Who would you rather have another $100 million dollars - the US government or Bill Gates? One has a track record of creating incredible products, the other is a literal dumpster fire, blowing $100bil ain’t nothing to the government.
I don't really subscribe to this idea that the US Government burns money as a rule. I'm sure there's many places that could be streamlined or made more efficient. But to blanket state that the US government as a whole is wasteful garbage seems naive, considering the immense scale and breadth of functions they carry out. The US Government employs 2.5 million people (3.8 million if you include the US Army, for which spending actually represents 61% [!] of the current US Budget) – the scale is personally hard for me to grok, at least. One thing that changed my mind about government spending is to look at the budget of a government program or facet of a program you're personally familiar with, and at least in my experience, it blows my mind what they can accomplish with what they're allocated.
For example, the entire yearly operating budget of Big Bend, a national park bigger than the state of Rhode Island, is only $7 million, including employee salaries, maintenance and restoration, emergency services, special programming, on-site research, and educational outreach – and it brought in around more than $27 million in visitor spending last year. From a money-making standpoint (which I don't think is the purpose of a government so much as to serve the public interest), that represents an extremely good return on investment – not to mention all the positive externalities of such a venture.
The notion that the government wastes more money than the private sector is a persistent myth with little evidence to back it up. Private capital wastes enormous amounts of money on failed ventures, inflated salaries, and profit-taking, and is every bit as wasteful as any over-budget government project.
Exactly. I'm not about to defend rent-seeking billionaires, but I trust them more than government--the entity which literally kills millions of people. I'd rather economic mass went into making Lambos and penthouses for billionaires than warheads and aircraft carriers to murder more people.
Real-estate speculation is basically rent-seeking, but inheritance is not. If someone amasses a fortune by creating wealth and leaves his assets to his offspring, they are not parasitic even if they never work. What matters is how the wealth was originally accumulated.
Why do you believe that inheritance is not parasitic or rent-seeking behavior? Large fortunes exert a gravitational effect, attracting more money and thus making their owners much more powerful than they would otherwise be.
The way I see it, the unchecked growth of intergenerational wealth is how we end up with aristocracy, and I would rather prevent aristocracy from rising than try to overthrow it once it's entrenched.
Rent seeking is natural. That's why we get progress.
Nobody would ever invest time and money to a business idea whose profits would get immediately competed away. Everybody would on the other hand invest into a business with guaranteed profits which cannot be competed away - ie. a monopoly.
That's producer's perspective. Consumer would on the other hand rather see competition among producers, because lack of competition leads to overpriced shitty products. However fierce competition leads to shitty and dangerous products too, because of need to cut corners and lack od funding for long term research (eg. current day airline industry).
So there must be a middle ground. Some degree of rents (profit which cannot be competed away) is necessary for progress and product quality.
There are several kinds of rents that I see.
1. Short term innovation monopoly These rents are usually short termed until they get copied by others. These are perceived to be fair and even if not, they have short life span, so who cares. Wait 5-10 years before the market catches up.
2. Rents from natural monopoly. Generally all network infrastructure falls under this because the first mover has great advantage over potential successors eg. by laying railroads, sewers, power grid or network cables in geographically optimal location. Other natural monopolies are eg. law or stuff which might harm you (drugs, pharma) - people prefer goods that everybody else uses and distrust smaller unknown alternatives.
3. Government blessed monopolies. For many industries it is more profitable to strangle competition than to better their products. Eg. patents, Mergers&Acquisitions, price undercutting and especially lobbying of regulations targetted against potential competitors - often in form of 'safety' regulations supposed to protect customers. Pharma industry would be a prime example.
4. Front running is another form of guaranteed income posing as legitimate business.
In finance: you are a banker and your client asks you to buy a stock for him. You buy the stock for yourself, which hikes the price and then you sell it to your customer at higher price.
In housing: you know that there is a massive trend of jobs concentrating in cities. You cheaply buy all land and houses in a prospering city, because you know that it will be needed by future generations. They will pay you huge rents later on. Nobody can stop you because your 'customers' are often not even born yet.
In both cases you seemingly offered your customer a service which they voluntarily paid you for, but something feels fishy about it.
All in all there are good rents and bad rents. How about distinguishing between the two and reversing the weird current tax system, which collects from the good ones (income, corporate and sales taxes) and giving to the bad bad ones (subsidies, redistribution).
Since often the government guarantees some company a monopoly, why shouldn't it pay for that privilege. Monopoly based taxation seems to me like quite a fair tax system.
In a very fundamental way, there is no such thing as "wealth creation", there is only wealth acquisition. Wealth is a zero-sum game.
No business actually makes money (well apart from a government mint:), but they do move it from elsewhere. No VC creates wealth - they get money from other people, perhaps in exchange for goods or services, but at the end of the day the total amount of money hasn't changed.
You have an apple seed. You plant the apple seed. You tend to the growing plant (soon a tree). A few years of work tending to the plant, and you get hundreds of apples every year.
No money is necessary. Wealth is about abundance. Money is just one type of scorecard.
Apologies for the strong tone, but the type of thinking that you just displayed has destroyed civilizations in the past.
If I have chickens and get more eggs than I would ever want to eat, each additional egg provides me less and less marginal utility. If you have cows and get more dairy than you would ever want, then each cup of milk provided you less and less marginal utility.
If I trade you a dozen eggs that have near zero marginal utility to me but lots to you, and in return you give me a gallon of milk that has near zero marginal utility to you but lots to me, then we are both enriched by this trade. That enrichment is wealth creation.
Wealth is not money.
If I spend 10 minutes scrubbing, polishing and fixing a rusty piece of whatever I found in the ground, assuming it's useful, I've created wealth, despite no bureaucrat, corporation or money ever being involved.
A tribe of cavemen with some animal skins and spears is more wealthy than a tribe with nothing.
This would be true in a purely deflationary economy with a medieval currency like physical gold (no paper notes on gold either). Saving would be rewarded and investment could typically only be profitable at someone else's expense. For most of history this was the case. But now that money is printed, wealth is positive sum. Everybody can win. The money that a VC makes from a business originally comes from credit, and the VC reinvests that new money to turn it into new credit eventually via central banks, and money is created recursively. It is not intuitive. People seem to assume the simpler gold-based model is how our economy works when it hasn't been the case for a while.
[+] [-] seibelj|6 years ago|reply
[+] [-] thebradbain|6 years ago|reply
For example, the entire yearly operating budget of Big Bend, a national park bigger than the state of Rhode Island, is only $7 million, including employee salaries, maintenance and restoration, emergency services, special programming, on-site research, and educational outreach – and it brought in around more than $27 million in visitor spending last year. From a money-making standpoint (which I don't think is the purpose of a government so much as to serve the public interest), that represents an extremely good return on investment – not to mention all the positive externalities of such a venture.
[+] [-] vannevar|6 years ago|reply
[+] [-] brnt|6 years ago|reply
[+] [-] bickfordb|6 years ago|reply
[+] [-] atomi|6 years ago|reply
[+] [-] zelly|6 years ago|reply
[+] [-] unknown|6 years ago|reply
[deleted]
[+] [-] blueprint|6 years ago|reply
[+] [-] unknown|6 years ago|reply
[deleted]
[+] [-] turk73|6 years ago|reply
[deleted]
[+] [-] DATACOMMANDER|6 years ago|reply
[+] [-] Porthos9K|6 years ago|reply
The way I see it, the unchecked growth of intergenerational wealth is how we end up with aristocracy, and I would rather prevent aristocracy from rising than try to overthrow it once it's entrenched.
[+] [-] zelly|6 years ago|reply
[+] [-] snidane|6 years ago|reply
Nobody would ever invest time and money to a business idea whose profits would get immediately competed away. Everybody would on the other hand invest into a business with guaranteed profits which cannot be competed away - ie. a monopoly.
That's producer's perspective. Consumer would on the other hand rather see competition among producers, because lack of competition leads to overpriced shitty products. However fierce competition leads to shitty and dangerous products too, because of need to cut corners and lack od funding for long term research (eg. current day airline industry).
So there must be a middle ground. Some degree of rents (profit which cannot be competed away) is necessary for progress and product quality.
There are several kinds of rents that I see.
1. Short term innovation monopoly These rents are usually short termed until they get copied by others. These are perceived to be fair and even if not, they have short life span, so who cares. Wait 5-10 years before the market catches up.
2. Rents from natural monopoly. Generally all network infrastructure falls under this because the first mover has great advantage over potential successors eg. by laying railroads, sewers, power grid or network cables in geographically optimal location. Other natural monopolies are eg. law or stuff which might harm you (drugs, pharma) - people prefer goods that everybody else uses and distrust smaller unknown alternatives.
3. Government blessed monopolies. For many industries it is more profitable to strangle competition than to better their products. Eg. patents, Mergers&Acquisitions, price undercutting and especially lobbying of regulations targetted against potential competitors - often in form of 'safety' regulations supposed to protect customers. Pharma industry would be a prime example.
4. Front running is another form of guaranteed income posing as legitimate business.
In finance: you are a banker and your client asks you to buy a stock for him. You buy the stock for yourself, which hikes the price and then you sell it to your customer at higher price.
In housing: you know that there is a massive trend of jobs concentrating in cities. You cheaply buy all land and houses in a prospering city, because you know that it will be needed by future generations. They will pay you huge rents later on. Nobody can stop you because your 'customers' are often not even born yet.
In both cases you seemingly offered your customer a service which they voluntarily paid you for, but something feels fishy about it.
All in all there are good rents and bad rents. How about distinguishing between the two and reversing the weird current tax system, which collects from the good ones (income, corporate and sales taxes) and giving to the bad bad ones (subsidies, redistribution).
Since often the government guarantees some company a monopoly, why shouldn't it pay for that privilege. Monopoly based taxation seems to me like quite a fair tax system.
[+] [-] corporate_shi11|6 years ago|reply
[+] [-] trevyn|6 years ago|reply
[+] [-] thrax|6 years ago|reply
[+] [-] tyzerdak|6 years ago|reply
[+] [-] zaro|6 years ago|reply
[+] [-] drpixie|6 years ago|reply
[+] [-] MR4D|6 years ago|reply
An example to prove my point:
You have an apple seed. You plant the apple seed. You tend to the growing plant (soon a tree). A few years of work tending to the plant, and you get hundreds of apples every year.
No money is necessary. Wealth is about abundance. Money is just one type of scorecard.
Apologies for the strong tone, but the type of thinking that you just displayed has destroyed civilizations in the past.
[+] [-] torstenvl|6 years ago|reply
If I trade you a dozen eggs that have near zero marginal utility to me but lots to you, and in return you give me a gallon of milk that has near zero marginal utility to you but lots to me, then we are both enriched by this trade. That enrichment is wealth creation.
[+] [-] pnako|6 years ago|reply
A tribe of cavemen with some animal skins and spears is more wealthy than a tribe with nothing.
[+] [-] zelly|6 years ago|reply
[+] [-] JauntTrooper|6 years ago|reply
A vaccine is worth much more than all of the sum of its parts.
The value of a bridge is not just the concrete, steel and manhours it took to build it.
Wealth is created when something is built, arranged, or designed in a way that is better than its inputs, in a way that benefits people.
[+] [-] unknown|6 years ago|reply
[deleted]
[+] [-] subject117|6 years ago|reply