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Large corporations (such as those listed on the stock market) are not capital constrained, but the small, new and potential companies which are most important t
by nickff 12y ago
Large corporations (such as those listed on the stock market) are not capital constrained, but the small, new and potential companies which are most important to growth are highly capital constrained.[1][2]
Some have argued that it is good that rich people often get their way, because the alternative is far worse.[3]
[1] http://www.theatlantic.com/business/archive/2012/09/the-30-year-decline-of-american-entrepreneurship/262831/ http://www.theatlantic.com/business/archive/2012/09/the-30-y...
[2] http://www.nber.org/digest/feb11/w16300.html http://www.nber.org/digest/feb11/w16300.html
[3] http://econlog.econlib.org/archives/2012/09/why_is_democrac.html http://econlog.econlib.org/archives/2012/09/why_is_democrac....
- jjoonathan 12y agoSmall companies may be capital constrained, but the constraints come from friction more than from limitations on capital supply. If DD on the proposal for Joe's Diner is going to cost more than the pre-DD profit expectation, it doesn't matter how much capital is in the pool, Joe won't be getting funded. There's a nifty way around this: if Joe self-funds, he need not worry about his own principal agent problem. What kind of economies encourage self-funding? Those that provide employment opportunities sufficient for the purposes of saving and serving as a safety-net. NOT economies that systematically de-leverage the bulk of the working population.