Hacker News Reader

Comment by jstanley | Hacker News Reader

> 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?

View on HN

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.

I realized I answered the question (if landlords/investors restrict housing supply) quite indirectly, while there is a more direct answer.

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.

> Wouldn't they rather be arbitrarily rich instead?

Generally no, though you won't get this answer directly.

Many people prefer to be rich relative to others than arbitrarily rich. If you ask a bunch of random folks if they'd rather be in the middle class in their current country of residence in 2005, or of noble birth in ~1100 CE, you'll get the latter answer _a lot_ despite that being an objectively worse quality of living.

The rich are hoarding the pocket dimensions in the West Village where there is unlimited space for people to live, in order to extract higher rents!

As they say, "The sky's the limit." Just build taller buildings.

I'm all in favor of that. But in NYC, wealth or poverty are hardly predictors of YIMBYism. Most of the vocal opponents of building more housing are tenants. Given that renters are a solid majority, if they desired pro-housing policies, they could certainly elect representatives who would enact them.

One might surmise, given these facts, that there is some force other than democracy in control of the levers of power.

I would surmise no such thing! I think the far simpler explanation is either that renters are ignorant of housing economics, or that they have other priorities that override reducing market rents. Having talked with many renters, I think the former explanation carries most of the weight, with a little of the latter mixed in.

Or rather that democracy is easily influenced by a trillion dollar brainwashing industry

Relevant search terms: “air rights”, “penn central transportation co. V New York City”

Heh, yea, it seems like these people don't know who Mansa Musa was and that just dropping massive amounts of capital (well, raw gold in this case) into an economy has all kinds of side effects. Wild inflation/deflation is fun!

Economies are naturally deflationary (assuming a fixed money supply); services become more efficient, making capital more productive. This happens more or less automatically within competitive markets. So those capitalists do become arbitrarily rich, limited only by institutional factors (tax, labor bargaining, antitrust enforcement). By restricting access to capital markets you're siloing these gains off into their own pool.

Reply on news.ycombinator.com