What Capital Never Told You About Rent

What Capital Never Told You About Rent humansontheloop.com

Lifting the veil on institutional extraction

58 points•longitudinal93•9 days ago•46 comments•

#never #capital #told #rent #capital never #never told #capital never told #lifting

46 comments

fwlr8 days ago

Charging rent on capital was historically called “usury”, and was denounced by everyone from Aristotle to Aquinas, from Moses to Buddha to Muhammad. I suspect they had the right of it, which poses some problems for our present society, fractally composed of usury (as the article aptly outlines).

Plasmoid8 days ago

That theory was based on the idea there was a fixed amount of wealth in the world and it was impossible to create more.

fwlr8 days ago

I am not familiar with every theory behind every condemnation of usury (there are a multitude) but this is not true for any of the theories that I do know.

In fact it rather sounds like an intentionally foolish theory invented by someone practicing usury as the only possible reason anyone could disagree with them, and then incorrectly attributed to any opposition to their practice. You can sort of tell this is the case, because if you reverse the theory you get “usury creates wealth while other activities just shuffle it around”, which is a very flattering thing for an usurer to believe.

recursivedoubts8 days ago

No, the theory was based on the idea that money is sterile: it does not in and of itself produce anything, whereas the economy is productive. They were generally not sophisticated enough to understand the exponential curve of compound interest which is obviously incompatible with a finite economy, but long experience showed them that usury lead to wealth concentration and eventual collapse.

Unfortunately today usury is so endemic that people can't see any other way of living, even though debt-free publically issued money is an obvious possible solution to many issues we face today. See social credit (canadian, not chinese)

mwkaufma8 days ago

Pretty milquetoast analysis which I'm sure ruffles the feathers of all the landlords in the peanut gallery on this site, but what's really objectionable is the periodic terrible AI-generated images.

jstanley8 days ago

> 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?

js88 days ago

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.

js88 days ago

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: 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.

Arubis8 days ago

> Wouldn't they rather be arbitrarily rich instead?

Generally no, though you won't get this answer directly.

Many people prefer to be rich relative to others than arbitrarily rich. If you ask a bunch of random folks if they'd rather be in the middle class in their current country of residence in 2005, or of noble birth in ~1100 CE, you'll get the latter answer _a lot_ despite that being an objectively worse quality of living.

asdfasgasdgasdg8 days ago

The rich are hoarding the pocket dimensions in the West Village where there is unlimited space for people to live, in order to extract higher rents!

fhdkweig8 days ago

As they say, "The sky's the limit." Just build taller buildings.

pixl978 days ago

Heh, yea, it seems like these people don't know who Mansa Musa was and that just dropping massive amounts of capital (well, raw gold in this case) into an economy has all kinds of side effects. Wild inflation/deflation is fun!

epistasis8 days ago

These are very good ideas for much more of the populace to digest and internalize. I'm not sure how many will.

And much of the popular critique of capitalism is driven by those who don't distinguish between profit and rent, when in fact the near entirely of the extraction that is causing inequality is from rent extraction and not "profit" as used in this piece. Especially when it comes to real estate, which is most people's largest expense, growing, and one of the biggest political challenges we face today. (Broad homeownership has created a lot of people that benefit from increasing residential housing costs, or at least don't see any problems with them).

Glad to see Schumpeter get mentioned, as Schumpeterian rents are perhaps defensible for a while, I think.

tzs8 days ago

> Patent holders don’t reinvent a drug each time it is prescribed. Yet they all extract value ad infinitum, because they hold positional claims on these resources.

20 years is not ad infinitum.

Read the full thread on Hacker News →

46 comments

Related stories