Capitalists Don't Contribute
Robert Vienneau
Suppose we begin on 1 January 1997 and survey the entire stock of
goods held by all firms in a country that engages in no foreign
trade. We will find in our inventory half-finished goods, machinery
of various sorts that will last many years, raw materials, and
land of various qualities.
Now we imagine the workers work for an entire year. On 1 January 1998
we take another survey. Suppose we find that the resulting inventory
can replace all the goods in our first inventory, with some left
over. The land of various qualities is still there, and it was maintained
to be as good as previously. A machine that was new on 1 January 1997
is now a year old, but we imagine a new machine was produced in that
year. The machince that is new in 1 January 1998 is not part of the
net product, but the one-year-old machine is. The workers have used
the half-finished goods and raw materials to make other goods, but
some workers have reproduced another set of half-finished goods and
harvested additional raw materials to replace those used up.
After reproducing the stock that existed on 1 January 1997, this country
is left with a vector of all sorts of goods produced in the year.
When combined with the goods consumed during the course of the
year, we end up with the net product for 1997. This net product
is a heterogeneous collection of goods.
A certain number of workers have produced the net product with a
collection of natural resources and capital goods that have been
reproduced. Notice that the capital goods with which we started
were the result of workers' production in previous years.
That's what goes on in the firms. How about the households?
We can imagine in this model that some households consist solely
of workers, and others consist solely of owners who hold pieces
of paper, each piece of paper claiming ownership of a fraction of
the value of the capital stock. (By "value," I merely mean a sum
of prices.)
The workers, who have produced all the net product, receive in
wages only part of the value of the net product. As a simplifying
assumption, assume the workers spend their entire income.
The owners receive the remainder of the value of the net product.
Roughly, each receives an amount in proportion to the value of the
stock of the capital goods that they hold. (There's some complications
for differential rent of land which I am ignoring.)
Assume the owners save some fraction of the value of the part
of the net product which they receive.
A diagram is useful for visualizing the money and real flows in
this story:
+--- Consumption goods ----- -- $ Total receipts -+
| +- $ Workers consumption -> RETAIL |
| | +- Consumption goods -- & <-- Net product -+ |
| | | +-- $ Capitalist WHOLESALE | |
| | | | consumption -> MARKETS - New capital | |
| | | | +- $ investment -> goods -----+ | |
| | | | | | | |
| | | | | | | |
| | \|/ | | \|/ | \|/
| | Owners <------------ $ Profits ------------ INDUSTRY
| | (inter-
| +- Workers <------------ $ Wages -------------- industry
+--> ------------- Labor ----------------> flows)
HOUSEHOLDS
This is clearly a story about capitalism. And it seems to provide some
insight into what is going on in a capitalist society. For example, some
accounting identities can be obtained from the diagram. Also notice how this
diagram stands up to dimensional analysis.
You will find the above diagram in few, if any, introductory economics
textbooks. Instead, most textbooks have a "circular flow" diagram that
reflects a thorough mystification about capital and leads the student
to the confused belief that capitalism is somehow "natural."
Note the owners provide no direct inputs into production in the above
diagram. They are paid profits for no material inputs at all. Profits
are not the result of some sort of exchange of goods or services for
profit income. This suggests that wages are not exchanged for labor,
or at least the trade is not fair. It is exploitative:
"From the point of view of Political Economy, however, the most
important fact is that while wages are paid for work, and one can
(and in some circumstances should) think of the wage bill, equal
here to Worker Consumption, as reproducing the power to work,
*profits are not paid for anything at all*. The flow of profit
income is not an exchange in any sense. The Samuelson [circular
flow] diagram...is fundamentally misleading; there is no 'flow'
from 'household supply' to the factor market for capital. The
*only* flow is the flow of profit income in the other direction.
And this, of course, leads straight to that hoary but substantial
claim that the payment of wages is not an exchange either, or at any
rate, not a fair one. For Wages plus Profits adds up to the Net
Income Product; yet profits are not paid for anything, while wages
are paid for work. Hence the work of labor (using the tools,
equipment, etc., replacement and depreciation of which is already
counted in) has produced the entire product. Is labor not
therefore exploited? Does it not deserve the whole product?
-- Edward J. Nell, "The Revival of Political Economy"
--
Robert Vienneau
r
v
i
e m
n o Whether strength of body or of mind, or wisdom,
@ c or virtue, are always found...in proportion to
d . the power or wealth of a man [is] a question
r e fit perhaps to be discussed by slaves in the
e p hearing of their masters, but highly unbecoming
a a to reasonable and free men in search of the
m c truth.
s -- Rousseau
Edward Flaherty
Robert Vienneau wrote:
> I take the following story from the New School economist Ed Nell.
>
[snip]
> Note the owners provide no direct inputs into production in the above
> diagram. They are paid profits for no material inputs at all. Profits
> are not the result of some sort of exchange of goods or services for
> profit income. This suggests that wages are not exchanged for labor,
> or at least the trade is not fair. It is exploitative:
>
> "From the point of view of Political Economy, however, the most
> important fact is that while wages are paid for work, and one can
> (and in some circumstances should) think of the wage bill, equal
> here to Worker Consumption, as reproducing the power to work,
> *profits are not paid for anything at all*.
I find it remarkable that anyone can actually believe this.
How did the firms come to be? How do they continue to be?
Do capital and labor spontaneously self-assemble into a
cohesive productive unit? Of course not. They have to
be organized into a specific market activity. Someone has
to gather the resources into a firm. Someone has
to decide what the firm will produce. Someone has to take
the financial risk and responsibility for failure and success.
Someone has to make the non-routine business decisions.
These are the jobs of the entrepreneur.
Anyone arguing the entrepreneur does not contribute anything
to the production process clearly does not understand the full
process.
The normal profit is the entrepreneur's opportunity cost. He
must expect to earn at least the normal profit to continue to
stay in that industry, otherwise he will switch to his next best
alternative.
Moreover, the binomial distribution of workers and owners
in the model just isn't realistic. Millions of people are both
workers and capitalists.
> The flow of profit
> income is not an exchange in any sense. The Samuelson [circular
> flow] diagram...is fundamentally misleading; there is no 'flow'
> from 'household supply' to the factor market for capital.
What are entrepreneurs, then? Space aliens? They are households,
as well.
> The
> *only* flow is the flow of profit income in the other direction.
> And this, of course, leads straight to that hoary but substantial
> claim that the payment of wages is not an exchange either, or at any
> rate, not a fair one. For Wages plus Profits adds up to the Net
> Income Product; yet profits are not paid for anything, while wages
> are paid for work. Hence the work of labor (using the tools,
> equipment, etc., replacement and depreciation of which is already
> counted in) has produced the entire product. Is labor not
> therefore exploited? Does it not deserve the whole product?
Please spare us the "workers of the world unite" crap.
--
Edward Flaherty
School of Business & Economics
College of Charleston
flah...@cofc.edu
Office phone: (843) 953-7166
Fax: (843) 953-5697
Web site: http://www.cofc.edu/~flaherty/index.html
SUSUPPLY
>Robert Vienneau wrote:
>
>> I take the following story from the New School economist Ed Nell.
>>
>
>[snip]
>
[more snipping by me]
>I find it remarkable that anyone can actually believe this.
Fatal flaw #1: You aren't dealing with "anyone", Ed. This is Robert.
[snip]
>Anyone arguing the entrepreneur does not contribute anything
>to the production process clearly does not understand the full
>process.
Fatal flaw #2: Or inhabits the Vieneauian Fantasy Island. Speaking of
islands, Robert still owes me some answers about Friday and Crusoe--and this
post of his is just a complication of that one.
[snip]
>Moreover, the binomial distribution of workers and owners
>in the model just isn't realistic. Millions of people are both
>workers and capitalists.
Fatal flaw #3: Robert is in denial on this (he's never heard of Bill Gates and
his 15 hour work day).
Whaddya, some kind of neo-classical economist or something?
[snip]
>What are entrepreneurs, then? Space aliens?
Fatal flaw #4: They might as well be, for all the experience Robert has had
with any.
[snip]
>Please spare us the "workers of the world unite" crap.
Fatal flaw #5: What fun would life be in upstate New York, if you can't
indulge in a little ostentatious compassion for "the rank and the vile"?
Patrick
Robert Vienneau
> Robert Vienneau wrote:
>
> > I take the following story from the New School economist Ed Nell.
> >
>
> [snip]
>
>
> > Note the owners provide no direct inputs into production in the above
> > diagram. They are paid profits for no material inputs at all. Profits
> > are not the result of some sort of exchange of goods or services for
> > profit income. This suggests that wages are not exchanged for labor,
> > or at least the trade is not fair. It is exploitative:
> >
> > "From the point of view of Political Economy, however, the most
> > important fact is that while wages are paid for work, and one can
> > (and in some circumstances should) think of the wage bill, equal
> > here to Worker Consumption, as reproducing the power to work,
> > *profits are not paid for anything at all*.
> I find it remarkable that anyone can actually believe this.
I don't find Edward's lack of knowledge and incoherences at all
remarkable.
> How did the firms come to be? How do they continue to be?
> Do capital and labor spontaneously self-assemble into a
> cohesive productive unit?
What is Edward talking about? My argument had a complete complement
of capital goods. What does Edward mean by capital? Is he confusing
money with produced commodities that can be used in the production
of more commodities? By a firm, does Edward mean to refer to an
institution organized in a hierarchical and authoritarian fashion?
It would seem that recognition of the existence of such institutions
under capitalism would strengthen the argument that returns to
capital are due to the exploitation of workers.
Somebody well educated in economics might connect up the diagram I
took from Nell with Michel Kalecki's macroeconomics. Kalecki presented
his macroeconomics with theories of how firms work. Kalecki's
microeconomics were very influential, albeit some think early
formulations tended towards tautology. Anyways, Kalecki's work
suggests the argument in my post is completely consistent with
the existence of capitalist firms.
I'm not sure if this addresses Edward's point. So let me turn to
an argument about why firms exist. I take the following points
from:
Geoffrey Hodgson, "Marx after Robinson: Production, Exchange, and
Related Matters", _The Joan Robinson Legacy_, edited by Ingrid H.
Rima, M. E. Sharpe, 1991.
Hodgson argues that the distinction between labor-income and
property-income turns on Knightian uncertainty. The idea is
that when my employer hired me, we did not agree to an implicit
contract in which all the jobs I might do are specified. Rather,
I agreed to let my employer direct my labor. You might note that
when a firm rents a capital good (e.g. an axe), the firm
doesn't specify all the activities it may use the axe for either.
But the firm doesn't obtain the services of a self-directed
agent when it gets the axe. My employer wants me to
accept their direction, but also to use my own intelligence in
figuring out the details of my job. (My job doesn't have to be
particularly intellectual - like computer programming - for this
argument to go through.)
Suppose I worked in an environment of probablistic risk. Both my
employer and I could list all the tasks I might do, and we could
assign a probability that I would do any given task. Based on a
state of nature I do some task. If I were to agree to be paid to
take a job of this nature, I am not submitting to my employer's
authority in some sense. I am merely agreeing to supply a mixed
basket of concrete labor activities, as in von Neumann and
Morgenstern's axiomatization of utility theory.
I guess a mainstream economist who rejects concepts of fundamental
uncertainty would say that's how employment contracts are. These
tasks and probabilities are not written down, but they're implicit
in the agreements reached between employers and employees. After all
under "rational expectations," everybody knows all probabilities.
But, according to Hodgson, that's not the typical job in a
firm today. Rather, we live in a world in which there is non-insurable
uncertainty. In particular, neither the employer nor the employee
can foresee all the tasks the employee may need to do to keep
the business running. In agreeing to employment, workers agree to
to be paid to accept the direction of their employer.
When capitalists lend out their money, or "rent out their capital" as
many economists would have it, they do not agree to accept anybody's
direction. Granted, the borrower is able to decide how to use
the "capital," but that's a different matter than directing the
activities of an individual.
I'm not sure that fundamental uncertainty explains why institutions
take these forms under capitalism. The weaker claim is rather that the
concept of fundamental uncertainty is needed to make sense of this
difference between property income and wages.
There we have a distinction between wages and property income
that links up with ideas of exploitation. The agreement to work
for wages is not entirely a market contract since the terms of
the contract are incompletely specified.
Hodgson connects his modernization of Marx up with certain
literature on the firm, particularly Coase, Williamson, and
a neo-Austrian (?) Langlois. He argues that transaction costs
cannot explain the existence of the firm if they are just some
constant ratio, like transportation costs. Rather, this
explanation only makes sense in a world with Knightian
uncertainty. In this world, not all states with positive
probability can even be specified. This is why capitalists
make the kind of agreements with workers that they do.
Elsewhere in Hodgson's writings, he suggests - or at least I
read him as suggesting - that he finds an anarcho-syndicalist
system appealing. I don't think he thinks there's any convincing
reason to think its less efficient than capitalism. He explains
why we have yet to see many attempts at such systems on the
grounds of an evolutionary argument.
I guess this uncertainty would be manifested in a non-exploitative
post-capitalist society, if any ever come to exist, in the existence
of syndicates.
> Of course not. They have to
> be organized into a specific market activity. Someone has
> to gather the resources into a firm. Someone has
> to decide what the firm will produce. Someone has to take
> the financial risk and responsibility for failure and success.
> Someone has to make the non-routine business decisions.
> These are the jobs of the entrepreneur.
>
> Anyone arguing the entrepreneur does not contribute anything
> to the production process clearly does not understand the full
> process.
It would be nice if Edward's reply had some relevance to my post.
My post presented an argument that capitalists did not contribute
anything to production. The supposed contributions of capital
and entrepreneurship are distinct concepts. I said nothing about
whether entrepreneurship did or did not contribute to
production.
> The normal profit is the entrepreneur's opportunity cost. He
> must expect to earn at least the normal profit to continue to
> stay in that industry, otherwise he will switch to his next best
> alternative.
Edward is being silly. Entrepreneurship can explain disequilibrium
variations around a normal rate of profit. It is not clear that
entrepreneurship would receive any non-zero return in equilibrium.
Suppose one argues otherwise. Specifically, suppose one argues
that entrepreneurs will receive a return at least equal to the
best return that they can receive by putting their effort elsewhere.
This opportunity cost explanation of the returns to entrepreneurship
leaves it as a kind of (perhaps high) wage. A regular return
proportional to the monetary (capital) value of the resources
of the firm is still unexplained.
See, that's the difference between the returns to capital and
the returns to entrepreneurship.
> Moreover, the binomial distribution of workers and owners
> in the model just isn't realistic. Millions of people are both
> workers and capitalists.
So what? My post was meant to highlight a difficulty, not to
support Edward's blurring of distinctions.
"Once we assume this production is founded on capital, the condition
that the capitalist must introduce into circulation values that he
has created - whether through his own labour or otherwise, since he
does not yet have available wage-labour, either present or past -
in order to set himself up as a capitalist, now belongs to the
antediluvian conditions of capital; it belongs to the historical
prerequisites, which already as such are past, and thus belong to
the history of its development and not in any way to its
contemporary history, i.e. not to the real system of the mode of
production that it controls... In the original transition from
money, or value existing in its own right, to capital, there is
presupposed an accumulation by the capitalist (achieved, perhaps,
by saving the products or values created by his own labour),
which he accomplishes before he was a capitalist. Thus although
money becomes capital as a result of prerequisites which are
determined and external to capital, as soon as capital as such
has come into existence, it creates its own prerequisites,
namely the possession of real conditions for the creation of
new values without exchange - through its own process of
production. These prerequisites, which were originally conditions
of its formation - and thus could not yet arise from its action
as capital - now appear as the results of its own realisation,
its own reality, as established by it - not as the condition of
its coming into being, but as the results of its existence.
Capital no longer precedes from its prerequisites in order to
develop; it is its own prerequisite, and proceeds from itself,
creating the presuppositions of its maintenance and growth...
This means that individual capital can still be formed, for
example by hoarding. The hoard is, however, only changed into
capital by exploitation of labour. Bourgeois economists, who
consider capital to be an eternal, natural (and not historical)
form of production, are always seeking to justify it, in that
they portray the conditions of its formation as the conditions
of its present realisation. They present the conditions in which
the capitalist (because he is still developing into a capitalist)
still has a non-capitalist mode of appropriation as the very
conditions of capitalist appropriation. These attempts at
apology indicate a bad conscience, and an inability to harmonise
the means of appropriation of capital, as capital, with the
general laws of property proclaimed by capitalist society itself."
-- Karl Marx, _The Grundrisse_
> > The flow of profit
> > income is not an exchange in any sense. The Samuelson [circular
> > flow] diagram...is fundamentally misleading; there is no 'flow'
> > from 'household supply' to the factor market for capital.
> What are entrepreneurs, then? Space aliens? They are households,
> as well.
I suppose one could include a kind of wage of superintendence in the
argument in my post. Syndicates might even give some of their members
a bigger share of their product than others. So?
> > The
> > *only* flow is the flow of profit income in the other direction.
> > And this, of course, leads straight to that hoary but substantial
> > claim that the payment of wages is not an exchange either, or at any
> > rate, not a fair one. For Wages plus Profits adds up to the Net
> > Income Product; yet profits are not paid for anything, while wages
> > are paid for work. Hence the work of labor (using the tools,
> > equipment, etc., replacement and depreciation of which is already
> > counted in) has produced the entire product. Is labor not
> > therefore exploited? Does it not deserve the whole product?
> Please spare us the "workers of the world unite" crap.
Edward's understanding might be improved if he realized that the
account of exploitation in the work of Nell and others is an abstract
realistic economic description, not necessarily a quasi-legal or
ethical concept.
Perhaps Edward should hang out on sci.econ.research. It is moderated,
if it is active. Then Edward could try to influence the moderation
policy so he need not see arguments he cannot answer and that make
him uncomfortable.
Donald L. Libby
>
> Robert Vienneau wrote:
>
snip
> How did the firms come to be? How do they continue to be?
> Do capital and labor spontaneously self-assemble into a
> be organized into a specific market activity. Someone has
> to gather the resources into a firm. Someone has
> to decide what the firm will produce. Someone has to take
> the financial risk and responsibility for failure and success.
> Someone has to make the non-routine business decisions.
> These are the jobs of the entrepreneur.
> > And this, of course, leads straight to that hoary but substantial
> > claim that the payment of wages is not an exchange either, or at any
> > rate, not a fair one. For Wages plus Profits adds up to the Net
> > Income Product; yet profits are not paid for anything, while wages
> > are paid for work. Hence the work of labor (using the tools,
> > equipment, etc., replacement and depreciation of which is already
> > counted in) has produced the entire product. Is labor not
> > therefore exploited? Does it not deserve the whole product?
Of course the workers are exploited - exploitation is an unavoidable
fact of work life, whether they exploit themselves or someone else. The
!Kung of the Kalahari make their living by exploiting their intimate
knowledge of plants, animals, and the cyclical nature of thier habitat,
which they exploit to their best advantage.
The true question is whether their exploitation is fair: whether the
exchange of wages for labor or of profits for capital is a fair
exchange. Is labor not entitled to the whole product of their work?
Yes, if they are the only people involved in the process of production.
In most cases, they are not, as Ed points out.
In the case of the local cooperative grocery store in my town, the
workers are in fact the owners and operators and board of directors, and
therefore entitled to whatever profits they can extract by exploiting
their customers, which is only an issue if the exchange of cash (or
barter in some cases) for food is not a fair exchange. The issue is
"fairness", not "exploitation".
Some of the co-op workers (some of whom play on an ultimate frisbee team
called the "East-Side Anarchists") have decided to defect to
better-paying jobs as managers at the publicly-owned natural/organic
grocery-store chain "Whole Foods Market, Inc." They are entitled to
become owners as well by purchasing stock on the open market (Nasdaq:
WFMI; http://www.wholefoods.com) or by negotiating an employee stock
ownership plan through collective bargaining. Who can blame these
people for exchanging their human capital (knowledge gained from their
experience at the co-op) for better pay and benefits?
-dl
--
Donald L. Libby, PhD (dli...@facstaff.wisc.edu)
NOTE: TO REPLY BY E-MAIL REMOVE "nospam!" FROM MY RETURN ADDRESS
Opinions are my own not those of my employer.
Visit the Network at
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Steve
Robert Vienneau <rv...@see.sig.com> explained in painful detail why he is a
fucking moron news:rvien-02029...@ua6-p42.dreamscape.com...
>Edward Flaherty <flah...@cofc.edu> wrote:
>
>> Robert Vienneau wrote:
>>
>> > I take the following story from the New School economist Ed Nell.
>> >
>>
>> [snip]
>>
>>
>> > Note the owners provide no direct inputs into production in the above
>> > diagram. They are paid profits for no material inputs at all. Profits
>> > are not the result of some sort of exchange of goods or services for
>> > profit income. This suggests that wages are not exchanged for labor,
>> > or at least the trade is not fair. It is exploitative:
>> >
>> > "From the point of view of Political Economy, however, the most
>> > important fact is that while wages are paid for work, and one can
>> > (and in some circumstances should) think of the wage bill, equal
>> > here to Worker Consumption, as reproducing the power to work,
>> > *profits are not paid for anything at all*.
>
>> I find it remarkable that anyone can actually believe this.
>
> I don't find Edward's lack of knowledge and incoherences at all
>remarkable.
>
>> How did the firms come to be? How do they continue to be?
>> Do capital and labor spontaneously self-assemble into a
>> cohesive productive unit?
>
> What is Edward talking about? My argument had a complete complement
>of capital goods. What does Edward mean by capital? Is he confusing
>money with produced commodities that can be used in the production
>of more commodities?
Economies don't function in that way Robert. Trying to masturbate in public
to a naked picture of Joan Robinson is not useful to your credibility.
By a firm, does Edward mean to refer to an
>institution organized in a hierarchical and authoritarian fashion?
>It would seem that recognition of the existence of such institutions
>under capitalism would strengthen the argument that returns to
>capital are due to the exploitation of workers.
Fuck you Robert. I own my own company and if one my contract employees does
not perform they are fucking out the door. So screw off and die you
worthless piece of crap. I am a dictator in my business. That doesn't mean
that I don't have to treat people kindly and encourage good work and reward
it it only means that I make the rules and if you are working for me and
don't play by my rules you are fired.
[snip of moronic argument about the economy emerging by spontaneous
generation]
SUSUPPLY
even the most patient among us have our limits.
It certainly can't be helpful to serious people on this newsgroup to have
Robert's sophomoric insults (only slightly above the level of Mr. Shagnasty's)
constantly directed at the few professionals who chime in from time to time.
It's posters like Robert who are responsible for the dearth of such. Why
should they bother to waste their time with such nonsense as that in which he
specializes. ( When was the last time we heard from Bill Vogt?) Thank you
again, Robert for your contributions.
>> I don't find Edward's lack of knowledge and incoherences at all
>>remarkable.
I'm sure he's run across his share of pompous asses too.
>> What is Edward talking about? My argument had a complete complement
>>of capital goods. What does Edward mean by capital? Is he confusing
>>money with produced commodities that can be used in the production
>>of more commodities?
>
Maybe he simply realizes that money capital is a tool. A tool that allows the
coordination of activity in time and space. Such coordination being
responsible for the unprecedented wealth we all enjoy in late 20th century
America. Even the love child of Joan Robinson and Ringo Starr (thanks to an
e-mail correspondent for the metaphor) should be able to appreciate that.
Robert never has been able to answer the question put to him numerous times:
Are the workers engaging in Marxian exploitation--the harmful use of another
for one's own purposes--if the workers destroy the capital?
After working out the answer to that Robert, try resuscitating Ptolemy's
explanation of the movement of the "solar system". Obviously, cold showers
aren't keeping you from mischief.
Patrick
Dan Parker
>
> > I take the following story from the New School economist Ed Nell.
> > equipment, etc., replacement and depreciation of which is already
> > counted in) has produced the entire product. Is labor not
> > therefore exploited? Does it not deserve the whole product?
>Edward Flaherty wrote:
>Please spare us the "workers of the world unite" crap.
Should be please spare us the labor theory of value crap.
Machines do most of the production, and now machines
are starting to make other machines. This is all occuring
even though automation is being held back to keep
the industrial age paradigms of employment from falling
off the scale. And yes people can be kept busy doing
the most useless things, but this doesn't mean automation
creates new jobs in the conventional sense. It's primarily
a banking industry issue to distribute the production
so that people can do what they please after their
10 or 20 hour work week (and a psychological issue
for people who need a certain amount of structure in
their lives).
"The gratification of wealth is not found in more possession or in lavish
expenditure, but in its wise application" - Cervantes.
Edward Flaherty
Dan Parker wrote:
>
> >Edward Flaherty wrote:
>
> >Please spare us the "workers of the world unite" crap.
>
> Should be please spare us the labor theory of value crap.
Empirically, measures of labor productivity such as education,
experience, job tenure (and others) explain about 40-50%
of wage variation between otherwise identical workers. This
is just as labor theory predicts.
The reason so many economists accept the marginal productivity
theory of wages as true is because it's backed up with
substantial empirical support.
If this is "crap," then by all means, let's have more of it.
Robert Vienneau
> Dan Parker wrote:
> > >Edward Flaherty wrote:
> > >Please spare us the "workers of the world unite" crap.
> > Should be please spare us the labor theory of value crap.
> Empirically, measures of labor productivity such as education,
> experience, job tenure (and others) explain about 40-50%
> of wage variation between otherwise identical workers. This
> is just as labor theory predicts.
Some Marxists would say that the quantity of labor embodied in
the labor power of skilled workers is the amount of labor
socially necessary to maintain and train the skilled laborers.
Somehow I doubt that this theory is what Edward is trying to
defend above. But his further explanation doesn't seem any
more relevant to this thread.
> The reason so many economists accept the marginal productivity
> theory of wages as true is because it's backed up with
> substantial empirical support.
> If this is "crap," then by all means, let's have more of it.
Many would doubt the worth of extending my summary of Nell's
argument into a theory of equilibrium. But let's consider the
prices that prevail in a long period position under competitive
conditions anyways. If labor can be expressed as a homogeneous
quantity, the wage and the rate of interest would lie on the
so-called factor-price frontier. If there are N heterogeneous
types of labor, the factor-price frontier would be an
N-dimensional surface in an N+1 dimensional space. In any case,
the wage of each type of labor would be equal to the value of
the marginal product of that type of labor for every point on the
frontier. Yet, if the rate of profits is positive, Nell's
argument applies. Labor can be exploited (in a sense that has
been formally defined) when all each wage are equal to the value
of the marginal product of that type of labor.
If Edward's point was to contradict Nell's argument, he has
made a logical error. The marginal productivity theory of
wages, assuming it is expressed with correct arithmetic, is
not inconsistent with the assertion that the returns to capital
result from the exploitation of workers.
Or perhaps Edward objects to my summary of Hodgson's attempt
to treat the internal structure of the firm as something
other than a black box. Who can tell? I guess he has merely
misread Dan Parker.
To summarize - I presented an argument that capitalists obtain
a part of the net income when workers are exploited in a
capitalist economy. Edward has not even attempted to give an
account of the returns to capital. Instead, he has presented
irrelevant comments about the returns to entrepreneurship and
wages.
Jim Blair
> Economies don't function in that way Robert. Trying to masturbate in public
> to a naked picture of Joan Robinson is not useful to your credibility.
.....
> Fuck you Robert. ....
> [snip of moronic argument about the economy emerging by spontaneous
> generation]
Hi,
I think you and SUSUPPLY are being a bit too hard on Robert Vienneau (so
to speak). He is obviously a bright guy who is well read in economics,
and up on classical physics field theory. (In fact, one of his problems
is that he thinks it applies to economics).
If we lived in a static economy, some of his ideas would have merit.
That is hard for you to understand, since in the real world, at least
since the industrial revolution, the economy is far from static.
Maybe I can find the time to explain why his ideas just don't apply to
the real world. But he has contributed some interesting items to some of
the sci.econ discussions. He comes across as nasty and bull headed, but
hey, no one is perfect.
--
,,,,,,,
_______________ooo___(_O O_)___ooo_______________
(_)
jim blair (jeb...@facstaff.wisc.edu) For a good time call
http://www.geocities.com/capitolhill/4834
Dan Parker
>
> Dan Parker wrote:
>
> >
> > >Edward Flaherty wrote:
> >
> > >Please spare us the "workers of the world unite" crap.
> >
> > Should be please spare us the labor theory of value crap.
>
> Empirically, measures of labor productivity such as education,
> experience, job tenure (and others) explain about 40-50%
> of wage variation between otherwise identical workers. This
> is just as labor theory predicts.
>
> theory of wages as true is because it's backed up with
> substantial empirical support.
>
> If this is "crap," then by all means, let's have more of it.
Ah yes productivity, as measured by GDP, which considers
disasters, as well as construction, to be growth.
The fact that the substantial empirical support
has the built in bias of regarding such things
as car accidents, incarceration rates, the Exxon
Valdez disaster, the Manitoba flood etc as more
'productivity' is of course insane.
The only logic in any of this is that the nonsense
is in place to try to create a world government.
Now I know it took the Pope 200 and some years
to admit Galileo was correct, and I know you
guys will go on at least as long as this
until you have a way out, so I gotta work
with those who are looking at ways out of the
bag.
Anyone else who wants to dispute the obvious
will have to do their own research.
A starting point
The Truth in Money by engineer Theodore Thoren
Do the keywords, hit the links esp Humane
World Community, and learn the reality
Bye
Dan
Bill Terrell
> Ah yes productivity, as measured by GDP, which considers
> disasters, as well as construction, to be growth.
> The fact that the substantial empirical support
> has the built in bias of regarding such things
> as car accidents, incarceration rates, the Exxon
> Valdez disaster, the Manitoba flood etc as more
> 'productivity' is of course insane.
As you intimate, GDP is a false god in economics. It is a far better
measure of trade than of wealth. Economically speaking, I am of the
capitalist denomination. But I have yet to hear anyone make a good
argument as to why a so-and-so-many something-point-something percent
annual increase in GDP is something worthy of pursuit..
Edward Flaherty
Dan Parker wrote:
> Edward Flaherty wrote:
>
> > Empirically, measures of labor productivity such as education,
> > experience, job tenure (and others) explain about 40-50%
> > of wage variation between otherwise identical workers. This
> > is just as labor theory predicts.
> >
> > The reason so many economists accept the marginal productivity
> > theory of wages as true is because it's backed up with
> > substantial empirical support.
> >
> > If this is "crap," then by all means, let's have more of it.
>
> Ah yes productivity, as measured by GDP...
I never mentioned GDP, you did. Wages are stronglyrelated to measures
of employee productivity, such as
education, experience, job tenure, etc. This is as labor
theory predicts.
--
Edward Flaherty
School of Business & Economics
College of Charleston
Office: (843) 953-7166
jim blair
......
The role of the capitalist and the entrepreneur.
A recent post has raised to old question of what (if any)
role is played by the capitalist and the entrepreneur in
modern western socities.
Robert Vienneau (who else?) has provided the example of a
static economy which is "at equilibrium" with pre-existing
factories. He then shows that the facrories can continue
to function, and that the money paid to the owners can be
considered as having been deducted from the wages of the
workers.
Not content with this flight from reality, he also introduces:
>We can imagine in this model that some households consist solely
>of workers, and others consist solely of owners who hold pieces
>of paper, each piece of paper claiming ownership of a fraction of
>the value of the capital stock. (By "value," I merely mean a sum
>of prices.)
This model may actually had some validity prior to the stock
market, 401K, IRA and retirement plans. Like maybe a over a
hundred years ago. Today most people are both, to some
degree, and at different times in their life. Most are
primarily workers when young. But as they age and save, they
own stocks (either directly, or through pension plans). Recent
reports are that over 40% of US households now buy stocks, and
that figure has been rising rapidly. Thus they are part worker
and part capitalist.
By retirement many are full time capitalists, living from
investments. Consider the example of that icon of the US
worker, the member of the teamsters union. The teamsters have
been a powerful union for decades and they built up a large
retirement fund. Then the question was what to do with all of
that money in the fund. Back in the 1960's they invested a lot
of it in Las Vegas hotels and casinos (some claim this involved
Mafia connections). At any rate the profits from many of the big
Las Vegas hotels are providing for retired teamsters.
He also adds this comment:
>Note the owners provide no direct inputs into production in the
>above diagram. They are paid profits for no material inputs at all.
Note the "no MATERIAL imputs". More on this later.
THE REAL WORLD
Now for a look at the real world of the 20th century. For
an overview, see the "Dynamic or Static?" file at:
http://www.geocities.com/capitolhill/4834/dynamic.txt
The point is that the economy is in constant flux. New ideas
and new industries are "poping up". But just where do they
COME FROM?
This is where the capitalist and the entrepreneur fit into the
picture. They are two different roles (but often the same
person fills both).
An entrepreneur sees an opportunity: a new product or new
idea. A concept (not a "material imput").
But many people have ideas. If an idea is to have a chance,
someone must put up the money to give it a try. This is
the capitalist. They risk money paying people and organizing
a trial of the new idea or product. Building a factory or a
new kind of tool. (I call that a "material imput"). It may
succeed, find a market, start a business or an industry. Or
it may fail and the capital risked be lost.
It may be entirely a new idea, or just expanding or a
modification of an existing plant. But money is put at
risk. The profit is the return paid for that risk.
Even when a new idea is not introduced, the existing factory
must be maintained. Machines and tools must be replaced when
they wear out or become out of date.
Say in a factory, each worker is using $100,000 worth of capital
(on average) in the form of tools, machines, computers, and
building, etc. And that 10% must be replaced each year. That
is $10,000 per worker that must be deducted from output (potential
wages?) each year. The $10,000 could come from the wages of the
workers, or from the owners (capitalists). But it must come from
SOMEWHERE.
So are profits "deducted" from wages? Well, that is one way to
look at it. But since the capitalist who built the factory in
the first place COULD have invested even more money and built in
robots and greater automation to the extent that no workers
would be needed to make the products, you can also say that
the wages are "deducted" from the profits.
Like many cases, it all depends on how you look at it.
http://www.geocities.com/capitolhill/4834/say.txt
Robert Vienneau
I do not find your comments about your local co-op uninteresting.
However, I find your post avoids the issues of the post with which
I started this thread.
It seems obvious to me that the experiences of co-op members in
a mostly capitalist society can only provide, at best, limited
guidance to experiences in a non-exploitative post-capitalist
society, if such is possible. Furthermore, as I tried to make
clear in a later reply to Edward, I see no requirement that all
members of a syndicate receive the same proportion of the product.
But the most obvious defect in your post is your extremely general
concept of exploitation:
> Of course the workers are exploited - exploitation is an unavoidable
> fact of work life, whether they exploit themselves or someone else. The
> !Kung of the Kalahari make their living by exploiting their intimate
> knowledge of plants, animals, and the cyclical nature of thier habitat,
> which they exploit to their best advantage.
By making exploitation rule everywhere, one avoids addressing the
specific definitions and idealizations that have been discussed in
the relevant literature on social matters, often building on Marx.
Your response seems intellectually lazy, at least.
To me, exploitation in the context of this thread has specific and
related meanings. First, exploitation is a formal property of a
system of prices of production when the rate of profits is positive.
Modern industrial societies exhibit a remarkable coordination between
activities of many producers. The coordination that exists results
from tendencies in the deliberate actions of many individuals acting
on their own perceptions and in their own interests. Nobody is in charge.
(There's also discoordinating tendencies inherent in a capitalist system.)
I think of prices of production as applying to an idealized model of
capitalism in which the same rate of profits applies in all
industries and a single price prevails for each commodity traded on
markets. As one who has any familiarity with the traditions in
economics that I draw on would expect, I don't think the prices
quoted in actual markets ever exactly match prices of production.
(Hayek had a different picture of a coordinated state, something
like the Arrow-Debreu model of intertemporal equilibrium. His
coordinated state applies when plans are mutually compatible.
These plans would include forecasts of changes in prices. These
common forecasts match trends in spot prices that can be found
by a mapping from the prices for the forward markets described
in the Arrow-Debreu model. I think prices of production is a
better concept for exploring capitalism, particularly since it
does not prejudge the question of the existence of an
involuntary unemployment equilibrium.)
Given the quantity data for a coordinated capitalist economy - what
Adam Smith called the levels of effectual demand - one can calculate
the labor embodied in every basket of produced commodities. This
calculation of embodied labor can also be performed for baskets of
commodities that can be purchased by the wage. Labor is exploited
when the commodities in the wage-basket embody less labor than
the workers expend in earning the wage. The rate of profits is
positive in the system of prices of production corresponding to a
viable technique if and only if the rate of exploitation
is positive. Furthermore, the rate of profits is larger when the
rate of exploitation is larger.
Those are mathematical theorems. I think the lack of knowledge of
these theorems by many mainstream economists in the United States
reflects an apologetic role of economics in the United States.
This formal definition can only go so far. In particular, one
can calculate how much of any other commodity, say corn, is
embodied in each produced commody. One can analyze corn-wages
and corn values. It's also a mathematical property that the
rate of profits is positive in the system of prices of production
if and only if corn is exploited.
This exploitation of corn doesn't seem to me to be a good
objection to the explanation of the source of profits in the
exploitation of the worker. It does point to the need for
further explication of the concept of exploitation, though.
Corn is not an active agent, while workers are. A second important
aspect of exploitation is a recognition of the fact that workers
are directed by others in a capitalist economy. That's an
aspect discussed by Hodgson in the reference I provided previously.
Exploitation of workers is increased when the workers can be
made to work longer or harder for the same wages or when the
commodities purchased out of wages can be made with less labor.
Thus, the question of exploitation turns on details of working
conditions, etc. in production throughout a capitalist market.
Some have objected to the characterization of the theorem
mentioned above as being about exploitation. They have argued
that if this state of affairs came about because of choices,
including intertemporal choice from an evenly-distributed
endowment, then it's OK. I think the recognition of exploitation
under capitalism as being tied into the domination of labor
by capitalism makes this objection uninteresting. It also
doesn't seem to be about the history of any world I know.
One aspect of Nell's argument I find interesting is that it
seems to be a formal argument about structural properties of
capitalism, without being restricted to concepts of labor-values
or equilibria.
Robert Vienneau
> ...Robert Vienneau (who else?) has provided the example of a
> static economy which is "at equilibrium" with pre-existing
> factories...
This is untrue. My exposition of Nell's argument does not describe
a static equilibrium.
Mr. Blair almost always misrepresents my posts. This post of his
is another example of strawmen, irrelevancies, pointless
distractions, and general muddle.
[ Fantasies about how the U.S. is a country of pension socialism]
> ...Recent
> reports are that over 40% of US households now buy stocks, and
> that figure has been rising rapidly. Thus they are part worker
> and part capitalist.
"In 1992, the top 0.5% of stockowners held 58.6% of all publicly
traded stock; the next 0.5%, 11.7%; the next 4%, 24.2%; add
these together and you discover that *the top 5% owns 94.5% of
all stock held by individuals* (Porterba and Samwick 1995)."
-- Doug Henwood, _Wall Street: How It Works and for Whom_,
Verso, 1997.
This is a good book, directly relevant to this thread. One blurb
that Doug seems to like:
"You are scum...it's tragic that you exist."
-- Norman Pearlstine, previously executive editor of the
Wall Street Journal
Notice, also, that nobody has addressed that argument in that long
Groucho quote I provided.
Once that argument has been addressed, serious people might want
to consider economic models proposed by Kalecki, Kahn, Kaldor,
Pasinetti, and Robinson. These models assume different savings
behavior by class. Some of these models were first presented
with the special case assumption that all wages are consumed,
before being generalized. The point, though, is to continue
the Keynes' insight that an investment function independent
of savings decisions better describes existing capitalist
economies than pre-Keynesian neoclassical models.
> ...the existing factory
> must be maintained. Machines and tools must be replaced when
> they wear out or become out of date.
>
> Say in a factory, each worker is using $100,000 worth of capital
> (on average) in the form of tools, machines, computers, and
> building, etc. And that 10% must be replaced each year. That
> is $10,000 per worker that must be deducted from output (potential
> wages?) each year. The $10,000 could come from the wages of the
> workers, or from the owners (capitalists). But it must come from
> SOMEWHERE...
Mr. Blair seems to have no idea of the distinction between net
and gross income.
I had written:
[> > Suppose we find that the resulting inventory ]
[> > can replace all the goods in our first inventory, with some left ]
[> > over. The land of various qualities is still there, and it was ]
[> > maintained ]
[> > to be as good as previously. A machine that was new on 1 January 1997 ]
[> > is now a year old, but we imagine a new machine was produced in that ]
[> > year. The machince that is new in 1 January 1998 is not part of the ]
[> > net product, but the one-year-old machine is. The workers have used ]
[> > the half-finished goods and raw materials to make other goods, but ]
[> > some workers have reproduced another set of half-finished goods and ]
[> > harvested additional raw materials to replace those used up. ]
I had also quoted Edward Nell:
[> > "...For Wages plus Profits adds up to the Net ]
[> > Income Product; yet profits are not paid for anything, while wages ]
[> > are paid for work. Hence the work of labor (using the tools, ]
[> > equipment, etc., replacement and depreciation of which is already ]
[> > counted in) has produced the entire product..." ]
It is the case that embodied technical change can make the distinction
between net and gross income hard to define precisely.
Grinch
>In article <36BB1A...@facstaff.wisc.edu>, jebl...@facstaff.wisc.edu wrote:
>> ...Recent
>> reports are that over 40% of US households now buy stocks, and
>> that figure has been rising rapidly. Thus they are part worker
>> and part capitalist.
The Federal Reserve says the number of households owning stocks rose
from 31.6% in 1989 to 40.3% in 1995 (a 28% increase in six years).
Of course, these numbers do not count household investments in
non-publicly traded corporations, partnerships and proprietorships,
but they are equity ownership as well. In fact, they are a much larger
source of household wealth than "stocks".
Unincorporated -- overhwelmingly small, family owned -- businesses
account for as much household wealth as stocks, retirement accounts,
and life insurance combined in the Fed's Survey of Consumer Finances,
but tend to go overlooked in these discussions of "who owns stock".
As for ever more people becoming "part worker/part capitalist", an
interesting factoid is that there are now more self-employed
individuals than union members in the US.
> "In 1992, the top 0.5% of stockowners held 58.6% of all publicly
> traded stock; the next 0.5%, 11.7%; the next 4%, 24.2%; add
> these together and you discover that *the top 5% owns 94.5% of
> all stock held by individuals* (Porterba and Samwick 1995)."
> -- Doug Henwood, _Wall Street: How It Works and for Whom_,
> Verso, 1997.
This is the sort of claim that strains credulity beyond reason, ala
the stuff that fathersmanifesto posts. Especially since the real data
is so easily available.
The idea that 0.5% of individuals own 58.6% of all stock held by
individuals in an era of Keoghs, 401(k)s and IRAs would itself be
quite a stretch, but 0.5% "of stockowners" (did he really mean that?)
is only a 40% subset of individuals (by the Fed's numbers, it would
seem rather less than that by Henwood's). So is the claim supposed to
be that less than 0.2% of individuals own 58.6% of all stock? And
less than 2% own 94.5%?
The Federal Reserve has less extreme numbers:
Distribution of stockownership, 1989, 1992, and 1995
Share of household stock owned by each group
1989 1992 1995
All HHs 100% 100% 100%
By HH income
(percentile):
Bottom 25 1.3% 1.2% 1.6%
25-49 4.0 3.8 6.4
50-74 10.9 12.6 11.5
75-89 14.8 16.5 19.4
90-94 11.3 14.7 10.8
Top 5 57.6 51.2 50.3
By age of head
(years):
< 35 4.7 4.2 3.9
35-54 39.2 38.9 39.9
55-64 22.1 28.0 23.5
65 + 34.0 28.8 32.7
Data on household ownership of investments is all over the Fed's web
site, for instance at:
http://www.stls.frb.org/publications/review/review97.html#JAN
and
http://www.bog.frb.fed.us/pubs/feds/1998/199820/199820abs.html
>This is a good book, directly relevant to this thread. One blurb
>that Doug seems to like:
>
> "You are scum...it's tragic that you exist."
> -- Norman Pearlstine, previously executive editor of the
> Wall Street Journal
As a financial editor, maybe he was commenting on the Henwood's
inability to convey a clear thought, and much greater aptitude at
grossly misrepresenting the research of others.
"Porterba and Samwick 1995", quoted by Henwood as the source for his
"In 1992, top 0.5% of stockowners held 58.6%" claim, says no such
thing. In fact it says the opposite -- that in 1992 the percentage
shareholdings of the top 0.5% had *plunged* a full third *from* a
1962-1983 average high of over 55%.
I haven't read Henwood's book -- did he not mention this sharp
decline? He didn't really say "In 1992" for that "0.5% own 58.6%"
number, did he?
The number that Porterba and Samwick actually give is the top 12.7% of
stockowners by income owning 54.3% of stock, which is a little
different from the "0.5% own 58.6%" attributed to them. And they give
the top 45% of stockowners as owning 81% of stock, which is a whole
lot different than "the top 5% own 94.5%". Are your sure Henwood
didn't report these numbers while citing P&S as his source?
If not, what's for Pearlstine to criticize?
"Porterba and Samwick 1995" generally paints a picture of shares
becoming much more widely held among the top 50% of the population by
income. Demographically, that tends to be people who have been in the
work force long enough to move up an income quintile or two and begin
to accumulate savings in retirement accounts.
Their whole presentation matches the Fed's, which is not surprising
since they used the Fed's Survey of Consumer Finances as their data
source. It's all available through Samwick's home page at Dartmouth.
Grinch
wrote:
Ooops. Posting at 3am I committed a Henwood.
The following should read:
"The number that Porterba and Samwick actually give is the top 12.7%
of families [not stockowners] by income owning 54.3% of stock, which
is a little different from the "0.5% of stockowners own 58.6%"
attributed to them. And they give the top 45% of families [not
stockowners] as owning 81% of stock, which is a whole lot different
than "the top 5% own 94.5%".
If Pearlstine trashes me for this I'll admit it's a fair cop.
SUSUPPLY
>Mr. Blair almost always misrepresents my posts. This post of his
>is another example of strawmen, irrelevancies, pointless
>distractions, and general muddle.
and
>Mr. Blair seems to have no idea of the distinction between net
>and gross income.
>
and
>It is the case that technical change can make the distinction between
>net and gross income hard to define precisely.
>
Hmm. Still think Steven and I were too hard on Robert, Jim?
Patrick
SUSUPPLY
>By making exploitation rule everywhere, one avoids addressing the
>specific definitions and idealizations that have been discussed in
>the relevant literature on social matters, often building on Marx.
>Your response seems intellectually lazy, at least.
As opposed to energetic sophistry, Robert?
>To me, exploitation in the context of this thread has specific and
>related meanings. First, exploitation is a formal property of a
>system of prices of production when the rate of profits is positive.
Or is laziness catching? Such as merely defining "exploitation" as profit. It
sure beats thinking, for saving time.
>Modern industrial societies exhibit a remarkable coordination between
>activities of many producers.
Coordination (in time and space, as has already been ignored by our
correspondent from the Empire State) is made possible by the tool of money.
> The coordination that exists results
>from tendencies in the deliberate actions of many individuals acting
>on their own perceptions and in their own interests. Nobody is in charge.
>(There's also discoordinating tendencies inherent in a capitalist system.)
Something noticed by Adam Smith, Marx and Engels, among a few others.
>I think of prices of production as applying to an idealized model of
>capitalism in which the same rate of profits applies in all
>industries and a single price prevails for each commodity traded on
>markets. As one who has any familiarity with the traditions in
>economics that I draw on would expect, I don't think the prices
>quoted in actual markets ever exactly match prices of production.
>
Oh, "exactly". What a useful concept.
[snip]
>Given the quantity data for a coordinated capitalist economy - what
>Adam Smith called the levels of effectual demand - one can calculate
>the labor embodied in every basket of produced commodities.
Can we do this exactly? Since the capital used will be mixed in with the
labor.
>This
>calculation of embodied labor can also be performed for baskets of
>commodities that can be purchased by the wage. Labor is exploited
>when the commodities in the wage-basket embody less labor than
>the workers expend in earning the wage.
Do I need to point out to anyone other than Robert, that this is entirely
arbitrary? That, by looking through the proper end of the telescope, we can
see that it is capital that is being exploited (especially if, through
inefficient labor, or even bad luck, the capital is destroyed).
>The rate of profits is
>positive in the system of prices of production corresponding to a
>viable technique if and only if the rate of exploitation
>is positive.
Again, merely an arbitrary definition. Why shouldn't we apply the same
reasoning to capital?
> Furthermore, the rate of profits is larger when the
>rate of exploitation is larger.
>
More fingering of the Marxian Rosary.
[snip]
>This exploitation of corn doesn't seem to me to be a good
>objection to the explanation of the source of profits in the
>exploitation of the worker. It does point to the need for
>further explication of the concept of exploitation, though.
>
Well. Knock me over with a feather! What brings on this change of heart?
>Corn is not an active agent, while workers are. A second important
>aspect of exploitation is a recognition of the fact that workers
>are directed by others in a capitalist economy.
Right. Ultimately by consumers--most of whom are also laborers.
[snip]
>Exploitation of workers is increased when the workers can be
>made to work longer or harder for the same wages or when the
>commodities purchased out of wages can be made with less labor.
Or, we could also say that the exploitation of capitalists is lessened with the
same logic.
>Thus, the question of exploitation turns on details of working
>conditions, etc. in production throughout a capitalist market.
Only to the deliberately obtuse.
>Some have objected to the characterization of the theorem
>mentioned above as being about exploitation. They have argued
>that if this state of affairs came about because of choices,
>including intertemporal choice from an evenly-distributed
>endowment, then it's OK. I think the recognition of exploitation
>under capitalism as being tied into the domination of labor
>by capitalism makes this objection uninteresting. It also
>doesn't seem to be about the history of any world I know.
There's a news bulletin for us.
Let's return to that island we left late last year, Robert. Suppose things
went like the following:
Crusoe arrives by rowboat on an island where Friday has been living on nuts and
berries.
Crusoe says to Friday: " I say, old chap, you look a little thin. See how much
more flesh I have on my bones? That's because I've been eating fish that I
caught with this rod and reel.
"Let's us make a deal. I'll teach you how to fish, and we'll split (50-50)
what you catch."
Friday says okay, and undergoes the training--provided by Crusoe-- necessary to
acquire the knowledge to be able to catch fish.
However, the training takes a few hours, and Friday decides that he is too
hungry to go out to sea and put his new skill to use.
"No problemo, Friday.", says Crusoe, "I've got a fish left over from the
catch I made before setting foot ashore. You can eat that, and you'll have
enough energy to fish all afternoon."
So, well fed, Friday sets out to sea, and fishing. Crusoe takes a nap (tired
from all that rowing).
Things don't however turn out as planned. Seems Friday is not a quick study.
He loses the rod and reel to the first fish he hooks. And when he attempts to
return to the island he crashes the boat on a reef and destroys it.
When Crusoe awakes from his nap he finds Friday sitting at the campfire
munching on nuts and berries. Friday relates his misadventures on the sea.
Crusoe is a little depressed about this turn of events--and hungry.
"How about sharing some of your nuts and berries with me, Friday", asks Crusoe.
"No way man, these are mine." replies Friday.
"But you lost my fishing gear and destroyed my boat, AFTER I gave you a fish to
eat.", protests Crusoe.
Friday is unmoved, "Nuts and berries weren't part of our contract. You took a
risk with the boat and gear. I look upon the fish of yours I ate as
compensation for putting up with your training session. If I'd brought in ten
fish, instead of losing your rod and reel, you'd be only too happy to feast off
half of it. Who asked you to put ashore on this island, anyway?"
So, Robert, the question to you is, please explain how Crusoe the capitalist
exploited Friday the worker.
Patrick
SUSUPPLY
>Friday is unmoved, "Nuts and berries weren't part of our contract. You took
>a
>risk with the boat and gear. I look upon the fish of yours I ate as
>compensation for putting up with your training session. If I'd brought in
>ten
>fish, instead of losing your rod and reel, you'd be only too happy to feast
>off
>half of it. Who asked you to put ashore on this island, anyway?"
>
I meant to write:
Friday, to Crusoe: "By the way, there's a minimum wage law on this island,
Buster. I spent 5 hours at sea and got nothing for it. So you owe me a basket
of nuts or berries for every hour. I'd learn how to climb trees fast, if I
were you."
Not that anything like this could happen in the USA, of course.
Patrick
jim blair
jim blair:
...Robert Vienneau (who else?) has provided the example of a
static economy which is "at equilibrium" with pre-existing
factories...
Robert Vienneau:
>This is untrue. My exposition of Nell's argument does not describe
>a static equilibrium.
>Mr. Blair almost always misrepresents my posts. This post of his
>is another example of strawmen, irrelevancies, pointless
>distractions, and general muddle.
Hi,
You did present a model of a national economy with "pre-existing
factories". I did assume that your model was in "equilibrium"
(what ever you mean by that) because you throw in phrases like
"..It is not clear that entrepreneurship would receive any non-zero
return in equilibrium."
and
"But let's consider the prices that prevail in a long period position
under competitive conditions anyways."
and
"...involuntary unemployment equilibrium."
and your previous comments about "neoclassical model" etc.
But if the economy in your example is not "in equilibrium",
please explain why not.
And I will be easy to convince, because (as you recall) I have
previously protested the idea that a modern economy is ever
"at equilibrium" as I know the term. The closest an economy
(or an ecology) can come to "equilibrium" is a steady state.
And if I miserpresent your posts that is not my intent. I
just try to translate them in understandable terms. If I get
them wrong, it is because I did not succeed.
And explain just how those factories got there in the first
place. And how will new industries and new factories will come
to be in the future.
And elaborate on this:
>Mr. Blair seems to have no idea of the distinction between net
>and gross income.
>
......
and
>It is the case that technical change can make the distinction between
>net and gross income hard to define precisely.
>
And did the Grinch post bring you up to date on the extent
of stock ownership (ie the "means of production") in the US today?
And I think this is just DIRECT ownership. Not including the
widespread pension plans. I cited the Teamsters union as one
example because I though everyone would know of it. I could
have cited many OTHER examples.
I (for example) own stocks as the result of 4 jobs where I worked:
teaching at 2 private colleges, a private research laboratory,
and as a Wisconsin state employee. Both private colleges enrolled
teachers in TIAA/CREF, the lab had a 401K plan (where I converted the
company stock into mutual funds), and the Wisconsin Department of
Employee Trust Funds is constantly sending me a newsletter about
how well there investments are doing. All state workers are enrolled
in the fund after 6 months.
All this in addition to an IRA. (and I have been a "worker" all of
my life.
Don Libby's example of the local "co-op" was to illustrate that
people can be both "workers" and "capitalists" in the same
organization at the same time. (hey Don, I thought you meant
that Mifflin Street co-op. But the web page is for the University
Avenue store, which is part of a big national chain. Looks like
even co-ops are becoming BIG BUSINESS--or is that an oxymoron??)
>To me, exploitation in the context of this thread has specific and
>related meanings. First, exploitation is a formal property of a
>system of prices of production when the rate of profits is positive.
...
>.. one can calculate
>the labor embodied in every basket of produced commodities.
>...The rate of profits is
>positive in the system of prices of production corresponding to a
>viable technique if and only if the rate of exploitation
>is positive. Furthermore, the rate of profits is larger when the
>rate of exploitation is larger.
So you DEFINE exploitation as profits?
One can calculate many things. One can define the explotation of
capital as being postive if and only if wages are paid.....
Robert Vienneau
This is all a distraction. My exposition of Nell's argument about
exploitation does not depend on the simplifying assumption that
workers' don't save.
> On 7 Feb 1999 10:52:33 GMT, rv...@see.sig.com (Robert Vienneau) wrote:
> >jebl...@facstaff.wisc.edu wrote:
>
> >> ...Recent
> >> reports are that over 40% of US households now buy stocks, and
> >> that figure has been rising rapidly. Thus they are part worker
> >> and part capitalist.
>
> The Federal Reserve says the number of households owning stocks rose
> from 31.6% in 1989 to 40.3% in 1995 (a 28% increase in six years).
>
> Of course, these numbers do not count household investments in
> non-publicly traded corporations, partnerships and proprietorships,
> but they are equity ownership as well. In fact, they are a much larger
> source of household wealth than "stocks".
I have not read Doug Henwood's primary sources. However, he gives
the following table, based on "Kennickell, McManus, and Woodburn 1996"
(I'm not including the breakdown of the top 10%):
distribution of wealth, debts, and income, 1992
bottom 90% top 10%
Percent of totals
family income 70.1% 29.9
Assets 38.1 61.9
principal residence 64.2 35.8
other real estate 18.2 81.8
stocks 18.8 81.2
bonds 12.0 88.0
trusts 15.6 84.4
life insurance 56.2 43.8
checking accounts 29.2 70.8
thrift accounts 42.6 57.5
other accounts 46.4 53.6
business 9.3 90.7
autos 75.2 24.8
other 29.1 70.9
Liabilities 65.0 35.0
principal residence 75.0 25.0
other real estate 20.8 79.2
other 77.5 22.5
Net worth 32.8 67.2
nonresidental 23.4 76.6
DOLLAR VALUES
family income $30,297 $116,403
net worth 66,984 1,237,025
nonresidental 35,098 1,038,085
Notice autos, principal residence, and life insurance. Henwood's
comments on the data from which this table is drawn:
"Though the household sector as a whole has a steeply positive
net worth, the liabilities are found disproportionally at the
lower end of the distribution. Subtract liabilities from assets,
and you find net worth to be concetrated far more densely than
income. In 1992, the richest 1% of households claimed 8.3% of
total income - but had 27% of all assets, 31% of all net worth,
and 38% of net worth if you disregard the principal residence,
which is the lion's share of most middle-class wealth. *The
richest 1/2% had a larger share of total nonresidential net
worth than the bottom 90% of the population (29% vs. 23%);
the richest 10% accounted for 77% of nonresidental net worth.*
An interesting factoid that escapes explanation: the 1992 survey
showed the top 1% losing quite a bit of their share of wealth,
apparently to the next 9%. (The bottom 90%'s share was
essentially unchanged.) This may be the effect of the 1989-92
slump, or a data anomaly, or some real long-term trend. Yet
despite these shifts, in the grand picture, wealth is now the
most concentrated it's been since the 1920s. According to
Edward Wolff (1995, pp. 28, 62-62), this trend is probably
the result of several things, among them the increasing
'dispersion' of wages and salaries - economists prefer this
morally neutral term to the more value-laden 'inequality' -
which has depressed saving among the middle class and boosted
it among the rich, and also the relative stagnation of house
prices (the main repository of middle-class wealth) along with
the phenomenal rise in stock and bond prices from the early
1980s through the mid 1990s.
Ownership of the most valuable financial assets - real claims,
like stocks and bonds - is densely packed in the upper crust.
In 1992, the richest 1% of households - about 2 million adults -
owned 39% of the stock owned by individuals, and 42% of the
bonds (Kennickell, McManus, and Woodburn 1996); the top 10%
together own well over 80% of both. Since households own about
half of all corporate stock, that posh 1% owns a quarter of the
productive capital and future profits of corporate America; the
top 10%, nearly half. These stockholders are overwhelmingly
white; fewer than 6% of black and Hispanic households owned any
stock in 1991 (U. S. Bureau of the Census 1995, p. 513).
These numbers are based on sorting households by their net worth;
if you sort households by their stock ownership, the concentration
is even more intense. In 1992, the top 0.5% of stockowners held
58.6% of all publicly traded stock; the next 0.5%, 11.7%; the
next 4%, 24.2%; add these together and you discover that *the top
5% owns 94.5% of all stock held by individuals* (Porterba and
Samwick 1995).
Despite the omnipresence of stock news in the papers and on TV,
especially 'public' TV, the active investor population, presumably
the target of all these pitches, is tiny. In 1983, only 19% of
households owned any stock at all, and of those amost half owned
just one; 4% owned two to four, and only 4% owned five or more.
The share who traded stock was even smaller: only 6% bought or
sold a share of of stock that year, and only 2% made five or more
trades (Avery and Elliehausen 1986). While more recent SCF data
have not been published, the New York Stock Exchange's 1990
shareholder survey (New York Stock Exchange 1990) showed a
modest uptick in the percentage of the population owning shares,
to 21% with two-thirds of them men. This increase looks like a
bit of an anticlimax, considering the grand bull market of the
1980s. Trading picked up somewhat more, with 12% making at least
one stock purchase or sale, and 4% making five or more trades.
Despite the expansion of these numbers, the stockholding and
trading share of the population is quite small - but the amount
of wealth they control is not: almost $1.5 trillion in stocks
and bonds alone in 1989."
-- Doug Henwood, _Wall Street: How It Works and for Whom_,
Verso, 1997, pp. 66-68.
There's a couple of footnotes, which I haven't included.
> Unincorporated -- overhwelmingly small, family owned -- businesses
> account for as much household wealth as stocks, retirement accounts,
> and life insurance combined in the Fed's Survey of Consumer Finances,
> but tend to go overlooked in these discussions of "who owns stock".
> As for ever more people becoming "part worker/part capitalist", an
> interesting factoid is that there are now more self-employed
> individuals than union members in the US.
Of course, the percentage of workforce that is in unions has been declining
over the last, say, quarter century. It's hard to believe that Grinch is
not being deliberately misleading and distracting here. One knows how
editorials in the _Wall Street Journal_ go.
>
> > "In 1992, the top 0.5% of stockowners held 58.6% of all publicly
> > traded stock; the next 0.5%, 11.7%; the next 4%, 24.2%; add
> > these together and you discover that *the top 5% owns 94.5% of
> > all stock held by individuals* (Porterba and Samwick 1995)."
> > -- Doug Henwood, _Wall Street: How It Works and for Whom_,
> > Verso, 1997.
>
> This is the sort of claim that strains credulity beyond reason, ala
> the stuff that fathersmanifesto posts. Especially since the real data
> is so easily available.
>
> The idea that 0.5% of individuals own 58.6% of all stock held by
> individuals in an era of Keoghs, 401(k)s and IRAs would itself be
> quite a stretch, but 0.5% "of stockowners" (did he really mean that?)
> is only a 40% subset of individuals (by the Fed's numbers, it would
> seem rather less than that by Henwood's). So is the claim supposed to
> be that less than 0.2% of individuals own 58.6% of all stock? And
> less than 2% own 94.5%?
The expanded context suggests that the claim is that stockholders
are households. Henwood seems to be distinguishing between stock
held by households and stock held by corporations. So Grinch's
reading to make Henwood's claim seem excessive may be mistaken.
Note the bit, though, in Henwood about sorting.
> The Federal Reserve has less extreme numbers:
>
> Distribution of stockownership, 1989, 1992, and 1995
>
> Share of household stock owned by each group
> 1989 1992 1995
>
> All HHs 100% 100% 100%
> By HH income
> (percentile):
^^^^^^^^^^^^
> Bottom 25 1.3% 1.2% 1.6%
> 25-49 4.0 3.8 6.4
> 50-74 10.9 12.6 11.5
> 75-89 14.8 16.5 19.4
> 90-94 11.3 14.7 10.8
> Top 5 57.6 51.2 50.3
So Grinch's numbers are about something other than my original
quote of Henwood's claim, as he somewhat gracelessly acknowledges in
a later post, although for a somewhat different reason. I don't know
why Grinch's 65.9 (= 51.2 + 14.7) differs from Henwood's 81.2%. Maybe
it's the difference between sorting households by income and net
worth?
> >This is a good book, directly relevant to this thread. One blurb
> >that Doug seems to like:
> >
> > "You are scum...it's tragic that you exist."
> > -- Norman Pearlstine, previously executive editor of the
> > Wall Street Journal
>
> As a financial editor, maybe he was commenting on the Henwood's
> inability to convey a clear thought, and much greater aptitude at
> grossly misrepresenting the research of others.
I think Pearlstine's quote is on Henwood's body of work, not just
this book. As seen above, Henwood gives the reader much detail. He
doesn't claim to agree with the interpretations of these numbers
of the authors of the works from which he draws them.
> "Porterba and Samwick 1995", quoted by Henwood as the source for his
> "In 1992, top 0.5% of stockowners held 58.6%" claim, says no such
> thing. In fact it says the opposite -- that in 1992 the percentage
> shareholdings of the top 0.5% had *plunged* a full third *from* a
> 1962-1983 average high of over 55%.
>
> I haven't read Henwood's book -- did he not mention this sharp
> decline?
Yep. See above. Henwood also mentions mounting debt burdens among
the less well-off.
> He didn't really say "In 1992" for that "0.5% own 58.6%"
> number, did he?
>
> The number that Porterba and Samwick actually give is the top 12.7% of
> stockowners by income owning 54.3% of stock, which is a little
^^^^^^^^^
> different from the "0.5% own 58.6%" attributed to them. And they give
> the top 45% of stockowners as owning 81% of stock, which is a whole
> lot different than "the top 5% own 94.5%". Are your sure Henwood
> didn't report these numbers while citing P&S as his source?
Grinch numbers are about something other than my original quote of
Henwood's claim.
> If not, what's for Pearlstine to criticize?
>
> "Porterba and Samwick 1995" generally paints a picture of shares
> becoming much more widely held among the top 50% of the population by
> income. Demographically, that tends to be people who have been in the
> work force long enough to move up an income quintile or two and begin
> to accumulate savings in retirement accounts.
>
> Their whole presentation matches the Fed's, which is not surprising
> since they used the Fed's Survey of Consumer Finances as their data
> source. It's all available through Samwick's home page at Dartmouth.
Notice nobody has yet addressed the argument in that Marx quote. Further,
this whole discussion of how unrealistic the division of households into
workers and capitalists is based on lack of knowledge of the tradition
which Nell draws on. E.g., this discussion would take a somewhat different
form among people familiar with Pasinetti and Kaldor's works.
Don Libby
>
snip
>
> Don Libby's example of the local "co-op" was to illustrate that
> people can be both "workers" and "capitalists" in the same
> organization at the same time. (hey Don, I thought you meant
> that Mifflin Street co-op. But the web page is for the University
> Avenue store, which is part of a big national chain. Looks like
> even co-ops are becoming BIG BUSINESS--or is that an oxymoron??)
>
My example included both the Mifflin St Co-op, a quaint little workers'
collective complete with death heads painted on the outside and Karl
Marx posters on the inside, and Whole Foods, Inc. a publicly owned
market-capitalized corporation.
I mentioned these because while workers in the collective kept the
profits to which they were entitled and which they extracted by
exploiting their customers and suppliers, when the same workers left to
co-op to take jobs as mangers at Whole Foods, Inc. they were just as
entitled to keep the profits due them as compensation for their
investment of human capital: the knowledge and experience they gained
while working at the co-op.
Furthermore, if they purchase stock in Whole Foods, Inc., they take on a
different set of risks: as workers if they screw up they risk getting
fired - a total loss of income, but if they screw up so big that the
enterprise fails, then as owners they risk losing their capital
investment - a total loss of income and principal. Don't they deserve
to be compensated for this risk in return for providing the capital
required to keep the business running smoothly?
-dl
--
****************************************
* NOTE: RETURN ADDRESS MAY BE DISABLED *
* IF YOU'RE HAVING TROUBLE REPLYING *
* REPLACE "SPAMNOT" WITH "DONLIBBY" *
* IN THE "TO" ADDRESS LINE *
****************************************
Jim Blair
>Mr. Blair seems to have no idea of the distinction between net
>and gross income.
SUSUPPLY wrote:
> Hmm. Still think Steven and I were too hard on Robert, Jim?
Hi
Perhaps I was wrong.
I recall that Robert Vienneau protested when you referred to him as
"Bobby V" or something like that. He insisted that HE be referred to as
he designated.
But he refuses to do the same for others. (As in Doctor Blair ;-).
Jim Blair
> This is all a distraction. My exposition of Nell's argument about
> exploitation does not depend on the simplifying assumption that
> workers' don't save.
Hi,
But didn't you postulate that workers and capitalists were two
non-overlaping sets?? If the workers do save, just what happens to the
money that they save? And if it is invested, doesn't that make them at
least partly capitalists?
> Notice nobody has yet addressed the argument in that Marx quote. Further,
> this whole discussion of how unrealistic the division of households into
> workers and capitalists is based on lack of knowledge of the tradition
> which Nell draws on. ....
Isn't this a "tradition" based on the last century? When it did have
some relevence. But the world has changed a lot since then. It is even
changed a lot since 1980.
And the numbers about just who owns wnat percent of the total capital
stock is the distraction. It does not matter what percent of the capital
I own. What matters is "do I own ENOUGH to live on the interest it
generates"?
Paul Zrimsek
>Do I need to point out to anyone other than Robert, that this is entirely
>arbitrary? That, by looking through the proper end of the telescope, we can
>see that it is capital that is being exploited (especially if, through
>inefficient labor, or even bad luck, the capital is destroyed).
If we're going to fall in with the Vienneauvian idea of treating
different economic roles as if they were separate people, we ought to
be more worried about the exploitation of both capital and labor by
consumers-- who, by definition, produce nothing and consume
everything. Down with consumers!
Paul Zrimsek pzri...@tiac.net
-----------------------------------------------------------------
People are never more sincere than when they assume their own
moral superiority. --Thomas Sowell, *The Vision of the Anointed*
SUSUPPLY
>If we're going to fall in with the Vienneauvian idea of treating
>different economic roles as if they were separate people, we ought to
>be more worried about the exploitation of both capital and labor by
>consumers-- who, by definition, produce nothing and consume
>everything. Down with consumers!
Which is why I also wrote in my post:
<<A second important
>aspect of exploitation is a recognition of the fact that workers
>are directed by others in a capitalist economy.
Right. Ultimately by consumers--most of whom are also laborers.>>
Patrick
Robert Vienneau
> Robert Vienneau wrote:
> jim blair:
> ...Robert Vienneau (who else?) has provided the example of a
> static economy which is "at equilibrium" with pre-existing
> factories...
> Robert Vienneau:
> >This is untrue. My exposition of Nell's argument does not describe
> >a static equilibrium.
> >Mr. Blair almost always misrepresents my posts. This post of his
> >is another example of strawmen, irrelevancies, pointless
> >distractions, and general muddle.
> You did present a model of a national economy with "pre-existing
> factories". I did assume that your model was in "equilibrium"
> (what ever you mean by that) because you throw in phrases like
>
> "..It is not clear that entrepreneurship would receive any non-zero
> return in equilibrium."
>
> and
>
> "But let's consider the prices that prevail in a long period position
> under competitive conditions anyways."
>
> and
>
> "...involuntary unemployment equilibrium."
>
> and your previous comments about "neoclassical model" etc.
It's hard to accept Mr. Blair as serious. I presented a story
about a viable economy. If one actually looks at the U.S. economy
at some given date, one will find factories, inventories, etc. in
existence. A year later, the productive capacity of the economy
will typically be larger. What does this have to do with claims
about whether the economy is in static equilibrium?
A careful reader of my exposition of Nell's argument would see
that it provides some account of how the capital equipment
existing at the end of the story was produced.
Somebody well-educated in advanced academic economics as it is
taught in the United States - so Mr. Blair is not expected to
understand this paragraph - would know that the term "dynamics"
is used in economics in several ways. For example, in many
extensions of the Harrod-Domar model, the stocks of capital
goods are not treated as parameters of the model; rather
the stocks are determined endogeneously. On the other hand,
endowments on the starting date are given in Hick's
temporary equilibrium, the Arrow-Debreu model of intertemporal
equilibrium, and Burmeister's dynamics. All of these models
have been described as dynamics. An intellectually incoherent
and uninformed objection to the sort of story in my first
exposition of Nell's argument in this thread and my Robinson
Crusoe story would go like follows: these stories take the
original endowments as given; economists would find dynamic
stories like Burmeister's more convincing. This is
self-contradictory because
o Burmeister's approach exhibits the criticized property
o That is, "dynamics", as used by mainstream economists
building on what they think of as mainstream economics
does not explain endowments
o Endowments are *not* taken as given in extensions to
Harrod's contrasting approach to dynamics
o Nevertheless, a bad understanding (Hahn's) of these
extensions would see them as a special case of Burmeister's
dynamics in which endowments and preferences happened
to be in a configuration resulting in a steady state.
A good reader of my posts would notice that I seem to exhibit
a preference for dynamics in the Harrod-Kaldor-Robinson line.
This well-informed reader, then, would not be criticizing me
for reliance on static equilibrium models or insisting that
I adopt Burmeister's so-called dynamic approach while and yet
explain how endowments come to be.
Let's turn to Mr. Blair's misrepresentations of my quotes.
None of these quotes are from my original post on this thread.
The first distorted quote comes from my addressing Edward F.:
"Entrepreneurship can explain disequilibrium variations
around a normal rate of profit. It is not clear that
entrepreneurship would receive any non-zero return in
equilibrium... A regular return proportional to the
monetary (capital) value of the resources of the firm is
still unexplained."
Edward has some academic training in economics. Because I know
something about academic economics, I know he would be interested
in equilibrium properties of models. I am merely pointing out
his response to my post does not explain the returns to capital
on ground-rules he should accept. Mr. Blair's second distorted
quote falls in this passage:
"Many would doubt the worth of extending my summary of Nell's
argument into a theory of equilibrium. But let's consider the
prices that prevail in a long period position under competitive
conditions anyways..."
An intelligent reader would notice the clear suggestion that
I do not think my summary of Nell's argument is an equilibrium
argument, although I do think it might be placed in an
equilibrium context. Mr. Blair's third misreading comes in
this passage:
"As one who has any familiarity with the traditions in
economics that I draw on would expect, I don't think the prices
quoted in actual markets ever exactly match prices of production.
(Hayek had a different picture of a coordinated state, something
like the Arrow-Debreu model of intertemporal equilibrium...I
think prices of production is a better concept for exploring
capitalism, particularly since it does not prejudge the question
of the existence of an involuntary unemployment equilibrium.)"
Notice I specifically say I don't think the prices observable
in actual economies match the prices in one model of a
coordinated state. One might describe that coordinated state
as an equilibrium. Mr. Blair's quote comes from my contrasting
the quoted property with regard to two competing models of
coordinated states. Still, I explicitly state that my preferred
model cannot be applied directly to describe actual economies.
Hayek thought the same about his preferred model. The post with
this third quote concluded with:
"One aspect of Nell's argument I find interesting is that it
seems to be a formal argument about structural properties of
capitalism, without being restricted to concepts of labor-values
or equilibria."
Once again, an intelligent reader would note that I don't think
Nell's argument need describe an equilibrium.
> But if the economy in your example is not "in equilibrium",
> please explain why not.
Given how Mr. Blair (mis)reads me, and his lack of
knowledge of academic economics as it is taught in many U.S.
schools, I feel no obligation to explain anything to him. It's
not as if I invented the terms "neoclassical economics" or
"equilibrium." Surely he can find his own tutor elsewhere.
> And I will be easy to convince, because (as you recall) I have
> previously protested the idea that a modern economy is ever
> "at equilibrium" as I know the term. The closest an economy
> (or an ecology) can come to "equilibrium" is a steady state.
And I would be glad to hear why a Harrod-Domar warranted
path - which I explained recently - is not a steady state.
> And if I miserpresent your posts that is not my intent. I
> just try to translate them in understandable terms. If I get
> them wrong, it is because I did not succeed.
It is curious that the quotes Mr. Blair selects to defend his
(lack of) understanding are immediately adjacent to comments of
mine suggesting that I do not believe the economy is in
equilibrium. On the other hand, I have noticed Mr. Blair's
incomprehension on issues that have nothing to do with my posts,
and even apparently that have nothing to do with political-economic
views.
> And explain just how those factories got there in the first
> place. And how will new industries and new factories will come
> to be in the future.
See above. Some Marxists criticize bourgeois economists - including
neo-Ricardian economists, as these Marxists understand them - as
wanting to explain the formation of capital while taking the production
of commodities, money, wage-labor, social structures that allow the
accumulation of money values to be useful, wage-labor, etc. But an
explanation of why capital is non-exploitative based on its
accumulation by independent artisans and savings workers exhibits the
bad faith criticized by Marx. One needs to explain both how
capitalist institutions came to be as the result of an historical
process and how capital is accumulated under capitalist institutions.
I rarely discuss the former.
[ Some stuff about the difference between gross and net income - deleted ]
[ Rambles about stock ownership - deleted ]
> >To me, exploitation in the context of this thread has specific and
> >related meanings. First, exploitation is a formal property of a
> >system of prices of production when the rate of profits is positive.
> ...
> >.. one can calculate
> >the labor embodied in every basket of produced commodities.
>
> >...The rate of profits is
> >positive in the system of prices of production corresponding to a
> >viable technique if and only if the rate of exploitation
> >is positive. Furthermore, the rate of profits is larger when the
> >rate of exploitation is larger.
>
> So you DEFINE exploitation as profits?
There Mr. Blair goes again. No, I do not. And, as usual, I am
following established literature.
Suppose one defines a triangle as a polygon with three angles.
One can show that a polygon has three angles if and only if the
polygon has three sides. In other words, a polygon is a triangle
if and only if it has three sides. Still, in this logical system,
a triangle is defined as having three angles. I had written:
"Given the quantity data for a coordinated capitalist economy - what
Adam Smith called the levels of effectual demand - one can calculate
the labor embodied in every basket of produced commodities. This
calculation of embodied labor can also be performed for baskets of
commodities that can be purchased by the wage. Labor is exploited
when the commodities in the wage-basket embody less labor than
the workers expend in earning the wage. The rate of profits is
positive in the system of prices of production corresponding to a
viable technique if and only if the rate of exploitation
is positive. Furthermore, the rate of profits is larger when the
rate of exploitation is larger."
I am interested in the definition of labor as being exploited in a
capitalist "when the commodities in the wage-basket embody less labor
than the workers expend in earning the wage." Once again, that
definition is not my invention.
[ Inanity deleted. ]
Robert Vienneau
> Robert Vienneau wrote:
> > This is all a distraction. My exposition of Nell's argument about
> > exploitation does not depend on the simplifying assumption that
> > workers' don't save.
> But didn't you postulate that workers and capitalists were two
> non-overlaping sets?? If the workers do save, just what happens to the
> money that they save? And if it is invested, doesn't that make them at
> least partly capitalists?
What is Jim Blair's point? In my first post on this thread, I wrote "As
a simplifying assumption, assume the workers spend their entire income."
What do those responding think a "simplifying assumption" means? Can
anybody present an argument about why I need care whether or not
workers save for the purpose of the argument I am examining? I have
yet to see an informed argument on this account. For example, it
seems obvious to me that the saving workers would be purchasing
(partial) ownership of firms that had acquired their capital goods
by exploiting previously or currently existing workers, as least
as exploitation is understood in the argument.
Try to avoid defending one institutional set up with another one of
self-employed artisans making loans in kind. Or, if that's the
argument you are going to make, present some argument why anybody
should think it addresses capitalism.
> > Notice nobody has yet addressed the argument in that Marx quote. Further,
> > this whole discussion of how unrealistic the division of households into
> > workers and capitalists is based on lack of knowledge of the tradition
> > which Nell draws on. [ E.g., this discussion would take a somewhat
> > different form among people familiar with Pasinetti and Kaldor's works. ]
(deleted words restored.)
> Isn't this a "tradition" based on the last century? When it did have
> some relevence. But the world has changed a lot since then. It is even
> changed a lot since 1980.
Saying the world has changed in some unspecified way does not constitute
an argument. No, it is not a tradition based exclusively on work in the
last century. Those who know how to use a research library can look up
Kaldor's, Pasinetti's, and related work themselves.
> And the numbers about just who owns wnat percent of the total capital
> stock is the distraction. It does not matter what percent of the capital
> I own. What matters is "do I own ENOUGH to live on the interest it
> generates"?
The last sentence is actually an interesting point. Some do own enough
to live off the returns to their capital. One might call these people
"capitalists."
jim blair
> If we're going to fall in with the Vienneauvian idea of treating
> different economic roles as if they were separate people, we ought to
> be more worried about the exploitation of both capital and labor by
> consumers-- who, by definition, produce nothing and consume
> everything. Down with consumers!
Hi,
Wow, that is a great insight. It is not the worker or the capitalist, or
the bureaucrat that is expoliting the rest, it's that CONSUMER.
We must put a stop to this exploitation!!!
Robert Vienneau
I adopt Burmeister's so-called dynamic approach and yet
of commodities, money, wage-labor, wage-labor, social structures that
allow the accumulation of money values to be useful, wage-labor, etc.
as given. But an explanation of why capital is non-exploitative based on
capitalist economy "when the commodities in the wage-basket embody
less labor than the workers expend in earning the wage." Once again,
that definition is not my invention.
[ Inanity deleted. ]
--
Paul Zrimsek
wrote:
>Some Marxists criticize bourgeois economists - including
>neo-Ricardian economists, as these Marxists understand them - as
>wanting to explain the formation of capital while taking the production
>of commodities, money, wage-labor, social structures that allow the
>accumulation of money values to be useful, wage-labor, etc. But an
>explanation of why capital is non-exploitative based on its
>accumulation by independent artisans and savings workers exhibits the
>bad faith criticized by Marx.
Why? An argument intended to show that profit is exploitative *per
se*-- and that is certainly how you've billed it-- ought not to depend
on any particular assumptions about the justice of the initial set of
holdings. After all, if you begin with the assumption that capitalists
aren't entitled to the assets they start out with, there's no need to
resort to Rube Goldberg diagrams to prove exploitation: the holders of
unearned wealth can exploit others merely by spending their money,
even if they never earn a penny of interest.
To assume that the initial holdings of capitalists are under a cloud
merely because they're the fruits of earlier capitalist accumulation
would be circular reasoning in any case.
Paul Zrimsek | "What's important isn't so much *what* you
pzri...@tiac.net | want to ban. It's the fact that you take
| part in the banning process. That's what
| democracy is all about." --Dave Barry
Edward C. Wood
wrote:
>On 7 Feb 1999 10:52:33 GMT, rv...@see.sig.com (Robert Vienneau) wrote:
>
><Snip>
>
>> "In 1992, the top 0.5% of stockowners held 58.6% of all publicly
>> traded stock; the next 0.5%, 11.7%; the next 4%, 24.2%; add
>> these together and you discover that *the top 5% owns 94.5% of
>> all stock held by individuals* (Porterba and Samwick 1995)."
>> -- Doug Henwood, _Wall Street: How It Works and for Whom_,
>> Verso, 1997.
>
>This is the sort of claim that strains credulity beyond reason, ala
>the stuff that fathersmanifesto posts. Especially since the real data
>is so easily available.
>
A little caution is called for here. The numbers quoted _could_ be
correct. I don't have time to work on it; but the problem is one I
referred to in my 4/14/97 post in response to one of yours. Of a
paper by FRB employees then available on the FRB web page I said:
"Note that there is no mention of distribution. Neither is there any
distribution in the data presented. It is as if the authors were at
pains to avoid mentioning the subject. Only in one table, Table 3:
Family net worth by selected characteristics of families, 1989, 1992,
and 1995, does distribution peek out -- so to speak. It does so only
because one 'selected characteristic' -- income -- is closely
correlated with net worth."
(I could have been clearer! I should have said '... distribution by
net worth categories.' This would be a table similar to the second
table below.)
><Snip>
>
>The Federal Reserve has less extreme numbers:
>
>Distribution of stockownership, 1989, 1992, and 1995
>
>Share of household stock owned by each group
> 1989 1992 1995
>
>All HHs 100% 100% 100%
>By HH income
>(percentile):
>Bottom 25 1.3% 1.2% 1.6%
>25-49 4.0 3.8 6.4
>50-74 10.9 12.6 11.5
>75-89 14.8 16.5 19.4
>90-94 11.3 14.7 10.8
>Top 5 57.6 51.2 50.3
>
My remarks in that older post about another table apply also to the
one above:
"This is a distribution of net worth by income classes not, what is
really wanted, a distribution of net worth by net worth classes. It
is less skewed toward the high net worth side than the 'pure' net
worth distribution. The upper ranges include ball-players, actors,
corporate officers, doctors and others who have large incomes with
modest net worth. The lower ranges include abstemious tax avoiders
and retirees who have moderate cash incomes and large net worth.
That, in fact, seems like the most probable explanation for the
shift, evident in the data, of the distribution-by-income-class
toward the low side over the six-year period. Rich old folks retiring
to live on their pensions and social security."
I took the table below from the reference you gave:
http://www.bog.frb.fed.us/pubs/feds/1998/199820/199820abs.html,
where it appears immediately under the table you reproduced above.
By net worth
(percentile)
Bottom 25 0.1 0.2 0.3
25-49 1.6 1.6 1.9
50-74 4.9 7.1 6.4
75-89 16.5 14.0 11.4
90-94 11.5 11.6 12.2
Top 5 65.5 65.6 67.9
Note that this distribution is appreciably more skewed than the
one above. The difference is probably not enough to account for
the claim at the beginning of this post which you say "strains
credulity beyond reason". Two further refinements could produce
a credible table that does:
1. Remove home and auto equities from net worth to get an
approximation to net-worth-that-produces-cash-income.
2. Include stock not held in the name(s) of household head(s)
--(either as registered or by brokers, which I assume is what is
meant by 'household stock')--but is imputable to them in
proportion to their shares in the mutual funds (which might be
included in 'household stock'), pension funds, trust funds,
insurance policies, etc.(which probably are not included in
'household stock').
Regards, Ed
Edward C. Wood
ew...@ix.netcom.com
Robert Vienneau
Here's a simple parable. Consider an island with a particularly simple
society with two people, Robinson and Friday. Robinson and Friday live
on one good, call it corn. At the start of our story, Robinson and Friday
have just finished a feast. Both Robinson and Friday have each eaten
food baked out of 50 bushels of corn. Also, Robinson has 50 bushels corn
remaining. Friday, perhaps because he's newly arrived, has none.
2.0 THE INITIAL DEAL
Both Robinson and Friday can see that they must continue to eat in the
future. They understand that their continual survival could be achieved by
planting the remaining corn, saving 50 bushels corn in next year's harvest,
and living off of the remainder. (In this story, Robinson and Friday are
each able to go a year between meals.)
So Friday says to Robinson, "Why don't you share your seed corn with me.
We'll each plant 25 bushels, and tend it half our time throughout the year.
If your island is like my tribe's, that will allow us to harvest three
bushels of corn for every bushel we plant. So at the end of the year,
each of us will have 75 bushels. We can each eat 50 bushels and use
the remaining 25 bushels for seed in the next year."
Robinson says, "Why should I give you anything? I happen to believe in
property rights."
Friday says, "You don't want to see me starve, do you? What do you propose
I do?"
Robinson says, "I'll tell you what. Why don't we come to the following
voluntary agreement. You take the 50 bushels of corn, plant it, and tend it
throughout the year. After harvesting, I'll take the 150 bushels we'll
get and pay you 50 bushels for your helpful work."
Friday says, "Why should I agree to that? I do all the work, and you
loaf around all year in a tropical paradise."
Robinson says, "Well, it's my seed corn."
Friday says, "Oh, all right. It's a deal."
2.0 THE STORY CONTINUES
At the end of the year, Friday consumes his wages of 50 bushels. Robinson
consumes his profits of 50 bushels. They are in the same situation as they
were originally. They strike the same deal again and continue year after
year.
3.0 FRIDAY READS A BOOK
It seems Robinson has brought the captain's library off the shipwreck
with him. One day Friday happens to notice this library. He says to
Robinson, "What are all these books?"
Robinson says, "I don't know. Being a practical person of the middle
order of society, I never bothered to read them."
Friday says, "Well, can I have that big tome by that fellow Marx."
Robinson says, "Unlike the corn, it's of no use to me. You can have it."
Friday takes away the book and tries to read Marx. He finds it quite
head-scratching in places, particularly the Hegel. That part seems so
deep as to be incomprehensible. But he does get some glimmers from it.
4.0 A DEBATE
One day at the end of three years of work, Friday confronts Robinson
and tells him, "You're exploiting me. I only get a third of the
produce. This year I should get 26/27th of it. And if we continue on in
this way, I should get all of it eventually"
Robinson can't make anything out of this. He says, "But I provide the
seed corn. Labor and seed corn are measured in different units. How
can you make a fair claim on any portion of the output but what we
have agreed to?"
Friday says, "It will take me a little while to explain." Robinson
says, "Unless some pirates show up, we have time. Go on."
Friday says, "Each year we harvest 150 bushels corn using 1 year of
labor and 50 bushels seed. We can see that any proportion of the
harvest was due to the corresponding proportions of the labor and the
seed corn. Here's some examples." And Friday draws the following
table in the sand:
FRIDAY'S TOTAL
PROPORTION SEED CORN LABOR HARVEST
1 50 Bushels 1 Year 150 Bushels
2/3 33 1/3 Bushels 2/3 Years 100 Bushels
1/3 16 2/3 Bushels 1/3 Years 50 Bushels
2/9 11 1/9 Bushels 2/9 Years 33 1/3 Bushels
1/9 5 5/9 Bushels 1/9 Years 16 2/3 Bushels
Robinson says, "That seems fairly obvious. I don't see where you are
going with this." Friday says, "We can use these numbers to break down
my work in each year to produce the output in the following years:"
WORK TOWARDS WORK TOWARDS WORK TOWARDS
YEAR YEAR 3 HARVEST YEAR 2 HARVEST YEAR 1 HARVEST
1 5 5/9 Bushels seed 11 1/9 Bushels seed 33 1/3 Bushels seed
& 1/9 year's labor & 2/9 year's labor & 2/3 year's labor
produce produce produce
16 2/3 Bushels 33 1/3 Bushels 100 Bushels eaten
2 16 2/3 Bushels seed 33 1/3 Bushels seed
& 1/3 year's labor & 2/3 year's labor
produce produce
50 Bushels 100 Bushels eaten
3 50 Bushels seed
& 1 year's labor
produce
150 Bushels
Robinson says, "I guess that's fairly clever. If I add horizontally,
I see that you have allocated each year's seed, labor, and output to
your columns. That's good. But if I add the first column vertically,
all I see is that our 150 bushels corn is the result of 1 4/9 year's
of your work and 5 5/9 bushels of my initial seed corn. What's your
point?"
Friday says, "Wasn't that seed corn the result of your work before
I showed up?"
Robinson says, "Well, yes. I worked hard for it. And I was even
generous enough to feed you at first."
Friday says, "That may be. But can't we say that the 150 bushels we
have now embodies the sum of 1 + 1/3 + 1/9 + 1/27 + ... year's
labor? And therefore that, the total labor embodied in this third
year's harvest is 3/2 year's of effort?"
"I don't know."
"It's just arithmetic. My contribution to this year's harvest, as
you saw, is 1 4/9 years of work. The 5 5/9 bushels you originally
contributed represents the remaining 1/18 years needed to produce
the harvest. Since [ 1 4/9 ]/[ 1/18 ] is 26, I should get 26 bushels
for every one of yours in the harvest."
Robinson says, "Um..."
"In other words, I, Friday, should get 26/27ths of this year's produce
as I said originally."
"Furthermore," Friday continues, "as long as we continue to follow
your deal, your fair share should become smaller and smaller. In the
limit, all of the annual harvest has been produced by me alone if you
don't help out at all."
5.0 THE UPSHOT
Robinson says, "Aren't you denying my capital is productive?"
Friday says, "We certainly need the seed corn. But how is your
ownership of it productive?"
"Sure it is. You need me to make the decisions what to do with it."
"Maybe so. My labor's the horse, and your capital is the lash."
This comment seems subversive to Robinson, and he gets angry. "Look,
your argument only works because of the simplicity of our island.
Excess profits and losses indicate where investment can be
directed most advantageously."
Friday says, "You are only arguing that the rate of profit be
calculated, not that profits be paid out. That indicator is
only one among several. We could have any of many different
incentive schemes."
Frustrated, Robinson says, "A deal's a deal. Whatever comes out of
our market transactions, that's what's fair. I refuse to do
arithmetic, so I can continue to talk nonsense."
This blockheadedness on Robinson's part so angers Friday that he
stages a revolution and kills Robinson. The island lives on in
communism from that day forward.
6.0 SOME NOTES
This story is un-Marxist. According to Marx, capitalism did not
arise through people rationally constructing capitalist institutions,
property rights, markets, etc. Nor will it fall by convincing
people of its unjustness by rational argument. Rather historical
materialism describes beliefs as reflecting changes in productive
forces as part of an historical process. My story is much too idealist
for Marx. Also, my story does not contain money, and money is
central to Marx's account of value.
The story can be made more realistic. We can add many workers and
capitalists, and assume perfect competition. We can also assume
continuously differentable production functions. For example,
this parable is consistent with the Cobb-Douglas production
function:
Q( L, X ) = 3 * 50^( 1/3 ) * L^( 1/3 ) * X^(2/3)
where Q is the corn harvested at the end of the year, L is the
number of person-years of labor during the year, and X is the
bushels of seed corn. Whatever wage comes out of the market will
be equal to the value of the marginal product of labor. These
assumptions and this equality of the wage and the value of the
marginal product of labor are compatible with some such calculations
as in the story. Unless the workers eventually get the entire product,
they are exploited, as above.
While my parable is non-Marxist, the concept of exploitation used in
it is based on my understanding of some aspects of Marx's theory.
"...we must understand the importance which Marx attached to his
distinction between 'labour' and 'labour-power': an importance
essential for the context of exploitation as a key to understanding
the bourgeois (or capitalist) mode of production. The role of the
labour theory of value in relation to the theory of surplus value
is frequently misunderstood. Often this is interpreted as embodying
a Lockean 'natural right' principle, to the effect that the product
of a man's labour belongs 'of right' to the labourer; whence it is held
that the appropriation of part of this product by the capitalist is
'unnatural' and unethical. Hence exploitation is interpreted as a
quasi-legal or ethical concept rather than a realistic economic
description. If what we have said about labour and the labour process
has been appreciated, it should be clear that this is an incorrect
interpretation. What could be said, of course, is that the notion of
labour as productive *activity* implicitly afforded the definition
of exploitation as an appropriation of the fruits of activity by
*others* - appropriation of those fruits by those who provided no
productive activity of their own. But far from being an arbitrary
or unusual definition of 'productive' and 'unproductive', this would
surely meet with general aggreement as normal usage of these words. The
problem for Marx was not to prove the existence of surplus value and
exploitation by *means* of a theory of value: it was, indeed, to
*reconcile* the existence of surplus value with the reign of market
competition and of exchange of value equivalents. As he himself expressed
it: 'To explain the *general nature of profits*, you must start
from the theorem that, on an average, commodities are *sold at their
real values*, and that *profits are derived from selling them at
their values*...If you cannot explain profit upon this supposition,
you cannot explain it at all.'
The point of this can the better be appreciated if it is remembered
that the school of writers to whom the name of the Ricardian
Socialists has been given (such as Thomas Hodgskin, William Thompson
and John Bray), who can be said to have held a 'primitive' theory of
exploitation, explained profit on capital as the product of the
superior bargaining power, lack of competition and 'unequal exchanges
between Capital and Labour' (this bearing analogy with Duhring's
'force theory' which was castigated by Engels). This was the kind of
explanation that Marx was avoiding rather than seeking. It did *not*
make exploitation *consistent* with the law of value and with market
competition, but explained it by departures from, or imperfections in,
the latter. To it there was an easy answer from the liberal economists
and free traders: namely, 'join with us in demanding *really* free
trade and then there can be no "unequal exchanges" and exploitation.'"
-- Maurice Dobb, "Introduction" in K. Marx, _A Contibution to the
Critique of Political Economy_, Progress Publishers, 1970, pp. 12-13.
Interestingly enough, the great Austrian economist Eugen Bohm-Bawerk's
account of capitalism arguably does not challenge Marx's claim that
the workers are exploited:
"Whoever is the owner of a capital sum is ordinarily able to derive
from it a permanent net income which goes under the scientific name of
interest in the broad sense of the term.
This income is distinguished by certain notable characteristics.
It arises independently of any personal act of the capitalist. It
accrues to him even though he has not moved a finger in creating it,
and therefore seems in a peculiar sense to arise from capital, or,
to use a very old metaphor, to be begotten by it...And, finally, it
flows without ever exhausting the capital from which it arises, and
therefore without any necessary limit to its continuance. It is, if
one may use such an expression in mundane matters, capable of
everlasting life.
And so the phenomenon of interest presents, on the whole, the
remarkable picture of a lifeless thing, capital, producing an
everlasting and inexhaustible supply of goods. And this remarkable
phenomenon appears in economic life with such perfect regularity that
the very concept of capital has often been founded on it. Thus
Hermann, in his _Staatswirtschaftiche Untersuchungen_ defines capital
as 'wealth which produces a constant flow of income without suffering
any diminution in exchange value.'
*Whence and why does the capitalist receive this endless and
effortless flow of wealth?*"
-- Eugen von Bohm Bawerk, _Capital and Interest_, "Volume 1:
History and Critique of Interest Theories", p. 1.
Notice that attempts to change the conditions don't attack the logic
of the above story. I don't see how the ability for some workers to
save to become capitalists or attempts to justify some highly
paid personnel as being paid for the labor of supervision threatens
the logic of the story. If you want to criticize the logic, show
that it's not reasonable within its own assumptions. But this cannot
be done. On the other hand, those that understand, say, the John von
Neumann model of growth know how to generalize the story to make it
much more realistic.
Don Libby
later...
> This blockheadedness on Robinson's part so angers Friday that he
> stages a revolution and kills Robinson. The island lives on in
> communism from that day forward.
Wait a minuite, R.V. Why doesn't Friday just kill Robinson on the spot
and steal the 50 bushels of seed corn? If he is a murderer or a thief,
why not just get on with it? Good thing Lenin wasn't there to speed
history to its inevitable conclusion, eh?
Rewind the tape:
Friday says, "You don't want to see me starve, do you? What do you
propose I do?"
Robinson calculates: "If I give him some corn, he will survive and
possibly murder me some day, but if I don't give him corn, then I will
murder him, or perhaps he will murder me out of desperation. Since I am
not a murderer, nor do I wish to be murdered, I will establish a trust
between us, make a bond, extend him credit, negotiate terms, and express
my interest in compensation for the risk I am taking that he will
squander the corn or his crop be wiped out by bad weather, and come back
next year demanding more. Now, let's see, where should we start the
negotiation? How about I loan him 50 bushels at 100% interest, that
seems good and fair and just to me, and if he disagrees, let him make a
counter-offer."
He says "Fine, we'll start the bidding on the price of corn at 100%
interest."
Friday balks, "No! I deserve a gift of corn at zero percent interest!"
Robinson silently calculates "He's not going to cooperate, seems to be
getting angry, my life could be in danger here. I'll lower the price to
calm him down and try to sell him on the deal."
"Friday good fellow", he says, "you know these tropical storms can be
tough on corn, and who knows when the next tsunami will come, so it
would be mutually advantageous for us to share the risk. Of course, I
am taking a chance that you will not apply yourself industriously to
your farming chores, and you'll be back again next year with your hand
out and your mouth open. After all, how is it that you've come to this
terrible condition of not having enough corn to make it through another
year? If I give you all the corn, how do I know that you will not
squander it and we'll both starve? I'll offer you 50 bushels at 80%
interest, that's a reasonable offer isn't it?"
Friday replies "You have a point there, but 80% is too much. I'm only
human, I have my leisure time needs, I'm only willing to pay 20%."
Robinson: "Come on, 60%, there's a good fellow".
Friday: "50%, and that's my final offer, but at this price, I only want
to purchase 40 bushels".
Robinson: "Fair enough, fourty bushels at 50%, principal 40 bushels plus
20 bushels interest, payable in one year, sign here please".
Friday goes off to tend his 40 bushel farm, Robinson to tend his 10
bushel garden. Friday gets just enough time off to see that Robinson
spends most of his time at the beach.
At the end of the year, Friday sees that Robinson has only 30 bushels,
not enough to make it through the year. He calculates "Hmm, the shoe is
on the other foot, now's my chance to get a better deal." He says
"Robinson, I may have to default on that loan, unless we renegotiate the
terms".
Robinson: "No way, a deal's a deal. We have a bond, we have a trust,
do you want to jeopardize the rule of law? You owe me 60 bushels."
Friday: "So sue me. Who ya gonna call, Ghostbusters?"
Robinson: "All right, what's your offer?"
Friday: "I'll give you 20%" Robinson: "30%" Friday "25% - even steven -
take it or leave it" Robinson: "Deal."
And so, Robinson ended the year with 80 bushels, Friday with 70. They
both grew fat and happy in harmony negotiated through the capital
market, each with equal opportunity to have the upper hand in successive
negotiations. Inequality gradually diminished over time and they both
got equally marvelous tans.
Tra la la.
Bill Terrell
into two classes, the capitalitsts and the laborers. If anything, recent
experience in the developed world contradicts that oversinmplified model. What
really has been going on is that most of us are both at different times of our
lives. We accumulate capital as we labor, and then retire on the accumulated
capital.
Who says the retired laborer-turned-capitalist must contribute?
Bill Terrell
Steve
Robert Vienneau wrote...oops! sorry
Booby aka Robert Vienneau, until you learn that capital goods and
consumption goods are not equivalent in a modern economy you are still
masturbating to that naked picture of Joan Robinson.
SUSUPPLY
read in Robert Vienneau’s latest update of the Crusoe-Friday parable (and
practicing the anti-capitalist mentality he preaches, Robert gives no credit
where it is due) such things as:
<< Friday says, "Wasn't that seed corn the result of your work before
I showed up?"
<<Robinson says, "Well, yes. I worked hard for it. And I was even
generous enough to feed you at first." >>
Unfortunately Robert misses the point of what I said (in "Move Over, Aesop")
last fall:
<<Let me see if I get this straight. Robinson produces 150 bushels of corn,
and
eats 50 himself, makes a gift of 50 to Friday, and saves 50. Pretty generous
guy, don’t you think.>>
And I even explained it to him back then:
<<Robinson’s first act was to give--or maybe
it was a loan, in which case Friday owes 50 bushels to Robinson—50 bushels to
Friday. So, Robinson is not at all heartless (BY YOUR OWN CREATION). I.E. He
didn’t let him starve at the beginning, why now?.>>
Again, the point is that the reality of Robert’s own creation is that Friday
owes Crusoe 50 bushels of seed corn. That is NOT taken into consideration in
Robert’s math. Thus, GIGO, as it used to be said.
Don Libby has just offered a model of how the interest rate could be determined
(though it leaves out the initial loan), so I won’t bother.
Not to mention that Robert’s own words also destroy his math, even if he
ignores my point about Friday starting out 50 bushels in the red, when he
writes:
>At the end of the year, Friday consumes his wages of 50 bushels. Robinson
>consumes his profits of 50 bushels. They are in the same situation as they
>were originally. They strike the same deal again and continue year after
>year.
That is, if, (in Robert’s own words) "They are in the same situation as they
were originally.", Robert’s mathematical proof of who is owed what is
destroyed. That "they strike the same deal again and continue year after
year.", means Robert contradicts himself.
As I told Robert, he needs a better editor. It is a telling irony that even
with a tendentious "simplifying assumption" as ludicrous as:
>>(In this story, Robinson and Friday are
>>each able to go a year between meals.)
Robert can’t make his story work. The reason for the above assumption, as
Robert knows, is that that eliminates one of the major reasons for the
productivity of capital. The necessity of coordinating activities in time and
space.
Speaking of telling ironies, one thing Robert has added to this year's version
that he didn’t steal from me, is the following:
<< 3.0 FRIDAY READS A BOOK
<<It seems Robinson has brought the captain's library off the shipwreck
with him. One day Friday happens to notice this library. He says to
Robinson, "What are all these books?"
<<Robinson says, "I don't know. Being a practical person of the middle
order of society, I never bothered to read them." >>
Nicely undressing Robert as the snob he is. (Have you guessed?) I’d pointed
this out to him last year too, when I responded thus:
<<
>The usual complaint about exploitation under capitalism relates
>to employer-employee relationships. It's pointless to oppose this
>claim by describing model economies in which nobody has a job.
<<Yes, that is the usual complaint. It could be dismissed as fatuous and
bizarre, were it not for the tens of millions of people who have met violent
death because some third-hand dealers in ideas took it seriously. >>
Well it took Robert six months to make the minimal improvements he offers now,
so when should I expect a little more evidence of anything worthwhile having
sunk in? April of 2000?
Patrick
Robert Vienneau
Your comments, while amusing, seem pointless. The end state of your
modification of the story is a model economy in which nobody has a
job. It seems that your modification can neither explain nor
justify the employer-employee institutions existing in contemporary
more-or-less capitalist economies, such as the United States.
Bill Terrell's comments only seem to have one virtue, that of
being short. He seems to be laboring under a misunderstanding
of who owns what in, say, the United States.
Paul Zrimsek
><<Robinson’s first act was to give--or maybe
>it was a loan, in which case Friday owes 50 bushels to Robinson—50 bushels to
>Friday. So, Robinson is not at all heartless (BY YOUR OWN CREATION). I.E. He
>didn’t let him starve at the beginning, why now?.>>
Indeed, if Vienneau wants to make this a story about exploitation,
rather than an odd attempt to analyze an act of charity as if it were
a business transaction, he needs to prove that Crusoe benefits from
foregoing the option of letting Friday starve and carrying on as
before. Since the course Crusoe follows in the story involves giving
up all hope of ever raising his consumption above subsistence level,
it's far from obvious that he comes out ahead on the deal.
Paul Zrimsek | Every crook will argue, "I like committing crimes.
pzri...@tiac.net | God likes forgiving them. Really the world is
| admirably arranged". --W. H. Auden
Don Libby
>
> Don,
>
> Your comments, while amusing, seem pointless. The end state of your
> modification of the story is a model economy in which nobody has a
> job. It seems that your modification can neither explain nor
> justify the employer-employee institutions existing in contemporary
> more-or-less capitalist economies, such as the United States.
> --
> Robert Vienneau
I'm pleased the tale amused, as it was so intended. Seriously, though,
while I did not intended to explain the occupational structure (for more
see: Blau and Duncan, 1967 _The American Occupational Structure_), I did
intend to illustrate the foundation of fiduciary institutions (the
contribution of capitalists). Key words: trust, bond, mututal risk
pooling, reciprocity, capital markets, interest, the price of money,
bargaining, negotiation.
It also illustrated the origin and role of power differentials in
negotiation as well as social mobility in the power structure as defined
by relations to the means of production (capital). And it was a ripping
good yarn to boot.
SUSUPPLY
>Your comments, while amusing, seem pointless. The end state of your
>modification of the story is a model economy in which nobody has a
>job. It seems that your modification can neither explain nor
>justify the employer-employee institutions existing in contemporary
>more-or-less capitalist economies, such as the United States.
>
In contrast to your model, Robert? What are the transaction costs in a two
person economy?
You must have had a tiring week-end. I was expecting your usual filibuster of
quotes from Chomsky, Sraffa, et al.
Patrick
SUSUPPLY
>Indeed, if Vienneau wants to make this a story about exploitation,
>rather than an odd attempt to analyze an act of charity as if it were
>a business transaction, he needs to prove that Crusoe benefits from
>foregoing the option of letting Friday starve and carrying on as
>before. Since the course Crusoe follows in the story involves giving
>up all hope of ever raising his consumption above subsistence level,
>it's far from obvious that he comes out ahead on the deal.
You must be new. Robert does not like his fantasies complicated by the way
things actually are. He's already passed on the chance to learn by ignoring
this from last fall (from "Move Over, Aesop"):
<<Robinson: "Well, Friday. I may have done you a disservice by feeding you
without requiring you to earn your meal. You seem to be trying to bite the
hand that fed you, not an uncommon reaction among humans. You see, I had to
labor for years to get my productivity up to 150 bushels of corn. I did it by
sacrificing (not consuming immediately everything I produced). But since I can
see that you haven’t had the advantages I had (you haven’t had the opportunity
to read Adam Smith and Milton Friedman), I’m going to help you.
"This is going to be the deal. You can work for me, I’ll supply the capital.
If you produce 150 bushels of corn, I’ll pay you thus: 40 bushels of corn for
current consumption, and I’ll put 10 bushels away in a 401K with your name on
it. That way in five years you’ll have some capital of your own, and you
won’t
really need my capital. You’ll be a capitalist, man!
"All that it will take is some sacrifice on your part. Consume 80% of what I
do for five years, it’ll be worth it. I had to make bigger sacrifices when I
was just starting out. In fact, I wish there had been someone to offer me such
a sweetheart deal as this.
"My people have a saying: "Give a man a fish, he eats for one day. Teach a
man to fish, he eats for a lifetime."
"Fish? Hmm. You know Friday, there might be another deal we could make that
would benefit both of us even more. It just dawned on me that we’re on an
island. I don’t know about you, but eating corn every year is getting pretty
monotonous. Remember I told you about Adam Smith, well he has this idea called
division of labor...."
And they lived happily ever.
That is until Friday discovers the Internet and stumbles across the
simple-minded, malicious parables posted by a certain self-deluded,
quasi-intellectual (who shall remain nameless).>>
Robert's goal in life seems not to extend farther than being the Marxist mascot
of sci.econ.
Patrick
Robert Vienneau
> [ Usual embarassing stupidity deleted. ]
Stephen, of course, is not interested in having an intelligent
conversation. Nevertheless, I think I'll illustrate his error
in supposing my Crusoe story depends on an assumption that
capital goods can otherwise be directly consumed.
Consider this modification of my Crusoe and Friday story.
Assume that Crusoe begins by owning 75 tons of steel. Friday is
hired to expend 1/2 year using 25 tons steel to produce 75 tons
of steel and to spend his remaining 1/2 year of labor using
50 tons of steel to produce 100 bushels of corn. Friday is paid
50 bushels of corn as wages at the end of the year. Friday eats
his wages. Crusoe eats the remaining 50 bushels of corn.
Once again, Crusoe and Friday strike the same deal in subsequent years.
Friday's first table breaks down into two tables:
FRIDAY'S TOTAL
PROPORTION STEEL LABOR STEEL OUTPUT
1 50 Tons 1 Year 150 Tons
1/2 25 Tons 1/2 Years 75 Tons
1/3 16 2/3 Tons 1/3 Years 50 Tons
1/6 8 1/3 Tons 1/6 Years 25 Tons
1/9 5 5/9 Tons 1/9 Years 16 2/3 Tons
1/18 2 7/9 Tons 1/18 Years 8 1/3 Tons
FRIDAY'S TOTAL
PROPORTION STEEL LABOR CORN OUTPUT
1 100 Tons 1 Year 200 Bushels
1/2 50 Tons 1/2 Year 100 Bushels
I deliberately chose numbers in this modification such that the
capital intensity varies between the steel and corn industry.
Friday's original second table becomes:
WORK TORWARDS WORK TOWARDS WORK TOWARDS
YEAR YEAR 3 OUTPUT YEAR 2 OUTPUT YEAR 1 OUTPUT
1 2 7/9 tons 5 5/9 tons 16 2/3 tons 50 tons
& 1/18 years & 1/9 years & 1/3 years & 1/2 years
produce produce produce produce
8 1/3 tons 16 2/3 tons 50 tons 100 bushels
2 8 1/3 tons 16 2/3 tons 50 tons
& 1/6 year & 1/3 year & 1/2 year
produce produce produce
25 tons steel 50 tons steel 100 bushels
3 25 tons steel 50 tons steel
& 1/2 year & 1/2 year
produce produce
75 tons steel 100 bushels
The 75 tons steel and 100 bushels corn produced at the end of the
third year is the result of 1 1/2 years of Friday's labor and 8 1/3
of Crusoe's original 75 tons steel. These 75 tons represent
3/4 years ( = 1/2 + 1/6 + 1/18 + .... ) of Crusoe's labor.
Hence, the total output of the third year embodies 2 1/4 years labor.
If Friday were to be non-exploited, he would be paid commodities
embodying 1 1/2 years. However, the 50 bushels corn Friday is paid
embody 1/2 years in this modification of the story. Thus, Friday is
exploited.
The analytical techniques, using Leontief input-output matrices,
that underlie these examples have widespread empirical
applicability, as others and I have already pointed out to Shawn
Wilson some time ago. There's a difference between these formal
manipulations of matrices describing one level of inputs and
outputs, and assuming Leontief production functions. I do not assume
Leontief production functions.
A more general account of Marx's economics showing how the
disaggregation of capital goods and consumption goods makes no
difference to the understanding of exploitation inherent in my
Crusoe tales can be found in:
Michio Morishima, _Marx's Economics_, Cambridge University Press,
1973.
I don't think Nell's conceptualization of exploitation in his
description of industrial economies is restricted to the notion
explicated in my Crusoe tales.
Steve
Booby, Until you understand that capital goods are not equivalent to
consumption goods you are still masturbating to that naked picture of Joan
Robinson.
Usual crap deleted....
Robert Vienneau
> Indeed, if Vienneau wants to make this a story about exploitation,
> rather than an odd attempt to analyze an act of charity as if it were
> a business transaction, he needs to prove that Crusoe benefits from
> foregoing the option of letting Friday starve and carrying on as
> before. Since the course Crusoe follows in the story involves giving
> up all hope of ever raising his consumption above subsistence level,
> it's far from obvious that he comes out ahead on the deal.
Crusoe makes a choice between leisure and consumption? Nowhere in the
story do I state what a physical subsistence level is.
Vienneau wants to have a conversation with people who can be taken
seriously. Several respondents on this thread seem to think their
refusal to address the issue of exploitation, their tortured
incomprehension of any definition of the concept, and beside-the-point
comments constitues an argument.
It is trivial to modify the story so that initial conditions don't
pose the strange stumbling block that Paul erects. Replace the first
paragraph of the parable with:
1.0 INTRODUCTION
Here's a simple parable. Consider an island with a particularly simple
society with two people, Robinson and Friday. Robinson and Friday live
on one good, call it corn. At the start of our story, Robinson and Friday
have just finished a feast. Both Robinson and Friday have each eaten
food baked out of 50 bushels of corn. Also, Robinson has 50 bushels corn
remaining. Friday, perhaps because he's newly arrived with just his
contribution to the meal, has none.
Modify part of Robinson's and Friday's discussion as follows:
Friday says, "Wasn't that seed corn the result of your work before
I showed up?"
Robinson says, "Well, yes. I worked hard for it."
Friday says, "That may be.
Robinson and Crusoe make choices in the story. Robinson consumes the
following goods and services in the time path presented in the story:
( 50 bushels corn, 1 year leisure ), ( 50 bushels, 1 year ), ...
Crusoe consumes:
( 50 bushels, 0 years ), ( 50 bushels, 0 years ), ...
Notice that if Friday were at subsistence level, which I did not
assume, Crusoe would be above subsistence level. Every year, Crusoe
has that extra year of leisure in his consumption bundle.
One possible alternative faced by Robinson is to tighten his belt in
the first year by consuming, say, 40 bushels. The remaining corn
can be devoted to production in the following years. Assuming Friday
still chooses to consume all his wages and is paid the marginal
product of his labor by the production function given in the
story, Crusoe's time path would then be approximately:
(40 bushels, 1 year), (52.9 bushels, 1), (52.9, 1), ...
Friday's path would then be approximately:
(50 bushels, 0 years), (56.4 bushels, 0), (56.4, 0), ...
Other possibilities can arise. There is no reason why Robinson
and Friday might not prefer the path in the original story. It all
depends on preferences over the set of all time paths.
The consideration of non-steady state paths makes the definition
of the labor embodied in a bushel of corn difficult. Multigood
models can exhibit complications not available in one-good models
like the above. In general, the steady state is a saddle-point
equilibrium. Neoclassical economists typically assume that initial
prices are such that the economy converges to the steady state -
this is known as the Hahn problem. In the limit, the labor
embodied in consumption goods is well defined, and, if Crusoe does
not work but does consume, Friday is exploited.
There is a literature on these topics that Paul could explore if
he wanted. And, yes, I am quite aware that Friday could save or that
Crusoe could work. The analytical Marxists, such as John Roemer,
have considered models in which whether one works for another,
employs another, is self-employed, or is in some combination of
classes is found by solving the model. Whether one is exploited or
not turns on whether the labor embodied in the commodities one
could consume is greater than the labor needed to earn them. There
are gray cases and possibilities, which are unrealistic in my
opinion, when those with a better initial endowment end up being
exploited.
SUSUPPLY
>Vienneau wants to have a conversation with people who can be taken
>seriously.
Precisely what Vienneau wants to avoid at all costs--known to all regulars as
"The Vienneau Method".
>Several respondents on this thread seem to think their
>refusal to address the issue of exploitation, their tortured
>incomprehension of any definition of the concept, and beside-the-point
>comments constitues an argument.
Robert, it's a bad sign to talk about yourself this way. Everyone knows that
you are the undisputed champion of failing to respond to this point.
So let's try again. What would be the results of Friday's labor if he had no
seed corn?
[Filibustering deleted]
Let's just make three small changes in the following from Robert:
>Whether one is exploit[ing] or
>not turns on whether the [capital] embodied in the commodities one
>[does] consume is greater than the labor needed to earn them.
Here's your big chance to show how interested you are in having a conversation,
Robert.
>There
>are gray cases and possibilities, which are unrealistic in my
>opinion, when those with a better initial endowment end up being
>exploited.
You devil, you. Conceding my point after you hoped everyone would have given
up reading any more.
Patrick
Paul Zrimsek
wrote:
>Crusoe makes a choice between leisure and consumption? Nowhere in the
>story do I state what a physical subsistence level is.
A bit of interpretive charity on my part: since one of the other
things you state nowhere in the story is why Friday wouldn't free
himself from Crusoe's "exploitation" by saving, I assumed this wasn't
meant to be an option. Since your idea of dealing with the possibility
is simply to say you're "well aware" of it-- without making the
slightest effort to determine whether its admission would change the
outcome of the story-- I guess I'd have done better to nail you on it.
(I trust it will be obvious to everyone but you that admitting the
possibility of saving would, in fact, change the story beyond
recognition-- dependent as it is on the assumption that a bushel of
corn and an hour of labor last year are equivalent to a bushel of corn
and an hour of labor next year. Having banished the specter of t*m*
pr*f*r*nc* in this manner, how can we deny that Friday will save? It's
only a matter of t*m* before he comes out ahead.)
As for leisure and consumption: it now appears that we've added a
second consumer good to the picture. Well and good; to say that Crusoe
is trading corn for leisure is far more accurate than the original
insinuation that he's getting leisure for free. What unstated
assumptions are you making about the exchange? If the deal in your
fable is to stand in for capitalism as described by the
neoclassicists, it has to maximize the combined utility of Crusoe and
Friday-- in addition to being preferable, from Crusoe's vantage point
alone, to letting Friday starve. Perhaps you have a utility function
in mind that meets both constraints; can we be trusted to see it?
Donald L. Libby
>
> Robert Vienneau:
> >There
> >are gray cases and possibilities, which are unrealistic in my
> >opinion, when those with a better initial endowment end up being
> >exploited.
>
> up reading any more.
>
> Patrick
My direct response to the question exploitation was found in my first
post to this thread: everybody exploits out of necessity. Exploitation
becomes problematic only in consideration of whether or not a concrete
material-historical act of exploitation is just or fair. Such
jurisprudence is negotiated among interested parties.
In my version of R.V.'s fable, two actors are engaged in an iterative
prisoner's dilemma where the costs and benefits of cooperation and
defection are determined through negotiation. Initial inequalities in
the power distribution tend to be self-limiting, converging in the limit
to a stable power distribution, which will be equal if both parties have
equal market power (according to Markov) which is the case in R.V.'s
example.
Those with proletariat status in a given iteration bring labor power and
the power to refuse labor, while those with bourgeiose status bring
capital and the power to refuse capital. In theory, the persons have
status mobility between classes, (Robinson and Friday switch roles as
creditors or debtors in sucessive iterations), but the class structure
(defined by relations to the means of production and importantly in
iterations extended over time, the means of subsistence and
reproduction: owners of capital or borrowers of capital) persists. In
my version of R.V.'s example, it is only in the initial iteration that
Friday is purely proletarian and Robinson is purely bourgeoise: in
subsequent iterations both hold both statuses to varying degrees, and in
the limit, both hold both statuses equally.
Various special conditions can reduce proletarian bargaining power (such
as a "reserve army of unemployed", or perhaps natural limits to
subsistence), in which case the balance of power may tilt toward
capital. Such tilts tend to be self-limiting as well, for the very
reason you ended your parable with and I started mine with: intolerably
unjust exploitation tends to provoke a political dilemma between
violence or reform.
Labor exchanges labor for capital. Whether or not that exchange is fair
depends on the negotiated rate of exchange. If labor fails to recognize
its power to withhold labor as a bargaining lever, as Friday did in the
first negotiation of R.V.'s fabulous fable, then labor is possesed of
what Michael Lerner has called "surplus powerlessness". Education tends
to dispel this, but in the absence of access to educational
institutions, folk music may fill the void, e.g. "rise up singing", "get
up get up, stand up for your rights", etc.
-dl
--
Donald L. Libby, PhD (dli...@facstaff.wisc.edu)
NOTE: TO REPLY BY E-MAIL REMOVE "nospam!" FROM MY RETURN ADDRESS
Opinions are my own not those of my employer.
Visit the Network at
http://www.medsch.wisc.edu/prevmed/network/index.html
Jim Blair
>Here's a simple parable. Consider an island with a particularly simple
>society with two people, Robinson and Friday. Robinson and Friday live
>on one good, call it corn. At the start of our story, ... Robinson has
50 bushels corn.... Friday, perhaps because he's newly arrived, has
none.
Hi,
Unless they fight it out for the corn, any negiotiated deal is likely
to favor Robinson, since he was there first and has the corn. There
first?? You mean he is able to live on the island without the aid of
Friday?
But what your parable, like you theory, lacks is a way to deal with
innivation. So consider this likely sequence.
Friday says "You have the all the corn. But I have an idea. If
you feed me for the next few months, I will build a boat and
net. I think there are fish in the sea, and I can catch them".
Robinson says "I am too busy weeding the corn to build a boat, and
besides I don't know how, and am afraid of the sea. But I'll feed
you, and in exchange, you give me half of the first 20 fish you
catch".
Friday builds a boat and after some practice become good at
catching fish. After sharing the first twenty fish, Friday
continues to fish (he is not very good a farming) and Robinson
grows corn.
They trade corn and fish (the exchange rate varies with the catch
and the crop that year). The first innovation, and Friday and
are both Capitalists as well as workers.
Either says "there are rabbits. If you provide me with extra
corn and fish for a week, I'll build a trap and try to catch
some. We will share the first 6".
etc, for goats, coconuts, berries, ....
Your parable has them fighting over one crop. In my version, as
in the real world, there is an ever expanding number of goods.
Jim Blair
>Saying the world has changed in some unspecified way does not constitute
>an argument. No, it is not a tradition based exclusively on work in the
>last century. Those who know how to use a research library can look up
>Kaldor's, Pasinetti's, and related work themselves.
Hi,
Not exactly saying that the world has changed in "some unspecified
way": I am saying it has changed in a way directly related to your
division of the population into two mutually exclusive "classes"
based on the ownership od capital. The fraction of the popluation
that owns capital (directly) is rising rapidly, and the fraction
that own capital indirectly was already high (as in the case of
the Teamsters pension fund, etc).
.....
And the numbers about just who owns wnat percent of the total capital
stock is the distraction. It does not matter what percent of the
capital
I own. What matters is "do I own ENOUGH to live on the interest it
generates"?
>The last sentence is actually an interesting point. Some do own enough
>to live off the returns to their capital. One might call these people
>"capitalists."
This applies to just about everyone by the time they retire.
Even the claim to Social Security is now a claim to money in
the "trust fund" that is "invested" in Treasury bonds, ie
represents ownership in shares of the government.
But now a substantial number of older workers also have 401K, IRA,
a pension plan or own stocks directly.
SUSUPPLY
his fable is an improvement over Robert's by several orders of magnitude. I'll
just quibble here and there.
>My direct response to the question exploitation was found in my first
>post to this thread: everybody exploits out of necessity. Exploitation
>becomes problematic only in consideration of whether or not a concrete
>material-historical act of exploitation is just or fair. Such
>jurisprudence is negotiated among interested parties.
Or as Galbraith said, "Under capitalism, man exploits man. Under socialism,
the reverse is true." (Which seems to be the point Vienneau is driving at,
also).
Yet, it is hard for me to see why we should use the word "exploitation"--as
Marx used it, the harmful use of another for one's own selfish interest--to
explain an arrangement which benefits both parties. Crusoe's offer must have
been an improvement in Friday's situation (or he wouldn't have agreed to it).
Why should third party observers be the judges of what is fair, when the
parties to the transaction have so much more information on it. Their actions
tell us they both think it advantageous. If not, they would choose other
courses of action.
Robert is always complaining that we won't play by his arbitrary rules. That
we have to work within his model. One could say the same thing to objections
to "Snow White", "Cinderella", or those stories of Alien Space Ship abductions.
Those models are usually internally logical (more so than Robert's,
actually).
[snip]
>intolerably
>unjust exploitation tends to provoke a political dilemma between
>violence or reform.
>
Or, more prosaically, spurs the "exploited" party to look for other options,
which, when found, will affect the "exploiter's" offer(s).
For all Robert's ostentatious claims to know so much "classical economics",
you'd think he'd know that Friday shouldn't appeal to Crusoe's benevolence, but
to his self-interest.
And I don't think one needs much "education" to see that.
Patrick
Dan Hersam
It's still being developed it looks like, but the game works great and if
you win you get $100 of real money. Check it out:
______
Dan Hersam (Systems Programmer, BYU CS Dept)
http://students.cs.byu.edu/~coins
Robert Vienneau
> On 16 Feb 1999 01:36:26 GMT, rv...@see.sig.com (Robert Vienneau)
> wrote:
> >Crusoe makes a choice between leisure and consumption? Nowhere in the
> >story do I state what a physical subsistence level is.
> A bit of interpretive charity on my part: since one of the other
> things you state nowhere in the story is why Friday wouldn't free
> himself from Crusoe's "exploitation" by saving, I assumed this wasn't
> meant to be an option. Since your idea of dealing with the possibility
> is simply to say you're "well aware" of it-- without making the
> slightest effort to determine whether its admission would change the
> outcome of the story-- I guess I'd have done better to nail you on it.
Perhaps the burden of proof is on those who object that some
"unrealistic" assumption is essential for the conclusion. Besides,
I presented a quote indicating an argument of Marx on exactly this
point. And I also pointed out authors who had developed models
consistent wtih Nell's point and with workers savings.
> (I trust it will be obvious to everyone but you that admitting the
> possibility of saving would, in fact, change the story beyond
> recognition-- dependent as it is on the assumption that a bushel of
> corn and an hour of labor last year are equivalent to a bushel of corn
> and an hour of labor next year. Having banished the specter of t*m*
> pr*f*r*nc* in this manner, how can we deny that Friday will save? It's
> only a matter of t*m* before he comes out ahead.)
I will not take the opportunity to explore all the problems of
a coherent story using time preference, especially in a multi-commodity
model. I suggest a lack of awareness of some problems can only be
due to an inadequate education in economics - although I, of course,
think very few teach it adequately.
One could always ask, how much more labor would be needed for an
economy to produce an additional net output of specified quantities
of specified goods. The answer would include the labor needed to
produce the inputs for these additional outputs. Note that I
have in mind a different, but equivalent - at least under the
simple conditions of my Crusoe parable - method in mind for
answering this question. This method would not trace back inputs
for all time, but merely manipulate the input-output matrix
describing the quantities flows for a single year. Assuming
the reader understands what I'm talking about and a certain
notation, this quantity of labor would be:
a0 ( I - A )^(-1) deltay
Don't worry if you don't understand the notation.
How does the possibility of saving have any relevance to
these calculations?
> As for leisure and consumption: it now appears that we've added a
> second consumer good to the picture. Well and good; to say that Crusoe
> is trading corn for leisure is far more accurate than the original
> insinuation that he's getting leisure for free.
Actually, the corn that Crusoe consumes becomes increasingly the
result of Friday's "unpaid labor time."
> What unstated
> assumptions are you making about the exchange? If the deal in your
> fable is to stand in for capitalism as described by the
> neoclassicists, it has to maximize the combined utility of Crusoe and
> Friday-- in addition to being preferable, from Crusoe's vantage point
> alone, to letting Friday starve.
That's a bad way of putting it. The sum of Crusoe's and Friday's
utility is not a meaningful quantity. But I couldn't immediately think
of a better short statement.
> Perhaps you have a utility function
> in mind that meets both constraints; can we be trusted to see it?
No, I haven't bothered to construct an utility function for this
parable. I know utility-maximization imposes hardly any constraints,
and so I don't see why the time path in my original story couldn't
be optimal for both agents. Once again, I think the burden of
proof is on those who want to assert otherwise.
By the way, Friday could be utility-maximizing even if his
exploitation-status is one argument of his utility function. Part
of the point of the story is that the description of Friday as
being exploited is consistent with choices made in unconstrained
markets.
Robert Vienneau
nospam!dli...@facstaff.wisc.edu wrote:
> My direct response to the question exploitation was found in my first
> post to this thread: everybody exploits out of necessity.
And as I pointed out, this response avoids exploring the definition
relevant for my Crusoe parable.
> Exploitation
> becomes problematic only in consideration of whether or not a concrete
> material-historical act of exploitation is just or fair.
And as I pointed out, exploitation is, first, a description in
these analyses. The question of justice is a later question.
> Such
> jurisprudence is negotiated among interested parties.
Gee, I thought the law was supposed to be an ass.
> In my version of R.V.'s fable, two actors are engaged in an iterative
> prisoner's dilemma where the costs and benefits of cooperation and
> defection are determined through negotiation. Initial inequalities in
> the power distribution tend to be self-limiting, converging in the limit
> to a stable power distribution, which will be equal if both parties have
> equal market power (according to Markov) which is the case in R.V.'s
> example.
Let's see. Your version describes Crusoe and Friday as self-employed
and making loans in kind. For some reason, you think that despite the
disparity in initial endowments, the story will eventually converge
to them being equally well-off self-employed agents. I suggest that
rather, in a society characterized by the making of commodities for
the market and a drastic difference in distribution, a market for
labor power might develop along with classes. For what it's worth,
this is close to Jon Elster's opinion:
"...In the first model, agents are supposed to minimise labour time
by engaging in exchange of non-labour commodities, In other words,
there is a commodity market, but neither a labour market nor a
credit market. By definition such an economy cannot contain classes,
which are defined by the buying and selling of labour-power, yet there
can be exploitation. This is an interesting result, since it disproves
the frequently stated view that 'exploitation takes place at the
point of production,' substituting for it the idea that exploitation
occurs at the point of exchange. True, the possibility of exploitation
without class is, with one exception, mainly a logical one. The
exception is international trade, which may bring about exploitation
by 'unequal exchange' even if there is no employment relation."
-- Jon Elster, "The Crisis in Economic Theory" (Review of
Nelson and Winter (1982) and J. Roemer (1982), London Review
of Books 5 (9):5-7, <http://home.sol.no/~hmelberg/ar83ciet.htm>
Although I think Elster and Roemer's formalism misses certain aspects
of work in hierarchial firms in capitalism, their work is good for
thoroughly exploring the formal notion of exploitation used in my
Crusoe parable. More about Jon Elster is available at:
<http://home.sol.no/~hmelberg/els1b.htm>
I am currently reading the chapter about exploitation in Jon Elster's
_Making Sense of Marx_ (Cambridge University Press, 1985). This book
is interesting and well-written. I cannot decide if it would make the
beginner more or less confused about Marx. The same goes for Roemer,
but I enjoy the math.
Here a passage about a weird case of the poor exploiting the
rich that I had in mind in an earlier post:
"In recent work Roemer has explored the more general case, in which
agents have a supply function of labour that depends on their wealth.
Under reasonable assumptions about these supply functions, the
results of the pure accumulation model are shown to be robust. Under
non-standard assumptions - when the agents perversely want to
work longer hours the richer they are - the results do not hold.
Specifically, under the latter circumstances poor agents may exploit
the rich, if the latter want to work more than their large stock
of capital allows them to do, while the former do not even want
to utilize all of what little they have got, and hence hire the
rich to work for them."
-- Jon Elster, _Making Sense of Marx_, Cambridge University
Press, 1985, p. 172.
> [ More of the same, but referring to the important distinction ]
> [ between class and status. ]
> Various special conditions can reduce proletarian bargaining power (such
> as a "reserve army of unemployed", or perhaps natural limits to
> subsistence), in which case the balance of power may tilt toward
> capital. Such tilts tend to be self-limiting as well, for the very
> reason you ended your parable with and I started mine with: intolerably
> unjust exploitation tends to provoke a political dilemma between
> violence or reform.
"Intolerably unjust"? The qualification suggests Don may recognize
the validity of my position. I was raised in modern times, where
Hollywood thinks no story can have dramatic tension unless there's
violence. I don't take the ending of my story seriously.
> Labor exchanges labor for capital. Whether or not that exchange is fair
> depends on the negotiated rate of exchange. If labor fails to recognize
> its power to withhold labor as a bargaining lever, as Friday did in the
> first negotiation of R.V.'s fabulous fable, then labor is possesed of
> what Michael Lerner has called "surplus powerlessness".
My fable pictures a situation in which every factor gets paid the
value of its marginal product. Yet this is consistent with
exploitation under a traditional definition. I don't see why I
should worry about bargaining, given my assumption of payments
in accordance with marginal productivity.
> Education tends
> to dispel this, but in the absence of access to educational
> institutions, folk music may fill the void, e.g. "rise up singing", "get
> up get up, stand up for your rights", etc.
Babylon will have its prophets.
SUSUPPLY
Zrimsek? Welcome to the club.
Robert launches into the Full Irwin (Corey):
>Perhaps the burden of proof is on those who object that some
>"unrealistic" assumption is essential for the conclusion. Besides,
>I presented a quote indicating an argument of Marx on exactly this
>point. And I also pointed out authors who had developed models
>consistent wtih Nell's point and with workers savings.
[snip]
>One could always ask, how much more labor would be needed for an
>economy to produce an additional net output of specified quantities
>of specified goods. The answer would include the labor needed to
>produce the inputs for these additional outputs. Note that I
>have in mind a different, but equivalent - at least under the
>simple conditions of my Crusoe parable - method in mind for
>answering this question. This method would not trace back inputs
>for all time, but merely manipulate the input-output matrix
>describing the quantities flows for a single year. Assuming
>the reader understands what I'm talking about and a certain
>notation, this quantity of labor would be....
This much noise is a sure sign Robert can't answer your point, Paul. Always
accompanied by the suggestion that Robert is right unless someone else can meet
a burden of proof--Robert being above such things.
After all, very few of us plebians are as smart as he. The Vienneau method.
Tis a mystery why he continues to pal around with us.
Patrick
jim blair
My direct response to the question exploitation was found in my first
SUSPPLY:
Or as Galbraith said, "Under capitalism, man exploits man. Under
socialism,
the reverse is true."
Robert Vienneau wrote:
> And as I pointed out, exploitation is, first, a description in
> these analyses. The question of justice is a later question.
Jon Elster's opinion:
>.. The
> exception is international trade, which may bring about exploitation
> by 'unequal exchange' even if there is no employment relation."
Hi,
Why is there 'unequal exchange', when both parties agree to the
exchange? THEY must consider the exchange to be in their benefit, or
they would not agree to it in the first place.
Does 'unequal' mean that while both gain, one party gains more than the
other? And just who is it that makes that judgement? Is some 3rd party
to be the judge?
And related to that, and to the first two comments by Libby and
Galbraith: The real world application of the ideas of Marx resulted in
the end of the expliotation of the "workers" by the "capitalists". Only
to have that replaced by the exploitation of the "workers" by the
"bureaucrats". At least that was the analysis of Milovan Djilas in his
book "The New Class". The "new class" being the "bureaucrats".
What of the claim that under capitalism both the "workers" AND the
"capitalists" are exploited by the "consumers", who produce nothing but
consume all of the wealth??
And to think people like Ralph Nader even supported "consumers
rights"!!!
SUSUPPLY
>What of the claim that under capitalism both the "workers" AND the
>"capitalists" are exploited by the "consumers", who produce nothing but
>consume all of the wealth??
>
>And to think people like Ralph Nader even supported "consumers
>rights"!!!
That's pretty good, Jim. You might be the first runner-up to Ed Flaherty in
"most likely to be able to quit his day job".
Something tells me you aren't becoming any more endearing to Bobby Vee,
though.
Patrick
Paul Zrimsek
wrote:
>> A bit of interpretive charity on my part: since one of the other
>> things you state nowhere in the story is why Friday wouldn't free
>> himself from Crusoe's "exploitation" by saving, I assumed this wasn't
>> meant to be an option. Since your idea of dealing with the possibility
>> is simply to say you're "well aware" of it-- without making the
>> slightest effort to determine whether its admission would change the
>> outcome of the story-- I guess I'd have done better to nail you on it.
>
>Perhaps the burden of proof is on those who object that some
>"unrealistic" assumption is essential for the conclusion. Besides,
>I presented a quote indicating an argument of Marx on exactly this
>point. And I also pointed out authors who had developed models
>consistent wtih Nell's point and with workers savings.
Look, it's this simple: Suppose the subsistence level of consumption
in your story is 40 bushels a year, and that Friday limits himself to
this the first two years-- planting in his own private plot the 10
unconsumed bushels from his wage the first year, and the following
year that amount plus the 30 yielded by the plot the previous year. In
the third year, the private plot produces 120 bushels, of which Friday
feasts on 70 by way of celebration, setting aside the remaining 50
with the 50 from his wage for the next year's planting. He now tells
Crusoe, "Here's your 100 bushels; I quit."
Note that Friday's total consumption in this version is 150 bushels
over three years, exactly as in your version-- however, in year 4 he
gets to plant 100 bushels of his own corn instead of 50 of someone
else's, and it's pure profit from there on. What possible reason could
he have for passing up this opportunity, except that the two years of
scraping by on 40 bushels' consumption come at the beginning of the
story while the fat years have to wait for later? I doubt he'd be
deterred by the threat of Marx's calling him an artisan! If you have
some other theory in mind, it's time to either translate that into
Crusoe-and-Friday terms, or tear that story up and write another one.
>I will not take the opportunity to explore all the problems of
>a coherent story using time preference, especially in a multi-commodity
>model. I suggest a lack of awareness of some problems can only be
>due to an inadequate education in economics - although I, of course,
>think very few teach it adequately.
If you can't tell a coherent story *without* time preference-- and if
you want to play burden-of-proof tennis, I'd have to say the ball's in
your court now-- then exploring all those problems would seem to be
the only course left (whatever, aside from mathematical
intractability, those problems may be.)
>One could always ask, how much more labor would be needed for an
>economy to produce an additional net output of specified quantities
>of specified goods. The answer would include the labor needed to
>produce the inputs for these additional outputs. Note that I
>have in mind a different, but equivalent - at least under the
>simple conditions of my Crusoe parable - method in mind for
>answering this question. This method would not trace back inputs
>for all time, but merely manipulate the input-output matrix
>describing the quantities flows for a single year. Assuming
>the reader understands what I'm talking about and a certain
>notation, this quantity of labor would be:
>
> a0 ( I - A )^(-1) deltay
>
>Don't worry if you don't understand the notation.
>
>How does the possibility of saving have any relevance to
>these calculations?
You know, this is the sort of thing that makes people doubt your good
faith. Since "these calculations" come unaccompanied by so much as a
simple listing of what the variables are supposed to stand for, I'm in
no position to explain the relevance of *anything* to them-- and it's
hard to shake the suspicion that they serve some purpose other than
explanation.
>> As for leisure and consumption: it now appears that we've added a
>> second consumer good to the picture. Well and good; to say that Crusoe
>> is trading corn for leisure is far more accurate than the original
>> insinuation that he's getting leisure for free.
>
>Actually, the corn that Crusoe consumes becomes increasingly the
>result of Friday's "unpaid labor time."
You forget that I was addressing the question of whether it was
necessarily in Crusoe's interest to deal with Friday at all. The
branch of that decision in which Crusoe gets the corn is the one in
which he avoids exploiting Friday by leaving him to starve; in
equilibrium, Crusoe would be eating 100 bushels a year and saving 50.
His decision to hire Friday, then, is a decision to give up 50
bushels' consumption per year, produced by his own labor, in return
for a man-year's worth of leisure per year. Perhaps it wouldn't be
that hard to come up with a utility function under which that decision
would be rational for Crusoe, and the deal with Friday efficient for
both. I just like to have these things nailed down.
Paul Zrimsek
>Is this the first time you've had the pleasure of Robert's company, Paul
>Zrimsek? Welcome to the club.
Nope. You can find a few of my earlier comments on the famed Rube
Goldberg Diagram here:
http://www.dejanews.com/[ST_rn=ap]/thread/%3c01bce80f$83f5aa80$5584...@pzrimsek.tiac.net%3e%231/1
(In case you find this link too long to paste, the date of the
earliest message DejaNews would let me have was Nov. 3 1997.)
Paul Zrimsek pzri...@tiac.net
-------------------------------------------------------------
The point of opening the mind, as of opening the mouth, is to
shut it again on something solid. --G.K. Chesterton
SUSUPPLY
<<You're obviously unsophisticated to the point that you've misunderstood the
words, "at some point, have to be repaid", as something other than a caveat.
Must be repaid clearly implies a claim on future income which will not be
burdensome if rates of productivity growth are great enough to generate
increases in income sufficent to carry the cost of this debt.
This warning you consider "good news" and completely wish away the other side
of the coin to which Rubin spoke about today.>>
and
<<I don't know whether you're just a hothead or just another internet moron,
but
I don't think you've advanced the discussion at all.>>
Have a clue, Chas. Grinch is tutoring you in the most elementary concepts. It
is GROWING economic entities that need money to work with, not stagnant ones.
The payoff from productive activity usually comes several months (or even
years) after most of the activity was performed. The problem is how to finance
the activities given that reality. One way is to rent the tool, money. Just
as factory buildings, warehouses, forklifts, trucks, etc. are rented (or
leased). That is why expanding enterprises will often be "in debt". It is
usually a healthy sign.
"At some point", the warehouse my business is leasing will have to be returned
to its owners—I hope because we’ll be moving into a larger one—is this
something to be feared? It is not much different from having to return the
rented money--and then rent even larger amounts--after it has served its
productive purposes.
Patrick
SUSUPPLY
>You know, this is the sort of thing that makes people doubt your good
>faith. Since "these calculations" come unaccompanied by so much as a
>simple listing of what the variables are supposed to stand for, I'm in
>no position to explain the relevance of *anything* to them-- and it's
>hard to shake the suspicion that they serve some purpose other than
>explanation.
>
Paul, your name has been entered as a member in good standing of the Robert
Vienneau Encounter Group and Fan Club. Your RV doll (complete with pins with
which to stick) will follow in short order.
Patrick
Robert Vienneau
> Look, it's this simple: Suppose the subsistence level of consumption
> in your story is 40 bushels a year, and that Friday limits himself to
> this the first two years-- planting in his own private plot the 10
> unconsumed bushels from his wage the first year, and the following
> year that amount plus the 30 yielded by the plot the previous year. In
> the third year, the private plot produces 120 bushels, of which Friday
> feasts on 70 by way of celebration, setting aside the remaining 50
> with the 50 from his wage for the next year's planting. He now tells
> Crusoe, "Here's your 100 bushels; I quit."
> Note that Friday's total consumption in this version is 150 bushels
> over three years, exactly as in your version-- however, in year 4 he
> gets to plant 100 bushels of his own corn instead of 50 of someone
> else's, and it's pure profit from there on. What possible reason could
> he have for passing up this opportunity, except that the two years of
> scraping by on 40 bushels' consumption come at the beginning of the
> story while the fat years have to wait for later?
> I doubt he'd be
> deterred by the threat of Marx's calling him an artisan! If you have
> some other theory in mind, it's time to either translate that into
> Crusoe-and-Friday terms, or tear that story up and write another one.
Paul,
My story shows that workers can choose to be employed, given an
institutional structure where wage-labor is accepted. Yet the workers
are still exploited in a sense explained by the story.
Friday could have the tastes needed to make your story make sense. The
point is, your story does not end up with employers and employees. It,
therefore, cannot be used to justify more-or-less capitalistic modern
industrial economies.
You still haven't addressed this argument. Maybe a longer quote about
these issues will help you see some errors in your position. I'll
take this from Jon Elster.
But, before I do, let me comment a little on Elster's book. Some
Marxists have said it should be titled _Making Nonsense of Marx_,
_Making Hash of Marx_, or _Making Mincemeat of Marx_. To show you
why some Marxists dislike it, here's the index subheadings under
labor theory of value:
ill-defined because of heterogenity of labour
plays no role in the determination of equilibrium prices and the
rate of profit
cannot explain the possibility of exchange and profit
does not provide a criterion for the socially desirable choice
of technique
does not explain the actual choice of technique under capitalism
ill-suited to the analysis of balanced economic growth
inconsistent with the Marxist theory of class
constitutes a weakness in the theory of exploitation
vitiates the theory of fetishism
vitiates the critique of vulgar economy
rests on obscure Hegelian foundation
Now I sometimes reference works that are well-known for criticizing
Marx (e.g. Steedman's _Marx After Sraffa_). Sometimes some others
more sympathetic to Marx have taken me to task for my line of
reasoning. Yet I'm often the subject of ill-lettered red-baiting.
Why? Merely because I take Marx seriously enough to read him and to
understand some of the debates about the analytical content of his
thought that have followed on from him. The anti-intellectualism I
have seen here is ignominious, especially when it comes from academics.
For example, describing Nell's diagram - or even my pale ASCII
representation of it - as a "Rube Goldberg device" is anti-intellectual,
especially when I contrasted it with the circular flow diagram found
in many intro economics texts.
Elster quotes Marx:
"Certain though it be that the mass of work must be performed by
more or less unskilled labour, so that the vast majority of wages
are determined by the *value of simple labour-power*, it nevertheless
remains open to individuals to raise themselves to higher spheres
by exhibiting a particular talent or energy. In the same way there
is an abstract possibility that this or that worker might
conceivably become a capitalist and the exploiter of the labour of
others. The slave is the property of a particular *master*; the
worker must indeed sell himself to capital, but not to any particular
capitalist, and so within certain limitations he may choose to sell
himself to whomever he wishes; and he may also change his master. The
effect of all these differences is to make the free worker's work
more intensive, more continuous, more flexible and skilled than that
of the slave, quite apart from the fact that they fit him for a
quite different historical role."
Elster quotes Marx again:
"The truth is this, that in this bourgeois society every workman,
if he is an exceedingly clever and shrewd fellow, and gifted with
bourgeois instincts and favoured by an exceptional fortune, can
possibly be converted into an *exploiteur du travail d'autrui*
(exploiter of the work of others - RLV). But where there is no
*travail* to be *exploite*, there would be no capitalist nor
capitalist production."
And again:
"The definedness of individuals, which in (pre-capitalist
societies - JE) appears as a personal restriction of the
individual by another, appears in (capitalism - JE) as
developed into an objective restriction of the individual by
relations independent of him and sufficient unto themselves. (Since
the single individual cannot strip away his personal relations,
but may very well overcome and master external relations, his
freedom *seems* to be greater in case 2. A closer examination of
these external relations, these conditions, shows, however that
it is impossible for the individuals of a class etc. to overcome
them en masse without destroying them. A particular individual
may by chance get on top of these relations, but the mass of those
under their rule cannot, since their mere existence expresses
subordination of the mass of individuals...)
This last quote is from the _Grundrisse_, which I also quoted. My
quote seems more Hegelian to me. I have always found Marx infinitely
clearer than any of the little Hegel I have read.
Elster comments on these passages:
"Both the freedom to change employer and the freedom to become an
employer oneself give rise to ideological illusions that embody the
fallacy of composition. The first is the inference from the fact
that a given worker is independent of *any* specific employer, to
the conclusion that he is free from *all* employers, that is
independent of capital as such. The second is the inference from
the fact that *any* worker can become independent of capital as
such, to the conclusion that *all* workers can achieve such
independence. It might look as if the conclusion of the first
inference follows validly from the premise of the second, but this
is due merely to the word 'can' being employed in two different
senses. The freedom of the worker to change employers depends, for
its realization, mainly on his decision to do so. He 'can' do it,
in the sense of having the real ability to do so should he want to.
The freedom to move into the capitalist class, by contrast, can
only be realized by the worker who is an 'exceedingly clever and
shrewd fellow'. Any worker 'can' do it, in the sense of having the
formal freedom to do so, but only a few are really able to.
Hence the worker possesses the least important of the two freedoms -
namely the freedom to change employer - in the strongest of these
two senses of freedom. He can actually use it should he decide to.
Conversely, the more important freedom to move into the capitalist
class obtains only in the weaker, more conditional sense: 'every
workman, *if* he is an exceedingly clever and shrewd fellow...*can*
possibly be converted into an exploiteur du travail d'autrui.'
Correlatively, the ideological implications of the two freedoms
differ. With respect to the first, the ideologically attractive
aspect is that the worker is free in the strong sense, while the
second has the attraction of making him free with respect to an
important freedom. If the two are confused, as they might easily
be, the idea could emerge that the worker remains in the working
class by choice rather than by necessity. This way of summarizing
Marx's analyses goes beyond what is strictly warranted by the text,
but seems to reflect the spirit of his argument."
-- Jon Elster, _Making Sense of Marx_.
(By the way, Milton Friedman makes this fallacy of composition in the
first chapter, "The Relation between Economic Freedom and Political
Freedom" in _Capitalism and Freedom_.)
> >I will not take the opportunity to explore all the problems of
> >a coherent story using time preference, especially in a multi-commodity
> >model. I suggest a lack of awareness of some problems can only be
> >due to an inadequate education in economics - although I, of course,
> >think very few teach it adequately.
> If you can't tell a coherent story *without* time preference-- and if
> you want to play burden-of-proof tennis, I'd have to say the ball's in
> your court now-- then exploring all those problems would seem to be
> the only course left (whatever, aside from mathematical
> intractability, those problems may be.)
I even cited coherent stories about savings that don't rely on
intertemporal utility-maximizing. So I can tell a coherent story,
if I choose.
Incoherence is not the same as mathematical intractability. In my opinion,
modern economics doesn't give any reason to think the returns to capital
can ever be explained by the forces of Thrift and Productivity. But I've
explained this umpteen times on other threads.
[...]
> >> As for leisure and consumption: it now appears that we've added a
> >> second consumer good to the picture. Well and good; to say that Crusoe
> >> is trading corn for leisure is far more accurate than the original
> >> insinuation that he's getting leisure for free.
> >
> >Actually, the corn that Crusoe consumes becomes increasingly the
> >result of Friday's "unpaid labor time."
>
> You forget that I was addressing the question of whether it was
> necessarily in Crusoe's interest to deal with Friday at all. The
> branch of that decision in which Crusoe gets the corn is the one in
> which he avoids exploiting Friday by leaving him to starve; in
> equilibrium, Crusoe would be eating 100 bushels a year and saving 50.
> His decision to hire Friday, then, is a decision to give up 50
> bushels' consumption per year, produced by his own labor, in return
> for a man-year's worth of leisure per year. Perhaps it wouldn't be
> that hard to come up with a utility function under which that decision
> would be rational for Crusoe, and the deal with Friday efficient for
> both. I just like to have these things nailed down.
It's your problem. I can see easily enough that a solution exists.
You can construct utility functions over infinite time paths, if
you want.
SUSUPPLY
smoke:
>Paul,
>
>My story shows that workers can choose to be employed, given an
>institutional structure where wage-labor is accepted. Yet the workers
>are still exploited in a sense explained by the story.
>
Which is to say, they aren't exploited at all. Friday is BENEFITING from the
arrangement.
>Friday could have the tastes needed to make your story make sense. The
>point is, your story does not end up with employers and employees. It,
>therefore, cannot be used to justify more-or-less capitalistic modern
>industrial economies.
Translation: "You're right, Paul. I have absolutely no answer to your last
response."
>You still haven't addressed this argument.
Translation: "You've completely destroyed the argument."
> Maybe a longer quote about
>these issues will help you see some errors in your position. I'll
>take this from Jon Elster.
Translation: "If I throw a smoke grenade, maybe I can escape in the
confusion."
And then it gushes forth, as it always does with Robert. Total sophistry (and
mostly second-hand sophistry at that) mixed with Clintonian proclamations of
victimhood.
For instance:
>Yet I'm often the subject of ill-lettered red-baiting.
>Why?
It's McCarthyism! Probably the result of all those right-wing editorials in
the WSJ.
>Merely because I take Marx seriously enough to read him and to
>understand some of the debates about the analytical content of his
>thought that have followed on from him.
Wrong, it's because you are a pompous fraud, Robert.
>The anti-intellectualism I
>have seen here is ignominious, especially when it comes from academics.
You could always threaten to hold your breath until you die.
>For example, describing Nell's diagram - or even my pale ASCII
>representation of it - as a "Rube Goldberg device" is anti-intellectual....
And your mother wears army boots too, Paul.
But this is the best (quoting Elster):
> Correlatively, the ideological implications of the two freedoms
> differ. With respect to the first, the ideologically attractive
> aspect is that the worker is free in the strong sense, while the
> second has the attraction of making him free with respect to an
> important freedom. If the two are confused, as they might easily
> be, the idea could emerge that the worker remains in the working
> class by choice rather than by necessity.
[snip]
>(By the way, Milton Friedman makes this fallacy of composition in the
>first chapter, "The Relation between Economic Freedom and Political
>Freedom" in _Capitalism and Freedom_.)
Poor deluded Milton. He doesn't understand there are TWO kinds of freedom.
(Of course, he "might easily be" confused, not having the intellect of a Robert
Vienneau).
>I even cited coherent stories about savings that don't rely on
>intertemporal utility-maximizing. So I can tell a coherent story,
>if I choose.
But, let me guess, you don't have the right kind of freedom just now to do so?
>In my opinion,
>modern economics doesn't give any reason to think the returns to capital
>can ever be explained by the forces of Thrift and Productivity. But I've
>explained this umpteen times on other threads.
Your opinion, and four dollars, will get you a double latte at Starbucks,
Robert.
>It's your problem. I can see easily enough that a solution exists.
>You can construct utility functions over infinite time paths, if
>you want.
Sheesh, Paul. Do you expect Robert to do all the work? He could do it if he
had to, you know.
Looks like Robert forgot to address Paul's point about "bad faith". Surely
just an oversight.
Looking forward to Robert's next recycling of his fable (about July, probably),
Patrick
Paul Zrimsek
wrote:
>My story shows that workers can choose to be employed, given an
>institutional structure where wage-labor is accepted. Yet the workers
>are still exploited in a sense explained by the story.
>
>Friday could have the tastes needed to make your story make sense. The
>point is, your story does not end up with employers and employees. It,
>therefore, cannot be used to justify more-or-less capitalistic modern
>industrial economies.
The problem with your fable is not that there exist auxiliary
assumptions which turn it into a fable about something other than
capitalist wage-labor; it is that there are *no* auxiliary assumptions
which do *not* do so.
The only assumptions I am making about Friday's tastes is that he'd
rather eat more corn than less, have more leisure than less, and
pursues these ends in a rationally self-interested manner (and if any
of these is untrue, his complaints about "exploitation" seem
under-motivated); and that he does not exhibit time preference (with
which you evidently agree). Once these are granted, it follows
ineluctably that if Friday can save, he will. This does make the tale
end up being about something other than capitalist wage-labor; but the
fault lies with the tale, not my analysis.
Incidentally, the point I'm driving towards with this is NOT "workers
can always save and become capitalists, so it's their own fault if
they choose not to and get exploited"; it's "if this story you meant
to describe capitalism, followed to its logical conclusion, ends up
not describing capitalism, perhaps you ought to check your premises."
While I think Elster's arguments would be pretty weak even directed
against the argument you take me to be making, they have nothing at
all to say about the argument I actually am making.
Paul Zrimsek pzri...@tiac.net
-------------------------------------------------------------------
It is helpful to imagine cavemen sitting together to think up what,
for all time, will be the best possible society and then setting
out to institute it. Do none of the reasons that make you smile at
this apply to us? --Robert Nozick
Robert Vienneau
> On 19 Feb 1999 02:43:11 GMT, rv...@see.sig.com (Robert Vienneau)
> wrote:
>
> >My story shows that workers can choose to be employed, given an
> >institutional structure where wage-labor is accepted. Yet the workers
> >are still exploited in a sense explained by the story.
> >Friday could have the tastes needed to make your story make sense. The
> >point is, your story does not end up with employers and employees. It,
> >therefore, cannot be used to justify more-or-less capitalistic modern
> >industrial economies.
> The problem with your fable is not that there exist auxiliary
> assumptions which turn it into a fable about something other than
> capitalist wage-labor; it is that there are *no* auxiliary assumptions
> which do *not* do so.
> The only assumptions I am making about Friday's tastes is that he'd
> rather eat more corn than less, have more leisure than less, and
> pursues these ends in a rationally self-interested manner (and if any
> of these is untrue, his complaints about "exploitation" seem
> under-motivated); and that he does not exhibit time preference (with
> which you evidently agree). Once these are granted, it follows
> ineluctably that if Friday can save, he will. This does make the tale
> end up being about something other than capitalist wage-labor; but the
> fault lies with the tale, not my analysis.
It is my claim that time preference (thrift) and productivity do not
explain the returns to capital in actual industrial economies. It is
also my claim that, despite a century of trying, nobody has yet
shown how to construct a sensible, non ad-hoc, and logically
consistent story of how these forces could explain interest and capital
in a multi-commodity model. I do not want to discuss these claims on
this thread.
My fable has only one commodity, for simplicity. It can explain only
certain aspects of capitalism. Specifically, it illustrates a
definition of exploitation which is consistent with all parties
making deals they find mutually advantageous. By the way, Elster
discusses other definitions of Roemer's. As I understand it, these
further definitions are supposed to be generalizations of the
definition illustrated in my story, but without depending on
the amount of labor embodied in commodities.
It is not the case, and you haven't shown this, that any auxiliary
assumptions on Friday's tastes will lead him to become self-employed.
He cannot get more (or any) seed corn next year without giving up
current consumption this year. I am *not* in agreement that one
should not introduce dated commodities into Friday's utility function,
if one insists on assuming utility-maximization. In fact, I think
a defender of capitalism or mainstream economics should introduce
such dated commodities in any utility function.
You have not demonstrated that my fable is inconsistent with
Crusoe and Friday maximizing their individual utilities. I don't
think you can, since I believe your claim is false. There's no
reason Friday might not prefer this time path:
(50 bushels, 0 yrs leisure), (50 b., 0, yrs), (50 b., 0 yr) ...
to:
(40 b., 0 yrs), (40 b., 0 yrs), (70 b., 0 yrs), (100 b., 0 yr),
(100 b., 0 yr) ...
Or to
(46 3/7 b., 0 yrs), (46 3/7, 0 yrs), (46 3/7 b., 1/2 yr),
(50 b., 1/2 yr), (50 b., 1/2 yr) ....
(The second year, 3 4/7 bushels of seed corn is Friday's and
46 3/7 b. of the seed corn Friday works with is Crusoe's. Since
Friday is only working with 13/14 of Robinson's seed corn as
in the original story, Crusoe works alongside Friday and only
pays Friday 46 3/7 bushels in wages. Friday has a total of
57 1/7 bushels at the end of the second year.
The third year, 10 5/7 bushels of seed corn is Friday's and
39 2/7 bushels of the seed corn Friday works up is Crusoe's.
Friday receives 39 2/7 bushels in wages and has a total of
71 3/7 bushels at the end of the year.)
I don't see how any of this has any bearing on the observation,
based on physical quantity flows, that, in the limit, Friday is
producing all the corn in my original story. That is, the amount
of Crusoe's original seed corn that goes toward producing current
corn becomes vanishing small as time goes on, and the only other
input(s) used in producing corn is Friday's labor. So I think it
reasonable to describe Friday as exploited. And this description
easily generalizes to multi-commodity models with more agents.
> Incidentally, the point I'm driving towards with this is NOT "workers
> can always save and become capitalists, so it's their own fault if
> they choose not to and get exploited";
Well, I think that would be a silly claim to make.
I assume you see that in my fable, Friday's decision to save alters
the institutional structure. In actually existing economies, a
single worker cannot abolish the institution of wage-labor merely
by choosing to save.
> it's "if this story you meant
> to describe capitalism, followed to its logical conclusion, ends up
> not describing capitalism, perhaps you ought to check your premises."
> While I think Elster's arguments would be pretty weak even directed
> against the argument you take me to be making, they have nothing at
> all to say about the argument I actually am making.
Certainly it is interesting, and to the point of this thread, to know
that Marx considered what happens if workers save.
SUSUPPLY
>It is my claim that time preference (thrift) and productivity do not
>explain the returns to capital in actual industrial economies. It is
>also my claim that, despite a century of trying, nobody has yet
>shown how to construct a sensible, non ad-hoc, and logically
>consistent story of how these forces could explain interest and capital
>in a multi-commodity model. I do not want to discuss these claims on
>this thread.
At least we can be thankful we're spared yet another refrain of your CCC
obsession. Such obsession having been conclusively shown to be nothing better
than a POSSIBLE economic anomaly. What would be a good term for someone who
obsesses on making the anomalous the rule?
>My fable has only one commodity, for simplicity. It can explain only
>certain aspects of capitalism.
Can't argue with the obvious. However "exploitation" is not one of the aspects
it explains.
>Specifically, it illustrates a
>definition of exploitation which is consistent with all parties
>making deals they find mutually advantageous.
No, it only "illustrates a definition of" circular reasoning. Something like:
Labor is exploited by capital.
Friday uses capital.
Friday is exploited.
Very sophisticated, Robert, as long as we overlook the shortcomings of your
major premise.
Which you obviously realize, else you wouldn't bother with the following
obfuscatory:
>It is not the case, and you haven't shown this, that any auxiliary
>assumptions on Friday's tastes will lead him to become self-employed.
Which is beside the point. But what else is open to you?
Marx clearly defines exploitation as the HARMFUL use of another person. Which
is the definition commonly accepted by almost everyone. Paul (only the latest
person to attempt the Sisyphean role) quite simply demolishes your fable within
its own terms.
"God, what an ego.", said the KGB Colonel to the dancer (in "White Nights").
(Relevant here not because of any resemblance on your part to Baryshnikov,
Robert). Because you can't grasp (or refuse to, more likely) that Friday has
other options--some of which (starvation) he values less than Crusoe's
offer--does not make that reality disappear.
[snip the characteristic sophistry with numbers]
>I assume you see that in my fable, Friday's decision to save alters
>the institutional structure. In actually existing economies, a
>single worker cannot abolish the institution of wage-labor merely
>by choosing to save.
Again, a completely irrelevant statement when it is understood that "the
institution of wage-labor" is not exploitative--it is an option among others.
Details. Details.
>Certainly it is interesting, and to the point of this thread, to know
>that Marx considered what happens if workers save.
Not at all, as usual, Robert.
Patrick
George Avery
simplest of reasons. It assumes that proles are satisfied by reducing
everyone to the status of proles. In reality, proles have the desire to have
their status improved, not to see other classes reduced to their own level.
SUSUPPLY
Right, it's the intellectual class that wants to reduce capitalists to
proletariat levels.
Patrick
Paul Zrimsek
wrote:
>It is my claim that time preference (thrift) and productivity do not
>explain the returns to capital in actual industrial economies. It is
>also my claim that, despite a century of trying, nobody has yet
>shown how to construct a sensible, non ad-hoc, and logically
>consistent story of how these forces could explain interest and capital
>in a multi-commodity model. I do not want to discuss these claims on
>this thread.
I've seen them several times over; the very most they establish is
that no one's ever succeeded in calculating just how much capitalists
contribute. (I doubt they establish even that, but agree that this is
a bad time to go into it.) Judging by the title you gave this thread,
you're claiming something a wee bit more ambitious.
>My fable has only one commodity, for simplicity. It can explain only
>certain aspects of capitalism. Specifically, it illustrates a
>definition of exploitation which is consistent with all parties
>making deals they find mutually advantageous. By the way, Elster
>discusses other definitions of Roemer's. As I understand it, these
>further definitions are supposed to be generalizations of the
>definition illustrated in my story, but without depending on
>the amount of labor embodied in commodities.
Perhaps the next iteration of this story ought to be based on those
definitions instead.
>It is not the case, and you haven't shown this, that any auxiliary
>assumptions on Friday's tastes will lead him to become self-employed.
What I said is they'll lead him to become self-employed *unless you
introduce time preference*.....
>He cannot get more (or any) seed corn next year without giving up
>current consumption this year.
....which you now proceed to do. That's good; but why do you introduce
it only in one part of the story? If we're going to discount future
consumption compared to present consumption, it would seem only
consistent to have Friday discount present labor against past labor
when doing his calculations (inasmuch as that labor is also foregone
leisure, like corn a consumer good).
[Omit calculations elaborating on a point not in dispute]
>I don't see how any of this has any bearing on the observation,
>based on physical quantity flows, that, in the limit, Friday is
>producing all the corn in my original story. That is, the amount
>of Crusoe's original seed corn that goes toward producing current
>corn becomes vanishing small as time goes on, and the only other
>input(s) used in producing corn is Friday's labor. So I think it
>reasonable to describe Friday as exploited. And this description
>easily generalizes to multi-commodity models with more agents.
See above; we're now agreed (at last!) that these are physical
quantity flows *in time*.
>> Incidentally, the point I'm driving towards with this is NOT "workers
>> can always save and become capitalists, so it's their own fault if
>> they choose not to and get exploited";
>
>Well, I think that would be a silly claim to make.
Not so much silly as irrelevant to this thread. In another context,
there would be something to the argument that workers' manifest
disinterest in freeing themselves from capitalist "exploitation" at
least sets an upper bound on how bad it can be.
>I assume you see that in my fable, Friday's decision to save alters
>the institutional structure. In actually existing economies, a
>single worker cannot abolish the institution of wage-labor merely
>by choosing to save.
Yes. Though I'm unclear on how that makes it a *better* representation
of that institution than it would otherwise be.
>Certainly it is interesting, and to the point of this thread, to know
>that Marx considered what happens if workers save.
Albeit in a singularly pointless way. I could just as well argue that
no one is really free to become a chef-- if *everyone* did it, who
would be left to grow the food?
Paul Zrimsek pzri...@tiac.net
---------------------------------------------------------------------
The question of who is right and who is wrong has seemed to me always
too small to be worth a moment's thought, while the question of what
is right and what is wrong has seemed all-important. -Albert Jay Nock
Robert Vienneau
> On 20 Feb 1999 09:38:50 GMT, rv...@see.sig.com (Robert Vienneau)
> wrote:
>
> >It is my claim that time preference (thrift) and productivity do not
> >explain the returns to capital in actual industrial economies. It is
> >also my claim that, despite a century of trying, nobody has yet
> >shown how to construct a sensible, non ad-hoc, and logically
> >consistent story of how these forces could explain interest and capital
> >in a multi-commodity model. I do not want to discuss these claims on
> >this thread.
> I've seen them several times over; the very most they establish is
> that no one's ever succeeded in calculating just how much capitalists
> contribute.
No. The arguments show that, despite a century of trying, nobody
has yet shown how to construct a sensible, non ad-hoc, and logically
consistent story of how the forces of productivity and thrift could
explain interest and capital in a multi-commodity model.
If you cannot tell how much "capitalists contribute" without already
knowing the answer, perhaps the postulated data cannot answer the
question.
> (I doubt they establish even that, but agree that this is
> a bad time to go into it.)
Well, see if you can answer below without making the disputed theory a
main point of your response.
> Judging by the title you gave this thread,
> you're claiming something a wee bit more ambitious.
Did you notice that my creation of this thread slightly post-dates
the thread "Why the Fuss about Stockholders?" I didn't respond to
that thread because I had no interest in cross-posting over hill
and dale.
For that matter, I wonder how economists distinguish the ability
of ownership of capital to yield a perpetual return (given
appropriate decisions) from
o The use of capital goods to produce commodities of greater
value than could be produced without capital goods.
o The use of capital goods to produce more goods than could
be produced without them
o The use of capital goods to produce goods (as distinct from
the use of consumption goods to gratify immediate needs).
Not surprisingly, I haven't seen an ability to even formulate the
problem to Eugen von Bohm-Bawerk's standards, much less address
the problem.
> >My fable has only one commodity, for simplicity. It can explain only
> >certain aspects of capitalism. Specifically, it illustrates a
> >definition of exploitation which is consistent with all parties
> >making deals they find mutually advantageous. By the way, Elster
> >discusses other definitions of Roemer's. As I understand it, these
> >further definitions are supposed to be generalizations of the
> >definition illustrated in my story, but without depending on
> >the amount of labor embodied in commodities.
> Perhaps the next iteration of this story ought to be based on those
> definitions instead.
You can look up Elster and Roemer yourself, if you are interested. I'm
more interested in using my fable to illustrate a specific definition
of exploitation, namely the definition illustrated by the fable.
> >It is not the case, and you haven't shown this, that any auxiliary
> >assumptions on Friday's tastes will lead him to become self-employed.
> What I said is they'll lead him to become self-employed *unless you
> introduce time preference*.....
What you actually wrote, after I had discussed different possible
preferences over possible time streams of goods, was:
The problem with your fable is not that there exist auxiliary
assumptions which turn it into a fable about something other than
capitalist wage-labor; it is that there are *no* auxiliary assumptions
which do *not* do so.
> >He cannot get more (or any) seed corn next year without giving up
> >current consumption this year.
> ....which you now proceed to do. That's good; but why do you introduce
> it only in one part of the story? If we're going to discount future
> consumption compared to present consumption, it would seem only
> consistent to have Friday discount present labor against past labor
> when doing his calculations (inasmuch as that labor is also foregone
> leisure, like corn a consumer good).
You don't seem to even understand your own position about what should
be discounted and who should do the discounting.
The distribution over time of Friday's labor flows seem irrelevant
to the point.
> [Omit calculations elaborating on a point not in dispute]
>
> >I don't see how any of this has any bearing on the observation,
> >based on physical quantity flows, that, in the limit, Friday is
> >producing all the corn in my original story. That is, the amount
> >of Crusoe's original seed corn that goes toward producing current
> >corn becomes vanishing small as time goes on, and the only other
> >input(s) used in producing corn is Friday's labor. So I think it
> >reasonable to describe Friday as exploited. And this description
> >easily generalizes to multi-commodity models with more agents.
> See above; we're now agreed (at last!) that these are physical
> quantity flows *in time*.
That was never in dispute. I dated all goods quite carefully in
my story.
Perhaps sometime you'll address the point. Here are the start of
the quantity flows in my story:
WORK TOWARDS WORK TOWARDS WORK TOWARDS
YEAR YEAR 3 HARVEST YEAR 2 HARVEST YEAR 1 HARVEST
1 5 5/9 Bushels seed 11 1/9 Bushels seed 33 1/3 Bushels seed
& 1/9 year's labor & 2/9 year's labor & 2/3 year's labor
produce produce produce
16 2/3 Bushels 33 1/3 Bushels 100 Bushels eaten
2 16 2/3 Bushels seed 33 1/3 Bushels seed
& 1/3 year's labor & 2/3 year's labor
produce produce
50 Bushels 100 Bushels eaten
3 50 Bushels seed
& 1 year's labor
produce
150 Bushels
Crusoe and Friday combine each year to consume 100 bushels. How much
does Crusoe's original seed corn contribute to producing those
bushels? The answer is:
CONTRIBUTION OF CRUSOE'S TOWARDS CORN CONSUMED
INITIAL SEED CORN AT THE END OF YEAR
33 1/3 Bushels 1
11 1/9 Bushels 2
3 15/27 Bushels 3
1 15/81 Bushels 4
and so on. How much does Friday's labor contribute towards producing
the corn consumed in each year? The answer is 2/3 years labor of that
year, 2/9 years labor one year ago, and so on. (The remainder of
Friday's labor each year goes towards producing seed corn for use
in subsequent years.)
Notice how the amount of Crusoe's original seed corn contributes less
and less each year. In the limit, Crusoe hasn't supplied anything towards
producing the seed corn. On the other hand, Friday's contributions
do not decrease. In fact, they increase, but also approaching a limit.
The amount of Crusoe's consumption does not decrease to zero,
even though he is providing less and less towards the production of
the consumption good. One might introduce a technical term to
describe this interesting property of the model. A traditional term
is "exploitation."
Whether Crusoe thinks corn consumed a century less is worth less than
corn consumed immediatedly, however interesting this postulation may
be, doesn't change the properties highlighted above of the physical
quantity flows.
Notice that Crusoe's feeling about the time profile of Friday's
labor is irrelevant to any point. I don't see how Friday's preferences
are relevant here, either. In the limit, all corn is produced by
(some time profile of) Friday's labor. Crusoe doesn't contribute
anything.
So far, the discussion of exploitation in this post has not required
that Friday's labor flows be summed across time or the calculation of
the amount of labor embodied in corn. If one does make such
calculations, one obtain the quantitative measure of exploitation
illustrated in my fable.
(Interestingly, Bohm-Bawerk does perform such sums in his critique
of productivity theories of interest. To prohibit such sums at this
stage of the argument, which is merely setting out certain aspects
of some problems, would be circular reasoning.)
> >> Incidentally, the point I'm driving towards with this is NOT "workers
> >> can always save and become capitalists, so it's their own fault if
> >> they choose not to and get exploited";
> >Well, I think that would be a silly claim to make.
> Not so much silly as irrelevant to this thread. In another context,
> there would be something to the argument that workers' manifest
> disinterest in freeing themselves from capitalist "exploitation" at
> least sets an upper bound on how bad it can be.
Your response seems to reflect a naive view of how institutions
relate to individual behavior.
Also, you might take a look at reactions to the institution of
wage labor when it was first introduced into various countries.
When I saw Peter Gabriel a few years back, he had in WOMAD a
British band called the Levellers.
> >I assume you see that in my fable, Friday's decision to save alters
> >the institutional structure. In actually existing economies, a
> >single worker cannot abolish the institution of wage-labor merely
> >by choosing to save.
> Yes. Though I'm unclear on how that makes it a *better* representation
> of that institution than it would otherwise be.
Is that supposed to challenge a claim of mine, a claim I don't
recall making?
The fable has a point. I could tell the story with many workers, many
commodities, heterogeneous labor, etc. But even less readers would be
able to follow the story then, especially since I would be inclined
to be inverting matrices, calculating eigenvectors, etc.
I think the point would remain unchanged if I introduced technical
change. Either the amount of specific capital goods or specific types
of labor that is needed to directly produce a commodity would then
be lower in later years. Still, when one listed the physical inputs
over time use to produce some dated commodity, the only inputs, in
the limit, would be quantities of labor. I am aware of arguments
about this point, of course.
[Further apologetics deleted.]
SUSUPPLY
usually overwhelm logic, writes:
>No. The arguments show that, despite a century of trying, nobody
>has yet shown how to construct a sensible, non ad-hoc, and logically
>consistent story of how the forces of productivity and thrift could
>explain interest and capital in a multi-commodity model.
I guess we should nominate Grinch for a Nobel prize then, for this he just
posted:
<<The BLS Consumer Expenditure Survey measures consumption by income
quintile (among a whole lot of other ways).
<<One thing that jumps out from the data is that the difference between
consumption at the top and bottom income quintiles isn't nearly as big
as the difference in income. In consumption terms, the rich aren't so
dramatically richer than the poor as they are in income terms.
<<The figures say that the average income of the household in the top
income quintile is almost 14 times that of the bottom quintile. But
the average consumption of the top quintile is only a little over 4
times that of the bottom quintile. That's a big difference that rarely
gets noted in discussions of how far apart the rich and poor are.
<<Household data for 1997 from the BLS:
(fixed-pitch font helps)
Income Quintile
Lowest |Next low | Middle |Next high|Highest
Income ...........$ 7,086 | $17,246 | $30,285 | $48,478 | $96,397
Expenditures...... 16,008 | 23,558 | 31,447 | 42,846 | 66,800
>>
[big snip]
>Notice how the amount of Crusoe's original seed corn contributes less
>and less each year.
Which (in case there are any readers left out there) is the BIG problem with
Robert's analysis. This, as Alice said, is not a real rule, Robert just made
it up (borrowed it from the CCC, actually).
As a model of exploitation, the fable is simply circular reasoning. The math
is irrelevant.
Patrick
Paul Zrimsek
wrote:
>Whether Crusoe thinks corn consumed a century less is worth less than
>corn consumed immediatedly, however interesting this postulation may
>be, doesn't change the properties highlighted above of the physical
>quantity flows.
Then who cares about them?
jim blair
> It is my claim that time preference (thrift) and productivity do not
> explain the returns to capital in actual industrial economies.
Hi,
Why not? If Friday saves corn to plant next year, or in my addemdum to
your story, borrows corn so he can spend some time building a boat and
fishing net, why does that not explain the return he gets from the corn
he plants or the fish he catches?
>
> My fable has only one commodity, for simplicity. ....
> As I understand it, these
> further definitions are supposed to be generalizations of the
> definition illustrated in my story, but without depending on
> the amount of labor embodied in commodities.
The problem with your story is not exactly that it is limited to one
commodity (and could be generalized to N of them), but that N is a
constant. You say that the capitalist/entrepreneur "dosen't contribute"
in a society where there are no new commodities.
Not an unexpected conclusion considering that the role of the
entrepreneur is to INDRODUCE new ideas/commodities.
Think of the contribution of (and reward to) the entrepreneur as being
proportional to dN/dt (the rate of increase in new commodities).
So you are claiming the contribution is zero in an example where N is a
constant, in this case = 1.
But in the real world there are new commodities every day.
Or are you making a distincetion between the "capitalist" and the
"entrepreneur"? And if so, what do you consider to be the contribution
of the entrepreneur? And what is the non-exploitative return for the
entrepreneur?