I have some convincing reasons, mostly based on the idea that competition in a free-market is a rivalrous, dynamic, and entrepreneurial process. Basically, markets lead to specialization rather than centralization, and just one technological innovation can radically switch the distribution of wealth and make certain products and services completely obsolete.
But besides that, my argument is kinda bare. Any help would be appreciated, as I'm currently in a debate with my professor and some students.
Oh, and one more thing. I said that, even if wealth centralization did occur, giving a ton of power to another centralized monopoly doesn't exactly seem like a solution to that problem. Sounds like a fair point, right?
Thanks, guys.
Wrong. There are all types of different workers: farmhands, factory workers, mechanics, engineers, grocers, burgerflippers, systems analysts, data-inserters, managers, secretaries, programmers, executives, bankers, etc. Different workers get different pay. Wage laborer is not an accurate categorization because you can still be a "wage laborer" and be very wealthy.
Haha. Did you even read the rest of my post? My point has nothing to do with the fact that workers get a different level of pay from each other. It's that such pay in total cannot equal the price of the product they produce, and therefore "overproduction" in a capitalist economy is inevitable.
well, we can solve the riddle by saying that 800,000 units circulate, and they can exchange hands many time, so that a large volume of transactions much greater than 800,000 can be counted occuring over a sufficiently long period. or we can assume that you mean for all payments and transactions to occure stepwise at fixed intervals, in which case we simply laugh at the notion of the total cost of all the commodies adding up to 1000000 given the stipulation that there is only 800,000 which they could exchange for.
well, we can solve the riddle by saying that 800,000 units circulate, and they can exchange hands many time, so that a large volume of transactions much greater than 800,000 can be counted occuring over a sufficiently long period.
or we can assume that you mean for all payments and transactions to occure stepwise at fixed intervals, in which case we simply laugh at the notion of the total cost of all the commodies adding up to 1000000 given the stipulation that there is only 800,000 which they could exchange for.
I'm not sure if that would make a difference. Could you give me an example of how this would work (like I did)? Every time a commodity is bought, the money returns to a capitalist, who must decide whether to reinvest the money or spend it on commodities. If he keeps deciding to reinvest it, then there must be an increasing number of unsold commodities (discounting other factors such as expanding credit).
I expect what you really want to ask is how there can be a spread in the aggregate between labour costs and sales receipts. well the sales receipts come from the spending of both the labourers and the capitalists whereas only the labourers income shows up as cost on the accounting whereas the capitalists income shows up as profit. but we always new that accounting profits are business income minus business expenditure. big whoop.
I expect what you really want to ask is how there can be a spread in the aggregate between labour costs and sales receipts. well the sales receipts come from the spending of both the labourers and the capitalists whereas only the labourers income shows up as cost on the accounting whereas the capitalists income shows up as profit.
but we always new that accounting profits are business income minus business expenditure. big whoop.
So you're suggesting that capitalists spend all of their profits on commodities and reinvest the same amount every year? If a capitalist did that, his business would never grow and he would get annihilated by the competition.
"well, we can solve the riddle by saying that 800,000 units circulate, and they can exchange hands many time, so that a large volume of transactions much greater than 800,000 can be counted occuring over a sufficiently long period."
Yeah, one widget could be sold 100 million times to a total of over 800,000 units, but then we've still got all those unsold widgets.
no Birthday Pony, its 800,00 units of currency....
the amounts of goods that the capitalist and the workers end up with costed a total of 100k+900k = 1000k to produce
there was only ever 800k physical pieces of currency in the economy.
Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid
Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring
Yep. The more I think about it, the clearer it is that this "solution" doesn't solve anything.
Um... you just proved my point. Over time the number of unsold goods increases, ending with unsold goods totaling 100K worth of inputs. What do you think would happen if you continued along these line? This stock pile of unsold goods would keep increasing. And remember, the capitalists don't want these goods. These are goods that are on the market. This proves the Keynesian assertion that capitalism inherently causes aggregate demand to fall below aggregate supply.
Um no those are the capitalist's Consumer goods that the workers had made. a nice variety of them!. Things like mansions and sportscars and fine clothes and the best food. If the capitalists hadnt wanted them they could have kept less and sent more over to the workers but why? They would want to send less to the workers and have more good stuff for themselves but alas you just can't find willing workers if you don't share the booty like they do before when I criticised the worker buying back his own product, that was legitimate since we were talking about singular customers with singular products. but you asked to aggregate so now we are looking at the class of all workers,and all the consumer products.
Um no those are the capitalist's Consumer goods that the workers had made. a nice variety of them!. Things like mansions and sportscars and fine clothes and the best food. If the capitalists hadnt wanted them they could have kept less and sent more over to the workers but why? They would want to send less to the workers and have more good stuff for themselves but alas you just can't find willing workers if you don't share the booty like they do
Ah, so the capitalists spend 100% of their profits on consumer goods (i.e. on the goods that other businesses produced)? What would stop one of them from reinvesting his profits instead of spending them on consumer goods? If he reinvested his profits, he could expand his business, hire more laborers, increase productivity, reduce the price of his goods, and steal the market share of his competitors. Why wouldn't he do this? In fact, isn't this what most businesses do?
How about we agree to go read a basic economics textbook before discussing economics, eh?
Well, I just read Capital, does that count?
I give you permission to adjust the scenario. So that we have two categories ; consumer and capital goods, itll hold up fine.
Try something more like Principles of Economics by Mankiw. New Keynesian, but better than nothing.
Yeah, I agree with FOTH on this. I'm not seeing what happens with those unsold goods, or consumer goods, or whatever goods.
And Wheylous, I'd still like to know how wages can ever decrease since apparently employers can't lower them.
Syntax misunderstanding. I didn't mean that they can't lower them. I mean that they can't "just" lower them. There's supply and demand for labor as well.
No, it's not about consumer goods vs. capital goods (by which I assume you mean the means of production). It's about goods vs. the commodity of labor-power. If the capitalist uses his profit to pay additional wages, then the goods will remain unsold, since as soon as the laborer is able to purchase the goods, he has already produced a new good of greater value than his wage.
You've probably noticed by now that this is a zero sum game. It is impossible for the capitalists as a class to realize profits in any given time period (there is an exception of sorts, which I'll get to). So to say that they spend or reinvest their profits doesn't really make sense until we split the group. So let's do that. I'll divide the capitalists up evenly into groups A and B. Group A will spend half their profits on goods and half on new wages. We also have to note the goods that are consumed--that is, that have been bought and have been withdrawn from the market. Hopefully my math is right:
(by the way, hats off to you for making that table the first time--that was hard)
So total price of unsold goods at end: 542.4625k
Total amount of workers money: 471.95k
Total price of unsalable goods: 70.5125
General observations:
1. The quantity of unsold goods increases at each step
2. Say's Law is false for a capitalist economy (it is probably true for an economy that doesn't sell labor-power as a commodity--i.e. feudalism, peasant/artisan, mutualism).
3. Workers real wages decline at each step (provided the rate of surplus value doesn't fall). They buy a smaller percentage of their total product each time.
4. Capital naturally tends towards centralization. Group A only makes profits as group B experiences losses. It's theoretically possible that they could switch between being profitable each step, but I think we all agree that a group that has won the first step is more likely to win the following step--with its chances increasing each successive round.
5. Eventually, the value of old unsold goods will equal the value of newly produced goods. In other words, the capitalists will be trying to sell goods that total twice the value of the money consumers are able to spend. Thus it will become virtually impossible for any firm to make a profit. Crisis is inevitable.
6. The greater percentage of profits capitalists spend on goods, the slower will unsold goods accumulate, the longer it will be before a crisis.
7. There would be few if any unsold goods, and few crises, if the capitalists spent 100% of their profits on goods. This is essentially how feudalism worked.
8. If all but one capitalist spent 100% of his profits on consumer goods, then the one that didn't would begin to accumulate money and cause the others to experience losses. Yes, this is a prisoner's dilemma.
There are several things capitalism has done to try to prevent this overproduction from occurring. One is taxation and government spending. If the government taxes capital gains and then uses the money on goods, this will have the same effect as if the capitalists spent an equivalent share of their profits on goods. If the government taxes capital gains at less than 100%, then crises will still occur; they will just take longer to develop. If the government taxes capital gains at 100%, then capitalists will have no reason to invest at all.
Another attempted solution is the one we've just gone through. Instead of reinvesting their money as wages, capitalists could lend the money to the workers who would then spend it on the unsold goods. The capitalists win twice on this, as the unsold goods bring in profits and they get to collect interest on the money they lend. But, uh oh, if they receive interest on their loans, that means they are owed more money than what they lent out. This is the exact same problem as overproduction. The quantities on each side don't add up. The people who borrowed the money (not individually--but as a class) must default on their debt. Thus, if wages aren't falling, workers are instead experiencing increasing debt. This video explains it pretty well (see also the work of Hyman Minsky and Steve Keen). Debt and the expansion of the money supply gives the illusion that profits aren't a zero sum game. I've tried telling people this before, but they insist that I'm crazy and need to read an economics textbook (presumably an Austrian one). They insist that 2 + 2 = 5. But what can I do? I guess I'll go read an economics textbook.