> There is no more intrinsic reason for the scarcity of capital than there is none for the scarcity of air.
You're suggesting that capital holders restrict the supply of capital so that they can extract rent on it? And if they didn't do that we'd just have unlimited capital and everybody would get to be arbitrarily rich?
Then what do capital holders get out of restricting the supply? Wouldn't they rather be arbitrarily rich instead?
> Every claim on human effort that exits the productive system as rent is a claim that cannot circulate internally, cannot pay workers fairly, cannot fund the next big idea or reduce the cost of the next product.
What? Why? When you pay rent do you think your landlord isn't going to spend that money?
They get power out of it (restricting the supply of capital).
In neoclassical economics, savings never pay off compared to investment. But in the real world, savings have important advantages:
1. They help you sustain longer in the case of strike (be it labor strike or investment strike).
2. They allow you to react to the market (for example, buying a promising startup winner after a competition consolidation) instead of being a first mover.
3. They allow you to price dump rapidly if a competitor threatens oligopoly pricing (usually the status quo), to drive them out of business.
That's why savings give you an actual power, which increases the richer you are.
Also, in my worldview, savings are liquid/reversible investments, while real capital investments are iliquid/irreversible - if you decide to build a factory you're commiting to an irreversible decision, if you buy an index fund, the decision is reversible, so it's basically savings. Making as few irreversible decisions as you can gives you an edge compared to others.
I realized I answered the question (if landlords/investors restrict housing supply) quite indirectly, while there is a more direct answer.
I recommend Keen/Standish paper on the theory of the firm: <a href="https://www.paecon.net/PAEReview/issue53/KeenStandish53.pdf" rel="nofollow">https://www.paecon.net/PAEReview/issue53/KeenStandish53.pdf
They show that profit-maximizing agents communicating via price-setting only will happily restrict output in order to reach oligopoly prices.
jstanley · · focus · HN ↗
You're suggesting that capital holders restrict the supply of capital so that they can extract rent on it? And if they didn't do that we'd just have unlimited capital and everybody would get to be arbitrarily rich?
Then what do capital holders get out of restricting the supply? Wouldn't they rather be arbitrarily rich instead?
> Every claim on human effort that exits the productive system as rent is a claim that cannot circulate internally, cannot pay workers fairly, cannot fund the next big idea or reduce the cost of the next product.
What? Why? When you pay rent do you think your landlord isn't going to spend that money?
js8 · · focus · HN ↗
In neoclassical economics, savings never pay off compared to investment. But in the real world, savings have important advantages:
1. They help you sustain longer in the case of strike (be it labor strike or investment strike).
2. They allow you to react to the market (for example, buying a promising startup winner after a competition consolidation) instead of being a first mover.
3. They allow you to price dump rapidly if a competitor threatens oligopoly pricing (usually the status quo), to drive them out of business.
That's why savings give you an actual power, which increases the richer you are.
Also, in my worldview, savings are liquid/reversible investments, while real capital investments are iliquid/irreversible - if you decide to build a factory you're commiting to an irreversible decision, if you buy an index fund, the decision is reversible, so it's basically savings. Making as few irreversible decisions as you can gives you an edge compared to others.
js8 · · focus · HN ↗
I recommend Keen/Standish paper on the theory of the firm: <a href="https://www.paecon.net/PAEReview/issue53/KeenStandish53.pdf" rel="nofollow">https://www.paecon.net/PAEReview/issue53/KeenStandish53.pdf
They show that profit-maximizing agents communicating via price-setting only will happily restrict output in order to reach oligopoly prices.