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Comment by pbhjpbhj | Hacker News Reader

Isn't that market-based finance?

It appears that can be entirely divorced from capitalism.

Just because we have demand driven resource exploitation doesn't mean that all of the profit has to be provided to a small over-class.

Indeed, wouldn't it create a greater ability to follow demand if the wealth were evenly distributed?

(We might ask if making the human race into the perfect resource-exploiting parasite is going to work well for us long term, but that is a very obvious limitation that diverges from the current discussion.)

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The reason that markets work is that people can expect to profit from them. There is no separating "people have different wealths" from functioning markets.

So if 1000 people profit, that's not motivation, but if 1 person profits that is? Do companies with more shareholders seek profit less than single-owner entities? It seems the contrary that when founder-owned companies become more widely owned they become far more profit led.

What's important is that people who make good investment decisions make more money than the people who make poor or no investment decisions.

That is required for capital markets to work.

The initial distribution of shares doesn't really matter, wealth will concentrate anyway.

Not if the system itself is actively redistributive (such as via a basic income)

The more you redistribute the more you remove the incentive to produce value.

That's also true the less you redistribute at the extremes. The sweet spot is somewhere in the middle. I frankly don't believe that created value is close to accurately rewarded in modern society.

How much does $100 motivate you? How about $100,000

How about $5 spread over 1 million people? How about $5 million?

You can limit how much different people's wealth is without preventing markets from working.

The more you limit it, the less well the markets work.

If you limit it too little the market stops working too, because cleptocracies form.

Any examples?

Not true

They'd work just as well if the expected rates of profit were lower, due to profit taxes.

Money is invested because people with money chase yield, if yields are positive, but lower across the board, that money would still be making the exact same investments.

Yea, the stumble is usually at the step of gaining control of the whole board or keeping money in the chunk of the board you control.

I don't want to sound like an extremist here: reasonable capital gains taxes are on net good.

But it's certainly not the case that people make the "exact same" investments with or without taxes, especially of course as taxes get higher. Money will shift out of investment to consumption as expected profits decrease, or indeed out of the tax regime to other areas or to black markets.

that's absolutely not a problem, quite the opposite.

the goal is to have investments that serve broad interests. instead of investing in better yachts, supercars, jets, etc.

instead of investing into Amazon to dropship fake shit for quick bucks our economic surplus ought to go into developing better actually useful appliances, tools, technologies

for example, instead of OralB and Philips bamboozling us with sonic this and that with smart AI toothbrush marketing we ought to actually figure out dental care.

okay, sure, higher taxes on the wealthy doesn't guarantee more conscious consumerism, but might at least give it a chance.

I'm afraid that in fact the kind of consumption encouraged by high cap gains taxes are things like yachts, supercars, and jets (which are not investments).

I think those are more about inequality and greed. They have so many resources they’re exhausting any and all passing interest. Bees seem to have solved this with graduating highly productive bees into a bohemian class. They spend their time doing oddball stuff and inform the hive of new opportunities missed.

Sounds like you’ll be angling for the position of Commissar of Which Things are OK to Innovate.

> reasonable capital gains taxes are on net good

Except on the middle class. All capital gains do to middle class workers is ensure they stay middle class

I’d agree that the won’t made exactly the same investments, but I’d argue that on average they’ll make better ones.

The riskier an investment is, the higher the return must be to justify the investment. Lowering returns across the board means nobody is going to invest in long shots.

What else are they going to invest in? Sure things that return net-negative after inflation?

They're going to invest in less risky things.

Real estate.

Okay, and... so what? Other than complete lack of sustainability and distribution, humanity has been capable of providing the necessities for every human on earth for a long time now. What use is there in long shot startups that could possibly triumph giving people unalienable access to necessities and free time?

The problem is that markets also stop functioning when wealth inequality passes a threshold and becomes too severe.

The reason that markets work is because participants have "skin in the game", and losing money would hurt them, so they want to avoid losing money, so they try to make good decisions, and those that don't lose their money and are disempowered in the process. But once you reach a state where you're so wealthy that money no longer matters, you are able to distort the market at will, making it irrational (and thus inefficient) and destroying its ability to efficiently allocate scarce resources.

I wish more people understood this. You don't need to go full communism and make everyone's wealth equal, but if you want markets to work you do still need to make sure that the wealthiest are not so wealthy that they won't suffer from making poor financial decisions.

> I wish more people understood this.

Please provide a case history.

Even the wealthiest man in the world is a few hands of poker away from poverty.

People don’t need the incentive or billions to make markers work. 99% of the population will never make more then a couple million and are well motivated to participate.

>all of the profit has to be provided to a small over-class

It’s not, and it is a fiction to say it is.

Capital wealth is a representation of total risk adjusted future expected returns subject to a discount rate.

But we don’t advertise human capital this way; the excess future labor returns adjusted for some basic cost of living.

But they are the same thing: future profits.

If advertised this way, relative wealth would look vastly different.

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