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Benja comments on Unteachable Excellence - Less Wrong
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By the way -- (only very tangentially related to the topic of this post, I'll admit, but hopefully just enough to pass muster) -- does anybody happen to know a good introduction to the theory behind this statement? Are there any introductory textbooks (microecon? macroecon?) that make the case, for example? Think of me as a very naive reader, who would be tempted to ask "clearly it is people doing actual work who create wealth, how does everybody reinvesting get people to do more / more useful work" and would like to hear the actual answer that convinced you in the first place.
Thanks! :-)
Presumably this is because allocation of capital drastically augments the labor that people do. (investing in a farm allows a farmer to replace his hand-plow with a tractor, drastically increasing output). I learned Intro. Econ from Greg Mankiw's textbook "Principles of Economics" and I was very impressed by his reasoning.
If this wasn't a sincere question then I apologize: my ability to read sarcasm is limited.
No, no, I do do sarcasm, but that wasn't a specimen. :) Thanks! I've put it on my reading list.
the simple answer is that when you reinvest you have to reinvest in something. Lots of people investing in lots of companies = more competition = better world.
Reinvestment is necessary to provide the tools for doing anything more than basic subsistence. Without the factories and tools provided by reinvested capital the "people doing actual work" wouldn't be more productive than a hunter/gatherer/stone-chipper or, at best, a Medieval serf.
Two good, readable books on economics are David Friedman's "Hidden Order: The Economics of Everyday Life" (a popularization of his Price Theory text) and Thomas Sowell's "Basic Economics". Sowell's text is amazingly clear and uses no math at all. Economics is one field where textbooks aren't superior - they bury the important principles under masses of usually useless detail.
Work => buy tools => get more done by work + tools.
A very simple introduction for the layman ist the 1920's book Richest Man in Babylon by George Clayson