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> For obvious reasons, it can't be more than the wealth of the world I think your reductio ad absurdum carries more weight than you give it. Real risk-free int
by ganeumann 12y ago
> For obvious reasons, it can't be more than the wealth of the world
I think your reductio ad absurdum carries more weight than you give it. Real risk-free interest can't on average over a long period be greater than economic growth. If capital is always rewarded more than the value it creates (economic growth is the meaure of the total value created) then where does the extra value come from? It has to come from labor. Labor will not, in the end, work for nothing (obligatory Pikkety reference should be inserted here.)
The sum of all capital in the world can only take a share of economic growth, some share must go to labor. That means that if there is an investment that returns more than economic growth, there must be an investment that returns less. As the pool of money being invested grows larger, it has to take part in both.
- sliverstorm 12y agoIt has to come from labor Or information asymmetry?
- ganeumann 12y agoBut then it's coming at the expense of some other investor (unless I'm misunderstanding.) No value is created. This might work if the amount being invested is small, but not as it grows larger.
- sliverstorm 12y agoYes, at the expense of someone else. It can still work as the amount invested grows, if you are in a position with a reliable feed of such information. See Plunkitt's "honest graft".
- ganeumann 12y agoMy point was to capital as a whole (that is, all of the capital.) When I say "get large" I meant as a large percentage of all capital. Even multi-billion dollar funds have this problem, and that's just a tiny fraction of all capital.
- hyperpape 12y agoI agree that it can't even get near 100% of economic value (though I don't have a clue how to make 'near' precise). I was being handwavy about how much, and could've been clearer.