[ExI] the formerly rich and their larvae...

Rafal Smigrodzki rafal.smigrodzki at gmail.com
Wed Feb 13 04:30:50 UTC 2008

On Feb 12, 2008 9:20 PM, The Avantguardian <avantguardian2020 at yahoo.com> wrote:

> I don't see how this relevant to the discussion. Software is a
> commodity that ought to be as fungible as water and any scarcity is
> artificially induced by "extortion networks" as per Rafal.

### Not quite. I agree that the software that results in a
network-related vendor lock-in, such as Windows, is overpriced,
although I wouldn't call it "artificially induced" - Microsoft
dominance happened naturally because there are too few people with
enough foresight to care about vendor lock-in. However, most software
is fungible (i.e. you can choose another vendor without risking
incompatibility with other network members) and its occasionally high
price reflects the difficulty of making it.

> The absolute levels are not increasing as fast they could be *because*
> of the relative differences. The rich act as analogously to routers in
> Rafal's "network model" of the economy. The rich thereby act as "choke
> points" in the economic network and because of their scarcity.

### Only in feudal and other similar economies based on extortion.
Yes, feudal lords gained by physically extorting money, they were
choking the economy. This notion is easy to understand, since such
state of affairs has persisted since time immemorial. Capitalist rich
*are* different. Capitalists stimulate the economy, by taking risks,
by deferring their compensation, by organizing workers to serve
consumers. Yes, the economy is limited by capitalists - there are
simply too few of us to go around. If you want the economy to grow,
make sure never to punish a capitalist for making money.

 Just as
> having too few routers in a computer network can impede bandwidth, so
> too can having too few rich people impede the generation of absolute
> wealth by an economy.

### Yes! That's why you need more rich people, and the best method to
make them breed, like the giant panda, is to stop messing with them,

> Think about all the Thomas Edisons that languish in poverty all over
> the world because they lack funding for R&D for their inventions. All
> the new businesses and new industries that cannot be built because
> young entrepeneurs lack the seed capital for their ideas. Think about
> all the people willing to put everything they own into their wacky
> invention but don't have enough to even get started because the handful
> of rich are too risk averse to fund them even if they happened to have
> any kind of social access to the rich.
> Do you realize how many times Henry Ford was turned down by venture
> capitalists before he finally got the green light for his "wacky idea"?
> What if he had been half as stubborn and twice as creative? The
> opportunity cost to society due to inequity are enourmous.
### You seem to be putting the cart before the horse - you say we need
to soak the rich to get cash for bright young entrepreneurs. But, why
bother being an entrepreneur, if you know they'll take away your money
if you make it? This is the kind of problem that in the long run
brought down the commies. All ambitious and smart people (except the
honest ones) wanted to be bureaucrats, who got to push people around.
There was just no money in inventing stuff, or in raising cattle, so
there was no meat in shops and inventions, like a pocket calculator,
were things I got from my aunt in Chicago. In real life, if you want
to get cash for poor inventors, make sure that the rich investor (who,
chances are, started out as a hungry wannabe years earlier) gets his
money back and then some, so he may become even richer, and willing to
provide even more cash for the next big thing.

BTW, do you know what percentage of income is invested by the rich
(i.e. upper 1%)? What is the percentage for the average American? I
leave this as a googling exercise, since I don't have my copy of "The
Mystery of Capital" where AFAIK you can find the data. Still, the rich
keep the majority of their wealth in investments already, and there
isn't that much more that they can invest. People of average net worth
still own a huge amount of wealth and could invest much more but they
don't. So, it's not the rich but everybody else's lack of willingness
to invest that's choking the economy.


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