Socialism 101

Dave Long
Tue, 04 Dec 2001 12:09:18 -0800

> Now, because C<<L, E may have an
> easier time pitching the plan if
> it is dubious[2] that V>>W, but
> are there other differences?

To continue arguing both sides of
the question (thanks to help from
some off-FoRK email):

1. assume that all parties share
   the same risk tolerance for
   their invested wealth, T.

In the partnership world, all the
ventures will be run so as to have
a risk of T or less (and, assuming
efficiency, average returns should 
be proportional).

In the capitalist world, many of
the ventures can be run at risks
of much greater than T, and the
capitalists will diversify their
holdings so their portfolios are
still only exposed overall to a
risk of T.

2. there are more possible risky
   ventures than less risky ones

(obvious to even the most casual

3. so we expect there to be more
   entrepreneurs with capitalist
   venture backing.

Note that we don't expect there
to be more wealth for the whole
ensemble of entrepreneurs; the
price of risk is that a few will
wind up with heaps of the ready,
and many with wallpaper.  Those
many, however, will be able to
say they suited up for the game.


What if both possibilities are
available?  With this model, we
would predict:

There will be many more large
capital-backed ventures than
partner-backed ones.

There will be many more old
partner-backed ventures than
capital-backed ones

Does the evidence agree?