Dumb Money

The juxtaposition in my RSS reader of Kedrosky's Venture Capital is an Attractive Nuisance, II and Organizations and Markets' Against Government Subsidized VC seems like a sign for me to comment on something I was striving to ignore.

Bloomberg announces a taxpayer subsidized venture capital fund just after the NBER publishes a paper on what a bad idea it is for the government to get involved in venture investing. Coincidence, of course, but shouldn't it be obvious to everyone that this is a bad idea?

I really don't understand why the bureaucrats think they can do better than the dozens of private venture capitalists and the hundreds of active angel investors in the city. We need more great startups in the city, not more investors vying to fund the few there are.

The best thing the city could do to encourage startup formation here is to make it easier to live here on a reasonable salary--startups can't afford to pay programmers like the banks can, at least not in the short-term. The City should encourage improvement of the physical infrastructure (mass transit, housing, office space, etc.) and let the invisible hand take care of the market.