Another way to think of this: imagine two equally-sized countries A and B. A implements Sam’s suggestion, taxing everything at 2.5% pa, B doesn’t.
In A, people are happy, we’ll fed, Pursuing their interests, living meaningful lives.
In B they are not.
however, in A, companies and the economy are not growing so fast: resources are funnelled into a populace that takes but doesn’t give back.
Over a long period of time, the extra 2.5% growth in country B will become so meaningful that it will look back on the savages in country A and decide that it’s resources would be better off under B’s management.
The 2.5% tax doesn't mean country B is growing 2.5% faster. The 2.5% in country B could be sitting in a vault doing nothing or being spent on yachts. Conversely the 2.5% in country A is being invested in making the workforce more productive.
> In general it is right to assume that free capital will be used as productively as possible.
Only if you define 'productive' as 'generating more capital'.
Yes, over the very very long term, externalities that aren't accounted for (it doesn't matter whether we're talking about negative externalities not mitigated, or positive externalities not invested in) will eventually exact their toll on capital, but in the short, medium, and even moderately long term, any externalities that can possibly be dismissed as irrelevant to the fundamental mission of turning large piles of money into larger piles, will be.
It is also worth noting that by ignoring externalities until some crisis forces the issue, opportunities are opened up for capital to (quite profitably) address the resulting crisis. Whereas addressing an externality in a more timely manner, while reducing overall costs, even more sharply reduces those opportunities.
All of those things are true, but they are things you believe after you have evidence to believe them. That you should assume free capital is being used in the most productive way possible is the null hypothesis and something generally recognized as true, despite how much HN doesn't like it.
If country B in that case has extreme inequality it may actually struggle with economic growth as there isn’t enough purchasing power among the poor to drive consumption which generally is what drives corporate profits.
In that case it could be that country A outgrows country B because the restributive policies have a stimulus effect.
The thing is, we don’t know how fast society-wide experiments will turn out.
In the US, this is where federalism is advantageous. Allow different states to try different policies and then measure the outcomes. Over time, winning policies will emerge and spread across the country.
Could, say, California tax corporations net worth at a percentage of the revenue derived from California? (This is a downward extrapolation from the original article's proposal to deal with assets hidden overseas.) I'm queasy about the current SCOTUS's assent.
In A, people are happy, we’ll fed, Pursuing their interests, living meaningful lives.
In B they are not.
however, in A, companies and the economy are not growing so fast: resources are funnelled into a populace that takes but doesn’t give back.
Over a long period of time, the extra 2.5% growth in country B will become so meaningful that it will look back on the savages in country A and decide that it’s resources would be better off under B’s management.
It’s AI colonialism.