As the Austrian School has pointed out, the ultimate source of human poverty and failure lies in poor logic.
Here is an example from Forbes Magazine and a leading hedge fund investor who is also a major charitable donor genuinely devoted to helping humanity and the planet.
The editor of Forbes, Randall Lane, quotes Paul Tudor Jones, as follows:
There is no bigger threat to our democracy than wealth disparity. It is a story normally reserved for monarchies, dictatorships and plutocracies….We got into this pickle because over the past 40 years the corporate focus on profits took on manic proportions relative to other stakeholders such as employees, communities and the planet.
There are several things wrong with this logic. In the first place, a focus on profits is not at odds with a focus on employees, customers, communities, or the planet. Profit, properly defined, is the net present value of all future profits, that is, what you should be able to realize by selling that profit stream today. To maximize profit, therefore, one must take a long term view and seek to provide exemplary service over many, many years to employees, customers, communities, and the planet. What Paul Tudor Jones is describing is not profit maximization, but rather short term profit taking, which will actually reduce the net present value of all future profits. As Henry Hazlitt pointed out in Economics in One Lesson, real capitalism focuses on the long run, not just the short run, and considers all consumers, not just some.
The problem of course is that we have never had the benefit of real capitalism. Thanks to the interventions of government into the economy, and especially into the pricing system, we get crony capitalism instead. This is bound to happen in a monarchy or dictatorship. But, contra Mr. Jones, it is no less likely to happen in an American style democracy, as American history has shown. So long as government influences, manipulates, or controls prices, powerful special interests will strive to use the power of government to gain monopolies or other advantages. There are, however, certain periods in which government ( and in particular central bank) policy puts crony capitalism on steroids, with a resultant sharp increase in economic inequality, and that is what we are seeing today.
