I have a theoretical question. At what point does capitalism become the other side of the coin from communism.
Like there's communism which is centralized planning and the state owning the means of production.
Then I think there's Adam Smiths ideal form of capitalism that I think can loosely be described as independent demand signals allocate resources throughout the economy.
What happens when a capital accumulates in a smaller pool of folks who choose how to allocate those resources. Silicon Valley isn't responding to demand, it's essentially centrally planning where to assign resources to create demand.
That doesn’t sound right. Silicon Valley is clearly responding to massive demand for AI services. The reason Nvidia has so much money is that people are paying them for something only they can make. It’s not like they’re issuing stock into a meme stock spike or something. They’re selling hardware that companies are demanding in large quantities because those companies need the hardware to provide services that people and companies want so badly that every marginal hardware dollar spent earns a large number of service dollars.
This is probably the most demand-mediated response of all time. The natural form of that is that the guy who we give lots of money to for his stuff is going to have lots to spend.
I have a theory that this issue happens because we put money into the stock market for our pension. This creates a concentration of wealth/money into a relatively few organizations. I think money and wealth should be created more locally.
Of course, this is very idealistic and simplistic.
However, what did people think was going to happen when the common wisdom is to put your money into an index and then shut up? It simply cannot be true that putting money into the index means you win. There's cost somewhere, a parasite on the system, that is going to come due at some point.
"....It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it."
- Adam Smith, final paragraph of Book I, An Inquiry into the Nature and Causes of the Wealth of Nations
Warning about companies being able to command regulation on themselves. We're far past anything Adam Smith would have thought was a good idea for how we organize capital and commerce.
You can do a lot of central planning if you can convince investors to give you a large enough pile of money, but it still doesn't compare to what the US government can do. You're not going to fund social security that way.
The demand signals never allocated the resources, a small number of people always did. Those people react to the demand signals (and they still do).
IMO a more important question is: what happens when the market power of a segment of society grows much greater than the rest? In a "K-shaped" economy, the top 20% have so much spending power (and even more future spending power) than their demand signals can overwhelm the rest. Then IMO the market won't respond to the demand signals of the bottom 20% and capitalism stops working for all. Add to that the possibility of AI automating more and more work and you have a system that only works for folks at the tops.
This isn't a resource allocation problem! it's a purchasing power distribution problem.
This doesn’t strike me as a problem. There are sufficient entrepreneurs that market need common to a total 20% of the population will be met. In the USA that 70 million is a sufficiently large number. After all, that’s $700 million of MRR at $10/month.
The things limiting provision of services are physical limits like the audience being widely dispersed or just characteristics like not all sharing the same needs and therefore not actually being addressable.
You obviously are well aware that addressability does not track with income category automatically but it does for many businesses. E.g. payday loans, rent to own, check cashing, dollar stores.
Since a large section of this group is in use of government credits, at the least businesses will evolve to meet the use of those. EBT grocers, Medicaid-focused care, etc.
The majority of the effort will be spent where the greatest economic opportunity is, but entrepreneurs will match their ability to address the market to their audience. It’s not possible for a dollar store to sell GPUs to Baseten. They don’t have the capability to do something useful there.
That is the entire Marx's Das Kapital. The main argument being free market will lead to concentration of power and then capitalism collaspe. He expanded on what he thought the not-capitalism could be.
Then Lenin concluded that if you will always have concentration of power and some folks doing centralized planning, it might well be the state.
And ever since that and the supposedly marginalist “revolution” people keep pretending their sliced up tautological economics is a science separated from politics because it’s convenient to those who wield capital. Truth is Marx might’ve not made the best case for the general law of profit equalization and presented the transformation of value to price in the best of mathematical terms, but I’ll be damned if the empirical evidence makes up for everything he missed.
The same group of minds that were behind communism were also behind modern capitalism. It's no surprise that these systems produce the same net results - it was by design.
I have a theoretical question. At what point does capitalism become the other side of the coin from communism.
Like there's communism which is centralized planning and the state owning the means of production.
Then I think there's Adam Smiths ideal form of capitalism that I think can loosely be described as independent demand signals allocate resources throughout the economy.
What happens when a capital accumulates in a smaller pool of folks who choose how to allocate those resources. Silicon Valley isn't responding to demand, it's essentially centrally planning where to assign resources to create demand.
That doesn’t sound right. Silicon Valley is clearly responding to massive demand for AI services. The reason Nvidia has so much money is that people are paying them for something only they can make. It’s not like they’re issuing stock into a meme stock spike or something. They’re selling hardware that companies are demanding in large quantities because those companies need the hardware to provide services that people and companies want so badly that every marginal hardware dollar spent earns a large number of service dollars.
This is probably the most demand-mediated response of all time. The natural form of that is that the guy who we give lots of money to for his stuff is going to have lots to spend.
I have a theory that this issue happens because we put money into the stock market for our pension. This creates a concentration of wealth/money into a relatively few organizations. I think money and wealth should be created more locally.
Of course, this is very idealistic and simplistic.
However, what did people think was going to happen when the common wisdom is to put your money into an index and then shut up? It simply cannot be true that putting money into the index means you win. There's cost somewhere, a parasite on the system, that is going to come due at some point.
"....It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it." - Adam Smith, final paragraph of Book I, An Inquiry into the Nature and Causes of the Wealth of Nations
Warning about companies being able to command regulation on themselves. We're far past anything Adam Smith would have thought was a good idea for how we organize capital and commerce.
You can do a lot of central planning if you can convince investors to give you a large enough pile of money, but it still doesn't compare to what the US government can do. You're not going to fund social security that way.
Fun fact: Internally all corporations are organized by central planning
The demand signals never allocated the resources, a small number of people always did. Those people react to the demand signals (and they still do).
IMO a more important question is: what happens when the market power of a segment of society grows much greater than the rest? In a "K-shaped" economy, the top 20% have so much spending power (and even more future spending power) than their demand signals can overwhelm the rest. Then IMO the market won't respond to the demand signals of the bottom 20% and capitalism stops working for all. Add to that the possibility of AI automating more and more work and you have a system that only works for folks at the tops.
This isn't a resource allocation problem! it's a purchasing power distribution problem.
This doesn’t strike me as a problem. There are sufficient entrepreneurs that market need common to a total 20% of the population will be met. In the USA that 70 million is a sufficiently large number. After all, that’s $700 million of MRR at $10/month.
The things limiting provision of services are physical limits like the audience being widely dispersed or just characteristics like not all sharing the same needs and therefore not actually being addressable.
You obviously are well aware that addressability does not track with income category automatically but it does for many businesses. E.g. payday loans, rent to own, check cashing, dollar stores.
Since a large section of this group is in use of government credits, at the least businesses will evolve to meet the use of those. EBT grocers, Medicaid-focused care, etc.
The majority of the effort will be spent where the greatest economic opportunity is, but entrepreneurs will match their ability to address the market to their audience. It’s not possible for a dollar store to sell GPUs to Baseten. They don’t have the capability to do something useful there.
If you in the top part of the K, this is a feature not a problem.
That is the entire Marx's Das Kapital. The main argument being free market will lead to concentration of power and then capitalism collaspe. He expanded on what he thought the not-capitalism could be.
Then Lenin concluded that if you will always have concentration of power and some folks doing centralized planning, it might well be the state.
And ever since that and the supposedly marginalist “revolution” people keep pretending their sliced up tautological economics is a science separated from politics because it’s convenient to those who wield capital. Truth is Marx might’ve not made the best case for the general law of profit equalization and presented the transformation of value to price in the best of mathematical terms, but I’ll be damned if the empirical evidence makes up for everything he missed.
The word you’re looking for, is Serfdom.
The same group of minds that were behind communism were also behind modern capitalism. It's no surprise that these systems produce the same net results - it was by design.