Capital isn’t a thing

Sunday, August 3rd, 2014

Capital isn’t a thing, Eric Falkenstein says — it’s a ledger, a way of determining who gets the make decisions about various things, and who gets the fruits of those things:

The fact that a minority has most of the power to decide and access the fruits is a consequence of a past where individuals anticipated a future where such a ledger would continue to be valid. It’s always been popular to think, maybe we should have a jubilee, get rid of those ledgers and start again as equals! Given the power law distribution of wealth at all times such a proposal is perennially popular to those ignorant of history. Yet, if you do this every period, capital isn’t owned by any individual, and so would be completely mismanaged as happens in societies without stable property rights. If you do this at all you can expect an immediately higher default premium which would make an economy undercapitalized. Luckily, our Founding Fathers specifically anticipated these problems and so emphasized the republican nature of our government, not making everything a democratic process.

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