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To clarify, I meant capital invested _as private propery_ is primarily for rent extraction. Speculation, as in buying some capital just to exclude it from othe

To clarify, I meant capital invested _as private propery_ is primarily for rent extraction. Speculation, as in buying some capital just to exclude it from others to profit from the resulting opportunity cost. Is the kind of rent seeking I was thinking of. I agree with your notion capital as such and it’s role in production. I just think there could more interesting approaches invented to allocate it. For example to endeavors that don’t produce much rent, or even profit, such as commons based production (open source software being one example). Markets mainly optimizes for lowering costs, not producing value. They are important tools for managing resource allocation, but thinking of them as optimize for value puts you dangerously close to interpret market prices as a measure of value.

pdonis 6y ago
> capital invested _as private property_ I'm not sure why that would be the key qualification to make. A corporation that invests capital to improve productivity is investing capital as private property. I don't see why you wouldn't simply focus on whether or not the capital is invested to improve productivity. > Speculation, as in buying some capital just to exclude it from others to profit from the resulting opportunity cost "Speculation" is not normally defined as buying capital, but as buying goods that are expected to become scarce in the future. That is not rent seeking, it's a natural part of a free market, and serves a valid function. In a free market, by buying goods that the speculator expects to be scarce in the future, the speculator drives up their price now (by increasing demand), giving others an incentive to economize (thus conserving the good against future scarcity), and drives down their price in the future when the speculator sells them (by increasing supply), thus increasing the good's availability when needed. The profit the speculator makes is a perfectly normal profit based on the value provided. I'm not sure why buying capital to exclude it from others would be termed "speculation", since buying capital at all, by its very nature, gives ownership of it to the buyer and excludes others. The buyer can rent it out, or can use it himself, but either way any ownership of capital, if used for productivity, earns a profit for the owner. That's why people do it. To term that "speculation" and "rent seeking" would make all productive enterprise rent-seeking, which is wrong. > Markets mainly optimizes for lowering costs, not producing value. Nonsense. Markets optimize for providing the things people want, as shown by their actual choices in that market. If people want more value and are willing to pay more for it, that's what the market will provide. The market for computer hardware is an excellent example: hardware with a wide range of capabilities and prices is available, because there are customers whose value to cost ratio is optimal at every price point over that entire range. In cases where markets end up providing the lowest cost product and that's it, either the additional value in more expensive products isn't worth it to people, so they choose not to pay for it, or information about the additional value in more expensive products is not getting to the potential customers who might be willing to pay for it. The latter case can be viewed as suboptimal, certainly (transactions that would be positive sum if they happened are not happening), but it's not due to any simple flaw in markets; it's due to unavoidable facts about the real world that can't be handwaved away, and certainly can't be "fixed" by government intervention.
- CuriousSkeptic 6y ago
  Let’s take land as an example of capital. When allocating land as private property, something you can buy or sell. You can just sit on it, leaving it unproductive, or you can use it to produce something, or you can rent it out to someone who has some use for it. Now as the owner you can exercise that choice with no regard as to what would produce the most economic value. So the first option might very well be the most interesting for you even if there are more productive options. And the choice ultimately comes down to rent seeking, not value creation. If, instead, the land could only be leased. The speculation option would not be there. The only option would be to use it for something that could pay the rent. Now land is a bit special so perhaps not the best example. But to provide the details of how capital could be allocated as non-private property. In a similar line of reasoning there are coop models of organizations with joint ownership of the means of production such that there isn’t a need for external capitalist ownership. And as such having different priorities, with no intention to trade shares the company might not need constant growth to achieve its goals, instead focusing on value creation first. So the qualification was just that for a capitalist, acting only as the owner of capital, value production is secondary to return on investment. On the topic of markets. I’d say the truth is somewhere between our two descriptions. Some of the more spectacular failures might be more tied to capitalism than markets as such. But certainly you agree there there are lots of value created outside of the markets entirely just as there lots of value destroyed within markets. Competition has its place, but there also has to be room for cooperation. I will just leave the spectacular failure that is capitalistic intellectual property approach v. commons based peer production as an example of how we clearly have some policy work to do before we can call things a success.

pdonis 6y ago

> capital invested _as private property_ I'm not sure why that would be the key qualification to make. A corporation that invests capital to improve productivity is investing capital as private property. I don't see why you wouldn't simply focus on whether or not the capital is invested to improve productivity. > Speculation, as in buying some capital just to exclude it from others to profit from the resulting opportunity cost "Speculation" is not normally defined as buying capital, but as buying goods that are expected to become scarce in the future. That is not rent seeking, it's a natural part of a free market, and serves a valid function. In a free market, by buying goods that the speculator expects to be scarce in the future, the speculator drives up their price now (by increasing demand), giving others an incentive to economize (thus conserving the good against future scarcity), and drives down their price in the future when the speculator sells them (by increasing supply), thus increasing the good's availability when needed. The profit the speculator makes is a perfectly normal profit based on the value provided. I'm not sure why buying capital to exclude it from others would be termed "speculation", since buying capital at all, by its very nature, gives ownership of it to the buyer and excludes others. The buyer can rent it out, or can use it himself, but either way any ownership of capital, if used for productivity, earns a profit for the owner. That's why people do it. To term that "speculation" and "rent seeking" would make all productive enterprise rent-seeking, which is wrong. > Markets mainly optimizes for lowering costs, not producing value. Nonsense. Markets optimize for providing the things people want, as shown by their actual choices in that market. If people want more value and are willing to pay more for it, that's what the market will provide. The market for computer hardware is an excellent example: hardware with a wide range of capabilities and prices is available, because there are customers whose value to cost ratio is optimal at every price point over that entire range. In cases where markets end up providing the lowest cost product and that's it, either the additional value in more expensive products isn't worth it to people, so they choose not to pay for it, or information about the additional value in more expensive products is not getting to the potential customers who might be willing to pay for it. The latter case can be viewed as suboptimal, certainly (transactions that would be positive sum if they happened are not happening), but it's not due to any simple flaw in markets; it's due to unavoidable facts about the real world that can't be handwaved away, and certainly can't be "fixed" by government intervention.

CuriousSkeptic 6y ago
Let’s take land as an example of capital. When allocating land as private property, something you can buy or sell. You can just sit on it, leaving it unproductive, or you can use it to produce something, or you can rent it out to someone who has some use for it. Now as the owner you can exercise that choice with no regard as to what would produce the most economic value. So the first option might very well be the most interesting for you even if there are more productive options. And the choice ultimately comes down to rent seeking, not value creation. If, instead, the land could only be leased. The speculation option would not be there. The only option would be to use it for something that could pay the rent. Now land is a bit special so perhaps not the best example. But to provide the details of how capital could be allocated as non-private property. In a similar line of reasoning there are coop models of organizations with joint ownership of the means of production such that there isn’t a need for external capitalist ownership. And as such having different priorities, with no intention to trade shares the company might not need constant growth to achieve its goals, instead focusing on value creation first. So the qualification was just that for a capitalist, acting only as the owner of capital, value production is secondary to return on investment. On the topic of markets. I’d say the truth is somewhere between our two descriptions. Some of the more spectacular failures might be more tied to capitalism than markets as such. But certainly you agree there there are lots of value created outside of the markets entirely just as there lots of value destroyed within markets. Competition has its place, but there also has to be room for cooperation. I will just leave the spectacular failure that is capitalistic intellectual property approach v. commons based peer production as an example of how we clearly have some policy work to do before we can call things a success.