I am not seeing the connection. Whenever I hear capital and elites, it’s a clear red flag around lack of understanding. And just laziness about money. I think a lot of these voices would change if they just had 20% of disposable income auto-invested in equities from an early age.
Bro it's so easy just save 20% of what you need above and beyond the basics of an upper middle class living, like maybe take one fewer trip to Bali each year, or cut back to only two cars per person, or timeshare your pool.
As an ex-Apple engineer who grew up with four generations living in a duplex, and as someone who now sees people struggling with grocery and gas prices and utility prices, I feel like more people even having any disposable income at all might be a better start.
How exactly are young people betrayed by the system supposed to get that disposable income? I live in country with highest unemployment rate in OECD. We have tons of people with master's degree unable to find ANY job, let alone something that would fit their education. There's fierce competition for jobs like part-time warehouse worker or cashier.
Only thing I can think of is moving abroad, but sending lots of young people abroad is not very sustainable from a domestic economy perspective.
If we all had a significant sum auto-invested in an early age, we'd all have a stake in preserving the practices that are causing so many problems. I don't wanna live in a broken world forever, so I'm kind of glad that we don't.
Do you mean disposable income or discretionary income?
Because taking 20% of the former leaves a lot of the population unable to pay for essential living expenses because they effectively have zero of the latter.
Marxist slop. Old school, apparently hand crafted bespoke slop, but slop nonetheless.
(Labor theory of value, they got rich by stealing what was rightfully yours, lots of linguistic games, private ownership is the root problem, yada yada...)
> There is no more intrinsic reason for the scarcity of capital than there is none for the scarcity of air.
You're suggesting that capital holders restrict the supply of capital so that they can extract rent on it? And if they didn't do that we'd just have unlimited capital and everybody would get to be arbitrarily rich?
Then what do capital holders get out of restricting the supply? Wouldn't they rather be arbitrarily rich instead?
> Every claim on human effort that exits the productive system as rent is a claim that cannot circulate internally, cannot pay workers fairly, cannot fund the next big idea or reduce the cost of the next product.
What? Why? When you pay rent do you think your landlord isn't going to spend that money?
They get power out of it (restricting the supply of capital).
In neoclassical economics, savings never pay off compared to investment. But in the real world, savings have important advantages:
1. They help you sustain longer in the case of strike (be it labor strike or investment strike).
2. They allow you to react to the market (for example, buying a promising startup winner after a competition consolidation) instead of being a first mover.
3. They allow you to price dump rapidly if a competitor threatens oligopoly pricing (usually the status quo), to drive them out of business.
That's why savings give you an actual power, which increases the richer you are.
Also, in my worldview, savings are liquid/reversible investments, while real capital investments are iliquid/irreversible - if you decide to build a factory you're commiting to an irreversible decision, if you buy an index fund, the decision is reversible, so it's basically savings. Making as few irreversible decisions as you can gives you an edge compared to others.
These are very good ideas for much more of the populace to digest and internalize. I'm not sure how many will.
And much of the popular critique of capitalism is driven by those who don't distinguish between profit and rent, when in fact the near entirely of the extraction that is causing inequality is from rent extraction and not "profit" as used in this piece. Especially when it comes to real estate, which is most people's largest expense, growing, and one of the biggest political challenges we face today. (Broad homeownership has created a lot of people that benefit from increasing residential housing costs, or at least don't see any problems with them).
Glad to see Schumpeter get mentioned, as Schumpeterian rents are perhaps defensible for a while, I think.
The problem with this is that the author has explained capitalism in a way that sounds harrowing to the wider public, but sensible to everyone holding any sort of power. These outcomes aren’t a side effect of the system; they are the system working as intended. Governments and corporations don’t want people that are comfortable and happy, they want people strapped to the yoke. The constant stress is them cracking the whip.
Charging rent on capital was historically called “usury”, and was denounced by everyone from Aristotle to Aquinas, from Moses to Buddha to Muhammad. I suspect they had the right of it, which poses some problems for our present society, fractally composed of usury (as the article aptly outlines).
Good essay with lots of interesting points. I especially liked how the author tried throughout to appeal beyond a narrow left-wing audience.
Something that I noticed that might help clarify things: I think the author mixes two phenomena together: (1) Rents and (2) subjective vs objective property rights.
Rents were pervasive in the middle ages. There are lots of black legends about medieval Europe, but we don't have to tell golden legends about it either. The whole economy if medieval Europe relied on people controlling land, then demanding goods and service in exchange for its use. That is Rent! It was often exceedingly exploitative and harsh!
What changed in the modern era was a the decline of objective property rights. The way property was treated in law went from "this is my farm, which is mine for farming, and it comes with these rights and obligations. That's the commons. I have these rights to it and these obligations to my lord and his other subjects in how I use it." This changed to "this is my property with which I can do what I see fit. I have no objective obligations to anyone else." Subjective property rights also existed before capitalism, but they completely eclipsed objective right in the early modern period. This increased economic productivity and growth on a scale that was not thought possible, but also, as the author notes, had negative consequences.
The reason that this distinction matters is that you can absolutely abolish subjective property rights and still have rents. You can actually make them worse. If people are being extorted for access to some good, they will not care if it's done by a private company or a public administrator. I don't see how the author's framework of "personal property" overcomes the issue.
Without coordinated effort to limit that extraction it will continue until the resource is exhausted.
An obvious conclusion is that one function of Government is to coordinating how much extraction is permissible or enforce fair dealing. Capital has spent a great deal of your collected rent persuading people that this idea is wrong and would lead to terrible harms.
> Patent holders don’t reinvent a drug each time it is prescribed. Yet they all extract value ad infinitum, because they hold positional claims on these resources.
Pretty milquetoast analysis which I'm sure ruffles the feathers of all the landlords in the peanut gallery on this site, but what's really objectionable is the periodic terrible AI-generated images.
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[ 0.19 ms ] story [ 20.4 ms ] threadWhat disposable income? When I was younger I had none, I was too busy paying rent and tuition,
Only thing I can think of is moving abroad, but sending lots of young people abroad is not very sustainable from a domestic economy perspective.
Because taking 20% of the former leaves a lot of the population unable to pay for essential living expenses because they effectively have zero of the latter.
(Labor theory of value, they got rich by stealing what was rightfully yours, lots of linguistic games, private ownership is the root problem, yada yada...)
You're suggesting that capital holders restrict the supply of capital so that they can extract rent on it? And if they didn't do that we'd just have unlimited capital and everybody would get to be arbitrarily rich?
Then what do capital holders get out of restricting the supply? Wouldn't they rather be arbitrarily rich instead?
> Every claim on human effort that exits the productive system as rent is a claim that cannot circulate internally, cannot pay workers fairly, cannot fund the next big idea or reduce the cost of the next product.
What? Why? When you pay rent do you think your landlord isn't going to spend that money?
In neoclassical economics, savings never pay off compared to investment. But in the real world, savings have important advantages:
1. They help you sustain longer in the case of strike (be it labor strike or investment strike).
2. They allow you to react to the market (for example, buying a promising startup winner after a competition consolidation) instead of being a first mover.
3. They allow you to price dump rapidly if a competitor threatens oligopoly pricing (usually the status quo), to drive them out of business.
That's why savings give you an actual power, which increases the richer you are.
Also, in my worldview, savings are liquid/reversible investments, while real capital investments are iliquid/irreversible - if you decide to build a factory you're commiting to an irreversible decision, if you buy an index fund, the decision is reversible, so it's basically savings. Making as few irreversible decisions as you can gives you an edge compared to others.
I recommend Keen/Standish paper on the theory of the firm: https://www.paecon.net/PAEReview/issue53/KeenStandish53.pdf
They show that profit-maximizing agents communicating via price-setting only will happily restrict output in order to reach oligopoly prices.
And much of the popular critique of capitalism is driven by those who don't distinguish between profit and rent, when in fact the near entirely of the extraction that is causing inequality is from rent extraction and not "profit" as used in this piece. Especially when it comes to real estate, which is most people's largest expense, growing, and one of the biggest political challenges we face today. (Broad homeownership has created a lot of people that benefit from increasing residential housing costs, or at least don't see any problems with them).
Glad to see Schumpeter get mentioned, as Schumpeterian rents are perhaps defensible for a while, I think.
Something that I noticed that might help clarify things: I think the author mixes two phenomena together: (1) Rents and (2) subjective vs objective property rights.
Rents were pervasive in the middle ages. There are lots of black legends about medieval Europe, but we don't have to tell golden legends about it either. The whole economy if medieval Europe relied on people controlling land, then demanding goods and service in exchange for its use. That is Rent! It was often exceedingly exploitative and harsh!
What changed in the modern era was a the decline of objective property rights. The way property was treated in law went from "this is my farm, which is mine for farming, and it comes with these rights and obligations. That's the commons. I have these rights to it and these obligations to my lord and his other subjects in how I use it." This changed to "this is my property with which I can do what I see fit. I have no objective obligations to anyone else." Subjective property rights also existed before capitalism, but they completely eclipsed objective right in the early modern period. This increased economic productivity and growth on a scale that was not thought possible, but also, as the author notes, had negative consequences.
The reason that this distinction matters is that you can absolutely abolish subjective property rights and still have rents. You can actually make them worse. If people are being extorted for access to some good, they will not care if it's done by a private company or a public administrator. I don't see how the author's framework of "personal property" overcomes the issue.
Sure. In aggregate. See also: "Tragedy of the Commons" and "Everyone Will Not Just"<https://emilybook.org/2024/11/03/everyone-will-not-just/>
Without coordinated effort to limit that extraction it will continue until the resource is exhausted.
An obvious conclusion is that one function of Government is to coordinating how much extraction is permissible or enforce fair dealing. Capital has spent a great deal of your collected rent persuading people that this idea is wrong and would lead to terrible harms.
20 years is not ad infinitum.
The article rabbits on about rentiers without once recognizing who ultimately owns all the land and sets all the rules.
It mentions Georgism which to an approximation is replacing private rent with public rent.
Georgism doesn't actually solve the problem of rent seeking it just changes the seeker.