combine companies to eventually become a monopoly to maximize profits and stockholder value.
My basic argument is the only reason companies don't more aggressively try to become monopolies is because government regulation(anti-trust laws) deter it.
Am I arguing for more corporate welfare absolutely not. Am I arguing for more regulation generally no. more effective regulation yes. More enforcement of current regulation yes. Both of which require more qualified effective people, which usually involves investment.
For having such a good understanding of market economic your solution is a little half baked.
The problem with this country everyone wants more or less taxes when the focus should be on more effective, transparent use of the countries funds.
There are somethings you can't just throw money at and it will fix it. Well, that's true in the negative as well.
It's a sincere question. I can't think of a single example.
Controlling supply or distribution, network effects are natural ways to get to a monopoly.
"but monopolies are also created through natural means and that still doesn't change my general premise"
I'm just looking for an example of a single monopoly that fits your statement.
is a "rent seeker" ?
Citation needed.
Smart, hard-working people who consistently exercise good judgement, prefer merit-based systems.
They do better in merit-based systems than systems that reward those who are born lucky, who have access, or who cheat and lie.
Is a citation really needed?
Yes the rational choice model is well-established to be false.
They may act in their perceived self-interest, but rational self-interest involves a lot more than that.
Citation? I hear this a lot, and it seems to stem from a misunderstanding of the word "rational" in this context, which I believe is supposed to mean "perceived" - how else would you objectively define rational?
Is it rational for a thirsting person to prefer gatorade to water (it is for them, if that's the choice they want to make)? Do you have more perfect information to justify your opinion on the matter as more "rational"?
“Rationality” refers specifically to this mathematical optimization.
Free markets lead to regulatory capture over time.
See: "Fortune 500 firms in 1955 vs. 2014; 88% are gone." If the largest companies were truly monopolies...
http://www.aei.org/publication/fortune-500-firms-in-1955-vs-...
When I read "the wrong kind of entrepreneurs flourish in America" it surprises me to not see: "the wrong kind of entrepreneurs flourishes in America". I understand that "kind" should be the subject of the sentence, not the entrepreneurs. I have seen this construct several times (e.g. "this type of errors are very common", etc) and I'm wondering if it's correct, or simply one of these errors that are so common that they become the de facto rule.
A related thing I've noticed is that in British English, they refer to companies as plural. For example: "Google are going to acquire company X", whereas in American English, you usually see: "Google is going to acquire company X."
It would be better to say "entrepreneurs of the wrong kind flourish in America" - but that might sound odd or overly formal to everyday speakers.
It's similar to the rule about ending your sentence in a preposition. It's incorrect, but it also sounds more natural in many instances.
How it works: Regulations that are supposed to protect the public end up being a cudgel with which to beat down small companies that can't afford to deal with an onslaught of often unjustified demands for regulatory compliance. When the only companies who can afford to comply are the big ones, it squeezes out new market entrants. This decreases competition. It's bad for all but a handful of people.
How it should work: Generally (not always), there should be a direct relationship between company size and the amount of regulations which apply (i.e. more regulations as you get bigger, fewer if you're small).
We need a heavy injection of honesty into our regulatory agencies. Restoring balance to the system would unleash a wave of economic growth.
When I was shilling for Senator Sanders in 2015 and 2016, I often said that I was equally excited for both his policies and the fact that he would make a lot of good appointments, which would clean a lot of crap out the rent-seeking regulatory system, which would be great for the economy.
Unfortunately, we're going to have to wait. But I hope this gets on more people's radars as one of the reasons why the middle class has been shrinking and real incomes going down for four straight decades.
It doesn't matter if insurance is private or public if the costs of healthcare are too high. I don't see why there is no compromise. It's very bad for the future of this country.
If you're going to go from the jobs angle - let me pose a question:
Today - in 2017 - not 100 years ago, not 40 years ago, but today - now.
Does unregulated innovation create more, better jobs then it destroys?
Do you draw a distinction between regulatory 'innovation' (Miscategorizing employees, breaking laws to increase your margins, skirting training or safety requirements, introducing conflicts of interest), and actual innovation (We can make more, or better stuff)?
Do you think they are equally valuable?
What is the ratio in market cap between these two kinds of innovations?
Most of the jobs that pay well are zero-sum games. Finance, tech, law. Even medicine and pharmaceuticals are becoming zero-sum games (e.g companies boosting drug prices because it's easier than inventing new ones).
People have become cynical and distrustful towards each other and the system. We have lost touch with our old values.
I'm surprised that society can continue to function under these conditions.
In this zero-sum economy, we are all enemies of each other.
Are you serious? Do you know how much mankind has accomplished since 1917?
As a westerner, I am much worse off than my parents were and so my perception of life is very cynical. The lifestyle that I had in my childhood and the idea of life which my parents projected onto me was so much better than today's reality. It's quite a depressing feeling.
OK, let's assume you're 30 and your parents were ~30 when they had you. That means your parents spent their 15-30's during the 1970's. What were the 1970's like in the US (yes, I'm assuming you're American)?
Absolute crap.
Post-Vietnam with everyone wondering whether or not the US was done as a superpower. A humiliating withdrawal from a war that killed 50,000 Americans. Stagflation, with inflation in the teens and unemployment 3x what it is today. Want to buy a house? Sign on the dotted line for a 17% mortgage. Oil embargoes/energy crisis and line ups for gasoline. "General Malaise". Serious crime problems in cities and a decaying inner city. Race riots in recent memory. Watergate scandal and a disgraced President who relinquishes office.
I think it's silly to think our parents had it better.
If you want to read about rent seeking, read Peter Theil's "Zero to One". It's a manual on rent-seeking. It's all about how to create a monopoly.
Changing Government policy to reduce rent-seeking is very tough politically. Successful rent-seekers are the biggest political contributors. They pay to not have their income stream cut off.
[1] https://hbr.org/2017/06/is-america-encouraging-the-wrong-kin... [2] https://www.bls.gov/emp/ep_table_201.htm
Basic system theory 101 says if you work with and optimize a proxy instead of the true metric then you will always deviate from your true and intended path. Money is only a proxy for value and some people did not get the memo. You need some second and third order correction terms if you use proxies.
This is the classic, maybe the reason given to justify patents. The implication being that no one would bother innovating if patents didn't grant them rent for a time.
But I wonder if the reality is merely that different people, and different kinds of people, would innovate in a patent-free world.
Patents started out as a 20 year protection on mechanical mechanisms or chemical processes as long as what was protected was publicly documented in full. Thus once the patent had run out, anyone could replicate it from the patent document.
But then the chemical process side used to argue for a quasi-software patent in court, because the patent described a computer monitored mixing process. And thus the ball got rolling.
Thing is though that 20 years is a very long time when we are talking software. By the time the RSA patent ran out, the algorithm described was largely obsolete.
On top of that we have gotten a mass of patents that are so generic in terminology, that even if they describe something mechanical they can potentially be applied to something done in software.
Not that patents have not been a problem even before computers. Serious refinements of the steam engine for example didn't happen until after the initial patent ran out.
Similarly Smith and Weston sat on their refinements for the Colt revolver until the patent ran out.
1) Patents are not an American invention. England had them before, and the Romans before that.
2) I'll assume you implied U.S. patents. The Founders regarded patents so highly that they wrote them into the U.S. Constitution. It was written generically and not limited or fixed to only "mechanical or chemical" but rather "to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries".
> Thing is though that 20 years is a very long time when we are talking software. By the time the RSA patent ran out, the algorithm described was largely obsolete.
RSA patent expired nearly 20 years ago yet RSA is still used today. For example, the public key used to secure https://news.ycombinator.com is RSA.
> Not that patents have not been a problem even before computers. Serious refinements of the steam engine for example didn't happen until after the initial patent ran out. > > Similarly Smith and Weston sat on their refinements for the Colt revolver until the patent ran out.
The myth is that patents block innovation. The reality is that blocking someone from doing something incentives them to find another way to do it. Afterall, if all you want to do is copy then how is that "blocking innovation"?
And focusing on the financial industry might make you feel good because it's easy to say "wall street..." and everyone joins in on the bitch fest. It's a ton of conjecture and hypothesizing as to why business is failing, but to make it sound like one industry is just banking cash while providing nothing, is a disservice to all the people that work in that industry.