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Tag Archives: wealth

The Problem of Rent-Seeking

Money is in theory just a liquid means of exchange so every bit of it should represent real world wealth.
The core problem of a society based on financialization is everyone starts to believe money itself is wealth.  Then society rewards the manipulation of money more than it does the creation of real wealth that actually helps people.

Why would anyone of means do anything productive if they can just collect interest and rent?
Rent-seekers use property to extract wealth indefinitely, making their living from a distortion of reality.
In the world of material things, there is no such thing as a gold mine that never runs out.  There is a limit in value to all things.  Yet those who control property can extract rents in perpetuity.

Patent law recognizes a limit in the claim to the rights of an idea or invention.  In time, the patented material becomes the natural inheritance of those who benefit from it.  So by what principle then does rented property stay forever in the hands of an owner who never uses it for themselves and never produces anything?

In Cincinnati, where I currently live, I noticed there are small patches of land used as paid parking in downtown.  Someone bought a small lot, threw down some asphalt on it, installed a ticket machine and voila, they can rake in cash every day.
The person who provides the parking lot, I thought, provides a useful service.  Not to mention most of these lots are cheaper than the parking garages, so they can save people money too.
On the other hand, I noticed these lots were minimally maintained. The asphalt was worn down, cracked, with weeds growing through it.  I supposed other than checking for freeloaders every once in awhile, there was no incentive for the property owner to do anything else while they reaped their dividends forever.

So the problem here is we need people to develop property and provide services but the value they bring to the table must also be recognized as finite.
The property owner must make a reasonable profit if we want them to bother but it is unnatural and improper for them to bring in an indefinite and infinite harvest once they have long since ceased to contribute new value.

So would it not make sense if there were limits to ownership of property that collects rents?  Like patents, you profit for awhile, but eventually it passes on into the public domain.
This could be especially relevant where there is opportunity cost.
Those little flat, run-down parking lots in Cincinnati are surrounded by 10 story buildings.
So while the land is put to a use that creates some value, surely it would create far more value if it re-entered the market and was used for a multiple story building owned and used by a business that actively creates new value every day.

The total gain appropriate to a renter could be determined by a number of factors.

-Absolute quantity of wealth invested in the property.(Did someone spend millions or billions of dollars on it?)
-Percentage of personal wealth invested.(Did someone put a lot of their money into the property?)
-Riskiness of the investment.
-Amount of effort to develop and maintain.
-Value the property gives back to society.(Penalize houses that sit empty just to get flipped later and/or keep rents artifically high.)
-Opportunity cost to society based on the property’s location.
-Is the property a strategic chokepoint that people have to pay for and therefore easy to command unreasonably high prices for?

The point would be to impose especially harsh penalties against large, lazy property holders who try to be dogs in the manger using the state’s monopoly on force— without which they own nothing—to parasitize others.  Without the threat of armed enforcers, they would probably be shot in the head trying to impose their will.  Why do they deserve state backing that not only hurts society, but delegitimizes the state by association?

Money acquired through parasitism is heresy.  Not only is the sacred relationship of money and wealth desecrated and distorted, every penny of false money-as-wealth is real wealth stolen from those who are trying to help the social order.  Once a society rewards clever defectors, while punishing honest cooperators, it is doomed.  Society cannot exist without maintaining the integrity of its wealth.

A worthwhile society understands that money used as counterfeit real-world wealth is nothing but theft and fraud—not just against one person but against the entire social order.  There could be a generous grace period after implementing such rules after which, perpetrators would be regarded as far worse than mere murderers.

See Also: White Collar Criminals Are Worse Than Street Criminals

Money Should Only Belong to Cooperators

Every dollar is a vote—so it is of supreme importance to make sure these votes are given into the right hands.  Someone of low character with millions of dollars can cause great damage to society just by influencing the market with their preferences.  Imagine a political election where ambitious psychopaths get super-ballots worth 10,000 normal votes.  It sounds bizarre if we think in terms of elections for political office, yet this is how the economy works and most of us are okay with it.
We approve of parasitic financiers hoarding away millions or even billions of dollars.  So long as someone “earns” their wealth, we don’t care if they’re being awarded in proportion to the value they contribute or even if they intend to use the group’s very lifeblood to defect.  In a system of economic nihilism, where economies are left to drift without guiding purpose, nothing matters so long as you get money while managing to stay out of a jail cell.

If the economy gives great rewards to people who contribute relatively little value, we can envision the heart sending the best of its blood supply to the appendix, or in the case of someone who harms society, to a tumor or tapeworm.  We see this circulatory system acts against the interests of its own body.  It’s a violation of natural law that strikes us as repulsive and wrong in living things, but most of us are unable to make the abstract leap from what we understand viscerally.
That is how the lower castes have always been subjugated, not primarily through force, but through their inability to extend principles.  Under the influence of economic nihilism even those capable of deeper reflection have forgotten that the distribution of society’s influence points is one of the most important and sacred tasks, vital to the success and continuance of a people.

We are told, for instance, that the job market is about giving jobs to the most competent and hardest working.  In practice, this really only applies to the most skilled and important work.  The vast majority of work can be done somewhat competently by most people with a bit of training.  So in practice, jobs are foremost billets we use to support members of society.  The act of hiring someone isn’t “just business,” it gives someone a sacred mandate to exist in society and benefit from its fruits.  Even with low pay, a worker is given money that will supply at least some of the necessities of food and shelter by permission of the many.  If we buy a sack of potatoes rather than stealing it or growing it for ourselves, we do so by accumulating enough dollar votes, each of which is a material token of the collective will.  What could be more amazing than a piece of such abstraction made into a solid thing?
To pay someone well carries even greater meaning.  It allows a person not just to survive but to have surplus needed for offspring and the leisure and buying power required to exert influence on society.  This is to plant the seeds of a garden, to elect someone who will form the character of society for generations to come.  Yet we ask only if they can do the job the best, not whether they are deserving of the distinction of holding society’s precious wealth or whether they will handle that responsibility well.
More important than doing the job as well as possible is to be a cooperator with the group’s mission.
This is why the owner of a small business hires a friend even if the world is full of people who may be better qualified.  The owner trusts his friend and his wealth goes to an ally rather than a stranger.
This is why in the long run a nation that prides itself on “work ethic” over allegiance loses to tribes that put allegiance first. Thus, the nation-state model that’s gone global since the 1860s is now challenged by the tribe-state.
A small tribe doesn’t have a “job market” with little worker atoms floating around. It has slots with roles that need to be filled and those slots are given to the best and most loyal. The choice of who is appointed to those posts and how many influence points they’re given decides success or disaster. Who we hire selects our tribe.
Conversely, there is a clear duty to deny influence points to those who will hurt the group and to hunt down those who abuse the points system.

A Tale of Two Debtors: Britain and France After the American Revolution

By the 1780s, France and Britain had approximately the same debt after spending huge sums fighting over the American colonies.

One recovered and the other collapsed into revolution.

The difference was their systems of finance and taxation.

While the outstanding war debts may have been the same, the interest rates were not.

Bourbon France had to pay twice as much interest on its loans as did the British. And that made all the difference.

To begin with, the English system relied far more on indirect taxes and tariffs for its income.
The French system meanwhile focused on many direct taxes that ended up discouraging economic growth.

The result was that by the time of the French Revolution, England yielded more tax revenue despite having only 1/2 the population of France.

Britain and France were set apart most of all by their systems of credit.

England had relied on the world’s 1st national bank since 1694 to efficiently raise large long term loans. At the same time, new loans kept flowing and interest rates dropped because the English parliament had the power to consistently raise enough taxes. The stability of this system drew in a steady steam of further capital from Dutch investors.

The French crown on the other hand relied on a host of middle men—tax farmers, nobles, high ranked clergy, lenders, and merchants for loans, at high rates of interest.
Without a central source to consolidate its loans, the crown found itself struggling to raise money quickly, keep track of its loans, or pay interest.

Worse, in the French system of direct tax farming, it was more profitable to farm taxes and loan out advances than it was to start businesses and engage in productive industry.
The French system encouraged parasitic plunder while stifling real economic growth that would produce more wealth in the long run.
Wealth ended up being gradually drained from the economy even as the French national debt skyrocketed with each successive war…

Paraphrased and summarized from:

The Rise and Fall of the Great Powers
Paul Kennedy, 1987
Pages 76-86

 

UK public debt from National Bank founding to modern times

 

French Debt Until the French Revolution

French Debt Until The French Revolution

How Girls Handle Money

“I held up a $20 bill and asked who wanted it. No one moved. A good 30 seconds later, one of the girls raised her hand and said, “We should make a rule about who gets it.”

Another girl raised her hand and declared, “It should go to the girl that got here first.”

Everyone looked around, and they all nodded in agreement.

We spent the next hour discussing how girls think about money and make decisions. Even when rules weren’t necessary, the girls refused to act and instead focused their energy on creating rules about who got the money.

Clearly, if men had been in the room, the women wouldn’t have stood a chance.

I asked, “Why?” The group preferred rules because rules establish a system of norms. “Then,” one astute girl laughed, “we can play within established parameters and still manipulate the rules to get our way.”

Instinctively, I responded, “And still be considered good girls?”

Without missing a beat, the group nodded in agreement.” Link

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