The first result I get when I search for "us homeless tent city" is https://www.latimes.com/california/story/2024-08-03/as-san-f... . That looks to me like a population who could make use of a bit more allocated capital. I don't buy the idea that capitalism is done in any country that still has substantial homeless populations; there is obviously a need for more something.
And I don't think the investors are confused by the situation; I mean, I know about it. I'm an investor and I'm claiming the trend is so big I can spot it from more than a continent away. ~40% of the US economy is government spending and there is a central planning committee that was publicly committed to keeping interest rates at 0% up until about 2 years ago which, funnily enough, makes it damn hard for rational people to make their voices heard on where money should go. The structurally important thing since '07 is positioning to be in the path of government largess and to be near the front of the queue for bailouts when the losses are realised. That isn't an environment where efficient capital allocation is possible.
Since efficient capital allocation is probably impossible, I don't expect it to be happening. It doesn't seem to be happening either, there are obviously opportunities, there is a huge and increasingly upset political constituency in the US who are screaming that the current situation isn't working for them.
I just dont see the global capitalist conspiracy to not make money in what you are saying.
What is the investor ROI for a typical homeless person?
Are you claiming they hate homeless more than they like making money?
>Since efficient capital allocation is probably impossible, I don't expect it to be happening. It doesn't seem to be happening either, there are obviously opportunities, there is a huge and increasingly upset political constituency in the US who are screaming that the current situation isn't working for them.
I think you are conflating efficiency of allocation and the availability of opportunities and rules of the system. Investors are allocating as efficiently as they can given the investment opportunities available.
There are are huge policy problems preventing the better opportunities. Central planning of the interest rate and 40% government spending is not an allocation selected or determined by the market, it is a policy choice.
Markets operation within the rules and incentive established by policy. What you are calling market failure is policy failure.
I don't think there is a point of disagreement on any of those matters; I never said it was a market failure. I'm complaining about the US's persistent decades-long policy failures. It seems self-evident to me that if investors are being corralled into P/E ratios up near 30 it is policy driven. Left to their own devices investors don't choose to invest in things with 30-year payback periods, they invest in things with 15-20 year paybacks.
> What is the investor ROI for a typical homeless person?
High? They're in a terrible negotiating position so anyone who can get them a better job & lifestyle can probably extract usurious profits. Finding and mobilising pools of cheap labour is one of the more reliable paths to prosperity. Market-driven capitalism is a heartless, brutal and effective machine for taking people like that and pushing their living standards up.
I doubt it'd be easy to do, but California's housing market happens to be a very obvious example of capital allocation failure right on the doorstep of the likes of Google.
If I'm an investor with 1million, how do I make money by helping a homeless person in California given the current laws and policies?
There is no option to allocate the capital to make money. That's why I think the problem is lack of options,not allocation. Allocation failure means a failure of investors to select an available option.
There seems to be a disagreement on terminology here. Would you agree that a hypothetical extremely communist society is automatically allocating capital correctly? Because under the definition you seem to be arguing for there is only one investor (the state), that investor has exactly one option under existing regulatory policy (the state's choice [0]) and therefore cannot misallocate capital.
That seems to be a weird understanding of capital allocation to me and my follow up if I'm reading you right is how would you describe a failure of central planning? They have capital, they misallocate it and get terrible results relative to the free market. Assuming that isn't capital misallocaiton to you, what is it?
It is hard for me to see how you'd even have a concept of capital misallocation that isn't implicitly "relative to a free market". Otherwise it'd be extremely challenging to even detect it even if capital was being deployed in a horribly stupid way.
[0] Noting that there are only administrative differences between the tax office taking $1 and spending it on something vs. the legislature telling someone that they have to spend $1 on the thing and that line of logic means that the state could implement its policies by directing investors.
>Would you agree that a hypothetical extremely communist society is automatically allocating capital correctly?
no, and I dont see how that follows at all. I think the opposite is more likely true due to the lack of markets. End stage communism is stateless (but that is a tangent).
If you have a single investor/state and law says exactly where the money goes, I would say that low capital efficiency is a policy failure, not a failure of the market to allocate.
I think this comes down to confusion of what a market is. A market has private buyers and sellers making exchange.
I grant that you could have a poor capital allocation by a government. I think the part that I vehemently disagree with is calling that a "market misallocation".
I suppose we're done here then, we don't agree on the terminology and there isn't much to be done.
It isn't important but if you can point at large community who uses capital allocation in that sense I'd be interested to know it. It seems like a weird usage to me because it would seem to imply that a fully (or even heavily) planned economy either doesn't have capital or don't allocate it; both flawed implications.
> I think the part that I vehemently disagree with is calling that a "market misallocation".
I didn't. I've been quite specifically talking about US government policy causing capital misallocations. The US bankers are generally very keen on the idea of getting richer and the US wouldn't have the sort of real metric stagnation it has if the policy settings weren't visibly stupid. Indeed, even then the market has attempted to reset the situation multiple times (politically interesting examples are '07, introducing Bitcoin and SVB's failure) and generally been stymied by active interventions to keep incompetent investors wealthy.
OK, I have been operating under the assumption that the capital allocation under debate was with respect to private markets because we started with the pricing of publicly traded stock pricing. Looking through the sequencing, I do note that you didn't specifically call out markets in your comments, and it was others invoking the idea of market failure of some sort.
It seems like I do agree with your assessment of government policy, but I still dont get where you were going with the communist thing.
And I don't think the investors are confused by the situation; I mean, I know about it. I'm an investor and I'm claiming the trend is so big I can spot it from more than a continent away. ~40% of the US economy is government spending and there is a central planning committee that was publicly committed to keeping interest rates at 0% up until about 2 years ago which, funnily enough, makes it damn hard for rational people to make their voices heard on where money should go. The structurally important thing since '07 is positioning to be in the path of government largess and to be near the front of the queue for bailouts when the losses are realised. That isn't an environment where efficient capital allocation is possible.
Since efficient capital allocation is probably impossible, I don't expect it to be happening. It doesn't seem to be happening either, there are obviously opportunities, there is a huge and increasingly upset political constituency in the US who are screaming that the current situation isn't working for them.