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It's called capitalism because we use capital to allocate value creation. So obviously finance extracts wealth, that's their job in a capitalist system.
by fxtentacle 2y ago
It's called capitalism because we use capital to allocate value creation. So obviously finance extracts wealth, that's their job in a capitalist system.
- DrScientist 2y agoWe only allocate to value creation if there is a functioning free market. The banks profit margins would suggest that they are not really facing the fierce winds of competition.
- amelius 2y agoBut in the case of OP the value creation does not happen because they are working in finance instead of in a job creating value. I want to see some decent analysis of the situation, not stories about how the system is supposed to work.
- mewpmewp2 2y agoDecision of where to allocate money creates value. Imagine you have 500k to allocate. You can choose to invest in A or B, after analysis you realize A is a failing business, but B with 500k invested will create enormous value by producing product C. If you didn't allocate in B this company wouldn't have had enough money to produce C and succeed.
- amelius 2y agoYes, but this can still be true if the system works in a perverted way. In your example, you should include how many $ go to the entity doing the allocation. If this is an insane amount of money, then maybe we are better off without finance and just figure out the optimal allocation in some other way.
- mewpmewp2 2y agoBut who will do that other way of optimally allocating? To take a simple extreme edge case, let's imagine that there's a business that requires 500k to truly flourish, but if it gets that 500k, it will become $10B company within 5 years. If it doesn't get the 500k it will likely fail. Only 1 person has noticed and believes that this business would have that potential. And let's say they either have 500k or they manage to convince others to get the 500k, how much of that $10B would they deserve?