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Lumifer comments on Publishing my initial model for hypercapitalism - Less Wrong Discussion
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Comments (78)
I don't understand how your hypercapitalism works (and I have looked at the links). I am also not sure of the point -- are you trying to force each buy/sale transaction to become an investment? to give consumers a long-term interest in the well-being of their counterparty?
It doesn't help that you don't use the standard economic terminology. For example, I think what you mean by "rent" is usually called "productivity" while the word "rent" has a different meaning in economics.
Oh...and I think economic rent is a fairly standard term. This is the amount that people pay for a thing above its cost because of a disadvantage they are under. Some economic rent is good, some is bad. You can argue that it is 'value' though if someone is willing to pay it. If they weren't getting that value out of it they wouldn't pay it.
Not quite. The difference between the price the buyer pays and the cost of the good to the seller is the seller's profit which is not the same thing as rent. To call something "rent" implies that the seller controls some limited resource that cannot be easily reproduced or acquired by his competition.
I think it is semantics that depend on your assumptions:
http://www.investopedia.com/terms/e/economicrent.asp
Profits are economic rent are the same in a lot of instances. If all markets were perfect their would be neither profit nor economic rent. Can you think of a situation where profit is not economic rent?
Profit is not the same thing as economic rent. You can think of economic rent as the portion of revenues deriving purely from the scarcity of some resource you hold, e.g. land in Manhattan (but not the stuff involved in administering or maintaining it), or the rights to a patent, or skills or credentials that are underrepresented in a market thanks to cultural factors. That has almost nothing to do with profit; although you can profit from economic rents, you can profit from other things too, and almost all transactions involve factors other than rents. A perfect market would eliminate rents, but it would not eliminate profits -- though it would drive down profits to the minimum necessary to motivate transactions.
There are rents involved in the production of most material goods, because natural resources are almost always scarce in this sense. However, as a counterexample we could imagine e.g. a frontier situation where land was essentially free and the prices of agricultural goods directly reflected the costs and effort involved in cultivating them.
When you talk about perfectly competitive markets having no profit, you're probably thinking of the term "economic profit". The sort of profit everyone usually thinks of is revenue minus cost, which is called accounting profit by economists so as to distinguish it from economic profit. Also economists are really bad at naming things. Economic profit is revenue-costs-opportunity costs.
In perfect competition, firms do make accounting profit, but they don't make economic profit.
Thanks for posting your model here and getting involved in the discussion. It's always good to be able to discuss these things publicly because I'm sure many people are learning a lot from it.
..and I'm all for profit. I think it is a great thing....I just also think there is an advantage to it being a time bound great thing. You made a profit! Awesome! Good for you! Now use it for the greater good or give it back(slowly...but still...)
That is not correct. If there are no profits, there are no incentives for sellers to stay in business.
Sure. I walk into a grocery store and buy an apple. I paid more than the cost of the apple to the store -- where is my "disadvantage" that the seller exploited to get rent? To forestall the location rent argument, let me point out that there is another grocery store selling the same apples down the block.
The economic rent is in the fact that there wasn't an apple tree on your the walk to the store.
Economic rent isn't always bad. Otherwise we'd have an apple tree infestation problem.
And we come full circle to me pointing out again that this is NOT the meaning in which mainstream economics uses the word "rent".
You do want to popularize your theory, right? That means explaining things using terminology that your target audience knows and understands. Unless you have a very good reason, changing the meaning of pretty standard terms leads to much confusion.
Hmm...I'll have to look into this more. There certainly is a difference between 'rent' and 'economic rent'. I'm really don't think I'm misusing economic rent.
You can call it profit if you want. In the model, some nodes have a better ability to extract profit than others. Or we can call it 'make moneyness'.
"Moneyness" is a term in finance :-)
Do you mean "better extract profit" or do you mean "generate value with higher productivity"?
And my initial question still stands: what is your aim and what problems do you want to solve?
See my answer below:
http://lesswrong.com/r/discussion/lw/m38/publishing_my_initial_model_for_hypercapitalism/ca33
I mean that some of us are better at generating some kinds value than others. (Division of Labor)
A wine maker who has been in the business for 25 years can make a better bottle of wine than I can. If he wanted to make the same bottle of wine that I can, he could do it more easily.
From what I gathered if two sellers would sell the exact same product but another seller could sell it at double the price it would become a favoured node. If they were not interchangeable products you could try to argue that the difference must be between the quality of the products. However if the same product has the same use value the measure is more about better extracting profits. There is the effect that given choice of equal product at cheaper or higher price a consumer ought to go with the lower cost. Competetive effects are supposed to kill off overpriced products but giving a bonus to seller for having a big mark up dulls their teeth.
Wikipedia has an article on "economic rent", so it probably is an existing term, although I have never heard it before.
Seems like "rent" is an income from a (generally) limited resource, while "economic rent" is an extra income from a resource that (locally, temporarily) acts like a limited resource.
Just like apples are generally not a limited resource, but if you need an apple, and your time is limited, and there is only one shop on your way, and it contains a limited amount of apples... then those apples here and now behave like a limited resource.
Yes, exactly. Most economic theory assumes 'in the moment' and a bit of God like reach. In the real world we have to deal with time and space.
For most of us working stiffs, when we go to the store to buy milk we are charged an large amount of economic rent to buy it cold, in a container, near our home. Despite the fact that you really need to drive an hour or more to find a cow. Given infinite time and teleportation, we'd hit the farm and get it for much, much less. You only have to look to digital assets to see how this plays out. This isn't a bad thing. We want the farmer, the pasteurizer, the delivery man and the grocery store to stay in business, but we also want them to do it better, faster, cheaper next time. General market dynamics cause this to happen a rate. I want it to happen at a faster rate.
I guess I need a better way to intro the concept. Would you be willing to help me work through that?
Does this video help at all? Maybe I need to have this as text? Maybe simplify it first?
I don't like videos for explaining concepts, but that may be just me.
First question: what is your aim? What is the problem you're trying to fix?
Maybe a better question is what do I know and how do I know it? :)
Money was different than it is now 40 years ago. It was different 30 years before that. I know this because wikipedia tells me that Nixon took us off the gold standard in the early 70s and that standard was established at Bretton Woods in the 40s. Because of this I apply a very high probability to the likelihood that our money will operate differently in the future then it does now.
I guess the problem I'm trying to solve is, if we are likely going to be using a new kind of money in the future, do I want that to be a good kind of money or a bad kind of money. I want it to be a good, human centered kind of money that help us solve hard problem and makes the world a better place.
I think I know that our money is 'bad' (sub-optimal may be a better word) because I look around our world and I see the following things:
A crappy income tax An inability to get money out of politics ultra poor people Ultra rich people Wasted human resources (see the entire finance industry) Corporations sitting on billions in cash when they could be ending cancer
I think changing our money can solve some of these issues because I've read the literature on what drives people to make economic decisions. If we can implement a system that rewires the drivers in a positive directions, we can solve some of these problems.
I think hypercapitalism is the answer because I've written some simple models that shows it is more efficient that regular capitalism. I left 10 other solutions on the cutting room floor before I put this together.