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All posters, except thrill, seem to have fundamentally misread the article. It isn't about Facebook or GS for that matter. Its concern is that several banks inc

by bwanab 16y ago

All posters, except thrill, seem to have fundamentally misread the article. It isn't about Facebook or GS for that matter. Its concern is that several banks including GS have a "too big to fail" subsidy. That subsidy is an implied insurance against failure. Let's say you are GS management and you have two possible investment choices: 1) A safe boring sure thing financed with little leverage that will bring in somewhere between 5% and 10% yearly return, or 2) A speculative leveraged investment that would bankrupt the company if it failed, but would make 50% a year if it succeeds. Which would you do? If 2 fails, the taxpayers pick up the bill and you can try again, if it succeeds you get substantially richer. This isn't capitalism in the sense that you learned in school. It's crony capitalism of the sort that the US has always rightly criticized in "other" countries. It doesn't make it right when it's practiced in the US.

mayank 16y ago
I would argue that the consolidation of (fiscal) power into a few large centralized institutions can be a natural outcome of capitalism, since an increase in the size of an institution (either through growth or acquisition) can offer more profit opportunities. Now if you view a corporation through the traditional lens of being sociopathically focused on profits, then it is natural for it to seek a position where its failure would catastrophically affect too many people for responsible governments to allow, as a sort of insurance. It's not "crony capitalism", it's unbridled capitalism. On the other hand, placing oligopoly restrictions to prevent the growth of corporations beyond a certain size and impact isn't (in a very strict sense) "capitalism". We already think that monopolies are bad, but where do you draw the line with oligopolies? 3 large banks? 5? 20? GS subsidizing FB, and the taxpayer subsidizing GS seem to be very natural outcomes of an unrestricted business environment and a mandate to generate profits. NOTE: not trying to take a left or right stance here, just viewing matters through the fun lens of mathematical optimization.
- deleted 16y ago
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by bwanab 16y ago

mayank 16y ago

I would argue that the consolidation of (fiscal) power into a few large centralized institutions can be a natural outcome of capitalism, since an increase in the size of an institution (either through growth or acquisition) can offer more profit opportunities. Now if you view a corporation through the traditional lens of being sociopathically focused on profits, then it is natural for it to seek a position where its failure would catastrophically affect too many people for responsible governments to allow, as a sort of insurance. It's not "crony capitalism", it's unbridled capitalism. On the other hand, placing oligopoly restrictions to prevent the growth of corporations beyond a certain size and impact isn't (in a very strict sense) "capitalism". We already think that monopolies are bad, but where do you draw the line with oligopolies? 3 large banks? 5? 20? GS subsidizing FB, and the taxpayer subsidizing GS seem to be very natural outcomes of an unrestricted business environment and a mandate to generate profits. NOTE: not trying to take a left or right stance here, just viewing matters through the fun lens of mathematical optimization.

deleted 16y ago
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