Venture Capitalists: Doing More with Less

The destruction of farm jobs, and doing "more with less," since the 1700s has brought about economic prosperity.

In the Freeman, economist Steve Horwitz responds to the Doonesbury cartoon below and comes to the defense of maligned venture capitalists like Bain, who generate huge benefits for society by "doing more with less":  

"Innovation enabled us to create more food with less work (see chart above), freeing humans to create other valued products through other jobs. This destruction of jobs and reallocation of labor and capital are the true sources of prosperity. Bain Capital's attempts to allocate resources more effectively can lead to big-time profit for it and its investors—and increased prosperity for everyone else even as jobs are destroyed in the process. 

Government’s attempts to create jobs do not do more with less. On the contrary, politicians get votes by creating as many jobs as possible, and they have no incentive to care about the price tag or what if anything those jobs produce. In other words, politicians will tend to do less with more. That’s called waste. 

Profits guide firms like Bain to meet people’s needs. This can lead to a growth in employment for some companies and a drop for others. But ultimately it means that resources are better allocated, increasing prosperity for all. When more is done with less throughout a market economy, billions of people are made better off, which only shows that firms like Bain are not vultures preying on the dead, but bees bringing the pollen of life from plant to plant. They are about profits and people."

Click to enlarge.