It hasn't really been set up this way. It didn't even evolve to be this way. It's ultimately a law of nature: ownership of capital yields exponential growth. The more you start with, the faster you grow. Most other sorts of vocations yield linear growth.
It absolutely has been set up this way, after having been set up in the opposite way for quite a while.
> Historically, some cultures (e.g., Christianity in much of Medieval Europe, and Islam in many parts of the world today) have regarded charging any interest for loans as sinful.
> The pivotal change in the English-speaking world seems to have come with lawful rights to charge interest on lent money,particularly the 1545 Act, "An Act Against Usurie" (37 H. viii 9) of King Henry VIII of England.
Usury and debtor's prisons, like slavery, died out not because they were morally reprehensible but because they gave way to more efficient means of achieving growth. Don't kid yourself.
> Usury and debtor's prisons, like slavery, died out not because they were morally reprehensible but because they gave way to more efficient means of achieving growth. Don't kid yourself.
The word “usury” means either the practice of making unethical loans, or simply charging any interest for loans. It should be clear that neither form of usury has died out — even if you consider regular loans ethical, surely you’ve heard of “payday loans”?
Neither has slavery but both ills are greatly diminished from their peak. It is now more profitable to do other things (lend at reasonable rates, pay wages) due to a variety of factors (mostly technology).
You objected to the assertion that society has been set up to reward ownership of capital. You somehow fail to acknowledge that when lending at interest is disallowed, owning capital does not automatically lead to accumulating more capital — a process which you called “a law of nature”, and which is clearly anything but.
The question is not whether reasonable interest rates are more profitable than others, but rather — whether society would be better off if lending at interest was disallowed altogether. I submit that it would.
> It hasn't really been set up this way. It didn't even evolve to be this way. It's ultimately a law of nature: ownership of capital yields exponential growth. The more you start with, the faster you grow. Most other sorts of vocations yield linear growth.
Anything with revenues in excess of expenses has the potential for exponential growth if you use the profits to expand the business. A successful landscaping business can have exponential growth, that doesn't mean each of the guys mowing lawns will be making exponentially more money.
But it has been set up that way in finance. It isn't a law of nature that mutual fund managers make a percentage of the fund as their compensation. The profitability of arbitrage is strongly influenced by the regulatory environment and the amount, timeliness and accuracy of information available to traders without privileged access.
Here's an example. I propose that we make insider trading entirely legal. According to all of the arguments used to justify HFT and the like this is the right choice because it will increase liquidity and more quickly and accurately reflect the true value of securities in their market price. Somebody please tell me why this argument is wrong in a way that doesn't apply equally to HFT.
It's hard to say. We're talking about humans and the systems we live within. Humans, by definition, have agency. When does an effect resulting from the actions of humans cease to be the product of agency?
Sure, where and how you draw those lines can be interesting, and possibly meaningful. I merely meant to raise awareness that you might have been addressing something the parent had not meant to say.
Exactly. The more leverage you have, the more money you (can) make. That's why we had a string of billionaires coming from internet companies (in a relatively short period of time) - internet enables a small team of humans to provide a service and sell to anybody in the world. Finance has a smaller, but less risky and longer-lasting leverage - invested money.
There's a slight problem there: real wealth rarely grows exponentially, and capital owners can only be paid via real wealth. So everyone else actually has a bargaining position.
