RECOMMENDED READING
A perplexingly common mistake among market evangelists is the assumption that wealth amassed represents value created. “There is one sort of labour,” wrote Adam Smith in The Wealth of Nations, “which adds to the value of the subject upon which it is bestowed: there is another which has no such effect. The former, as it produces a value, may be called productive; the latter, unproductive labour.”
Wealth can be a sign that tremendous value has been created for investors, customers and society more broadly. But wealth can also be captured rather than created. And while that works well for the capturer, the game is zero-sum, or even value-destroying, in aggregate. The private equity industry offers a fascinating case study in the importance of distinguishing between these scenarios.
Recommended Reading
Oren Cass Joins Bannon’s War Room to Discuss Financialization
The real Wall Street problem isn’t just the edge-case fraudsters or looters; it’s the entire exercise. Private equity, hedge funds, private credit: all these layers atop legitimate markets that create Read more…
The “Enormous Social Value” of Private-Equity Fees
The Wall Street Journal’s defense of private equity (“Populists Don’t Know Much About Private Equity”) is an impressionist masterpiece of market fundamentalism, relying on the unexamined assumption that fees paid to private-equity partners represent “social value.” One can simply step back and gawk in amazement, but true appreciation requires poring over each brushstroke.
Coin-Flip Capitalism: Q3 2020 Update
Commentary on developments in private finance and the Coin-Flip Capitalism debate as of Q3 2020
