[ KEY LESSON: HUMANS SEEK RENTS over productivity. The only way to obtain those rents is indirectly through market gains. And of all the goods you can produce, a one child policy for the unproductive provides the highest returns. Why? Because people CAN act on DIRECT rent seeking, and people CANNOT act on indirect rent seeking (market returns). ] In other words, socialism is the ultimate selfishness.
1. The investments are undecidable without monetary interests (it’s impossible) so that in the absence of money and rule of law we see discretion.
2. The investments are minimal because in all organizations, members seek to maximize rents.
3. Because the incentive to maximize rents is superior to the incentive to invest, corruption evolves instead of production.
4. Because of all of the above, the general standard of living of the people declines relative to those who practice markets.
5. Because of the difference in standard of living force must be used to retain the population(defectors) OR force will (in the past at least) be used to prevent invasion by defectors.
6. Socialists are simply seeking non-market rents. The way to obtain market premiums is to exit the company in favor of a company that pays more.
7. If you cannot exit the company and obtain a premium, then you are already maximizing your income.
8. Engineers (employees) that produce outsized returns provide those returns to the entire company, allowing increases in rents by all employees.
9. Investors require high returns for the simple reason that the vast majority of their investments fail. The portfolio strategy is to lose most, make good returns on a few, and have one windfall. This is also how the movie business, and publishing business work, with outliers paying for all others. (this is why redistribution – exists under capitalism: unpredictability)
10. Engineers with ideas that produce outsized returns leave the company to produce the product on their own. If they cannot produce it on their own then they means that the value was in the organization not the individual since the value is in organizing and creating investment, production, distribution, and trade.
11. There have been rare cases where individuals are not compensated (windshield wiper delays) but the vast number of individuals who contribute returns venture on their own – and don’t otherwise, because they in fact cannot produce the product.
12. As an aside, corporate democracy is absolutely ridiculous. All the evidence illustrates that leadership matters, and as someone who has built some very large consulting companies, specializing the creating consensus in companies, democracy in companies would be as catastrophic as it is in politics, and only lead to the same corruption. Someone DOES know the answer in the company. The primary function of Management Consulting Companies is to survey what everyone in a company knows, to identify which ideas have some potential given the available financial and market resources and then write an argument and develop consensus in the company because of it. Why? Dunning Kruger: everyone in a company (any organization, and in society) VASTLY overstates their knowledge except Generals, CEOs, and Presidents. Any competent CEO or general will say the same thing: I am only doing this job because I can’t find someone who will do it better, or I promised some people I would do it until I succeeded or failed. That’s it.
I could go on but basically redistribution occurs through success of organizations. The problem is simply the one eugenicists warned us about, and economists acknowledge only behind closed doors: that the central problem for any polity is reducing the size of the unproductive classes to those who have been the victims of accidents, rather than increasing the size of dependent classes until their rents are maximized, and investment and risk are no longer possible on the one hand, and ability to absorb shocks is no longer possible on the other.
HUMANS SEEK RENTS. The only way to obtain them is indirectly through market gains. And of all the goods you can produce, a one child policy for the unproductive provides the highest returns.
Why? Because people CAN act on DIRECT rent seeking, and people CANNOT act on indirect rent seeking (market returns).
This is why market economies succeed in vast improvement of lower class conditions more so than the upper classes (who are subject to constantly forced economic rotation.
While the reason socialist economies always fail, and always will fail is attributed to a lack of incentives to produce, and because the creation of incentives for corruption, and because
Very few companies last the lifetime of their founders and their children. And as capital is continually less important than rates of invention and innovation, this will continue. Wealth generally survives under three generations. And around 94% of wealth is generated by small and medium business entrepreneurship. And of that wealth a not insignificant portion is research and development that that is later acquired by larger companies with access to public markets.
The only thing we can do today is eliminate consumer interest on consumption (houses, cars, appliances), and cut the size of the unproductive classes by eliminating immigration extending work life by providing ‘retirees’ and ‘students’ with part time work, eliminating the obesity problem that limits people’s ability to work, and by culling the underclasses through one child policy.
Everything else is suicidal (Europe, Canada, and America), or destructive (brazil, india).
PROBLEMS WITH CURRENT MIXED ECONOMIES
The problem with current capitalism is that it is possible on the one hand to form unions that can extort from companies under collective bargaining (which is why companies left the USA), and on the other hand, it is possible for (a) investors to prey on companies at the expense of management and staff (this is easily fixed by prohibiting leveraged buyouts, and then legally limiting risk), and (b) we do not help companies adjust to shocks often enough (we should have helped hostess like we helped the auto companies), (c) we do not engage in enough private public ventures (like Tesla, which if successful directly or indirectly, will revolutionize transport by resetting the clock back 100 years), (d) we do not prohibit labor arbitrage (outsourcing production for the purpose of obtaining labor discounts), (e) and we conduct trade policy like everyone else, which is to attempt to restore technological leadership by ensuring that we are not behind (production of LED and other screens, and mass production of chips), (e) and eliminate corporate pensions (they are no longer possible) and centralize them (Singapore model), because they alter the pricing system such that products are decreasingly competitive. (and btw: eliminate government pensions as well.)