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.
Birthday Pony:I think it's clear enough that I'm using capitalism to mean "an economy in which wage labor is the predominant mode of employment."
As far as I'm concerned, it wasn't clear at all. You used the term "capitalism" in place of "free market", which was the term used in the OP and by others here. So it seemed natural to me to assume that you've been using those two terms as synonyms. If that's not the case, then I think the onus is on you to clarify your usage so the rest of us (hopefully) aren't confused.
Birthday Pony:If you or anyone else are confused, I'm more than willing to clarify.
Please do.
Birthday Pony:If the OP does not think that wage labor will be the predominant mode of employment in capitalism, I'd love to hear why. I do not intend to obscure or derail the thread by using an obtuse definition. If anyone needs clarification, please, just ask.
Again, please clarify. I think your intentions are irrelevant.
If you define "capitalism" as "an economy in which wage labor is the predominant mode of employment", then saying that "wage labor will be the predominant mode of employment in capitalism" is tautological and provides no new meaning or understanding. On the other hand, and given this definition of "capitalism", I'd like to ask you - what, then, is your definition of "economy"?
Birthday Pony:Yes, it's quite possible that it will. However there's little reason to believe that class structure, by which I mean a very basic division between employers and employees and nothing more, will be done away with, meaning its very hard to imagine that laborers or anyone other than other employers will be able to invest in capital.
Can you please explain what you see as this "very basic division between employers and employees"? Can you also please explain what you mean by "capital"?
Birthday Pony:My concern is not with the concentration of wealth in X's hands, but the concentration of wealth generally amongst groups, enough so to see a general division where there's a group that tends to own the workable capital and a group that tends to sell their time for a living. [Emphasis added.]
This last statement seems to be the crux of your position here. What exactly do you think is so bad/wrong about "selling one's time for a living"?
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Birthday Pony:It's almost as if no one here wants to get to the substance of my argument and would rather have a fun discussion about syntax. Let's do it simply, shall we? Firm produces, pays workers less than value of that which they produce.
Firm produces, pays workers less than value of that which they produce.
I'm assuming by "value" you actually mean "current selling price"? Otherwise, it sounds to me like you're implicitly appealing to the notion of objective value.
Birthday Pony:Workers cannot afford said product. In order for it to be sold to the masses and maintain profits the price must go down or wages must go up.
As others have asked, do you mean workers can never afford said product, or that the wage a given worker is paid to make one unit of said product is less than the current selling price for that unit?
If you're talking about the latter, I don't see how this is an issue unless you're implicitly appealing to the Marxian labor theory of value (or similar).
Birthday Pony:Wages go up, price goes up. No dice. Commodities and capital of the capitalist are deinvested in said industry or the capitalist begins to hoard, or overproduction occurs if there's an idiot in the board room.
Why would both wages and price have to go up? Or am I not understanding your first sentence in the above quote?
Why is it a problem for commodities and capital of the capitalist to be deinvested in said industry? Why is "hoarding" a problem?
Birthday Pony:Price goes down, wages go down, or profit goes down. No dice. Lay off a worker or two. Maintain profits, raise wages. Some workers can't afford the product because they are unemployed. Continuing this pattern leads to lower wages because the demand for work rises while the supply needed falls. Even a balance of this solution checks wages versus profit at equilibrium, maintain just enough concentration that the vast majority of the population wishes to do wage labor for a living.
Lay off a worker or two. Maintain profits, raise wages. Some workers can't afford the product because they are unemployed. Continuing this pattern leads to lower wages because the demand for work rises while the supply needed falls. Even a balance of this solution checks wages versus profit at equilibrium, maintain just enough concentration that the vast majority of the population wishes to do wage labor for a living.
As Jargon pointed out, you're using non-standard definitions for "demand" and "supply" in the context of labor markets. Otherwise, why is it a problem that some workers can't afford the product because they're unemployed? It sounds as though you think they're somehow prima facie entitled to the product. If so, where do you think this entitlement comes from?
Birthday Pony:And all these conclusions rely on one group having more capital than the rest. Not only that, for the premises to even make sense there already has to be concentration of capital!
Indeed, you've failed to explain how "concentrations of capital" arise in the first place, either occasionally or necessarily. I thought your whole point was to try to explain that?
Birthday Pony:I'm saying that workers cannot afford products relative to their employers. Nothing more.
That contradicts what you said earlier: "Workers cannot afford said product." "Cannot" used in that way suggests (if not demands) an absolute statement. To say that workers simply can't afford products relative to their employers lays wide open the possibility that, nevertheless, workers can afford products in absolute terms. Finally, as others have pointed out, this also ignores the time dimension altogether.
Birthday Pony:The crux of the argument here, which everyone continues to ignore, is that the only way employment can work is if there is a reason not to take the risk of self-employment. If the distribution of capital were such that everyone had a somewhat equitable amount, wage labor would not be the predominant mode of earning a living. There would be more diversity in business, meaning less risk of causing collapse by way of monopoly of oligopoly, less risk given that each person has a bit of something to throw around to consider starting a business, and easier access to loans given that people have commodities to put up as collateral.
What exactly are you supposing "somewhat equitable" to mean? Same thing for "monopoly of oligopoly".
How exactly does a more equal distribution of "capital" (I'm still not sure what you mean by this term) lead to, or necessarily mean, less risk? I fail to see how people would be any better at anticipating what others will desire in the future just because they have greater possession of or access to "capital".
Fool on the Hill: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: [Snipped chart.]
[Snipped chart.]
Your re-working of Nirgraham's example is more dramatic than it first seems. For one thing, Nirgraham''s example doesn't have anything to do with profit. The goods that aren't purchased by the workers are simply retained by the capitalists between one time period and the next. Your example introduces profit, but doesn't specify how much profit each group of capitalists makes.
Second, if you're going to split up capitalists into two groups, then it follows that you must split up workers into two groups as well - those who work for group-A capitalists and those who work for group-B capitalists. But then there's the possibility that some group-A workers will buy goods from group-B capitalists, and some group-B workers will buy goods from group-A capitalists. How many of these "cross-purchases" are there? You don't say.
Third, your example isn't even necessary to show "overproduction" over time. Nirgraham's own example shows it already. The number of unsold goods (i.e. those retained by the capitalists) rises from $0k worth after Time 1, to $50k worth after Time 3, and finally to $100k worth after Time 5. However, his example had nothing to do with "overproduction" per se and everything to do with dispelling the notion that more money must be needed to produce more goods. Another way of putting this is that the dollar value of goods in "the economy" in no way has to be the same as the number of dollars in "the economy".
That was the problem with his example. In real life, capitalist do seek profit and not simply surplus goods. Take my 401K for example. I don't receive x number of goods every year; all of the profits are reinvested. In my example, both capitalist groups price their goods at 10% above what they paid to produce them. Group A sells all of their goods at each step, so they make 10% profits. Group B shows a loss each time.
Until you show that it would result in an outcome without overproduction, I will assume that such a modification wouldn't make any difference.
Sure. But by overproduction, I meant unsold goods. Assume this: a worker spends all of his money on goods; a capitalist spends all of his money on wages (or really, all of his previous costs of production plus some of his profits). Thus, every time a worker spends money, an equal amount of money and commodity value is removed from the "economy." Every time a capitalist spends money, a greater commodity value enters the "economy" than the money value. So there is an ever increasing amount of goods trying to be sold in the "economy" but which cannot be bought. Firms cannot show profits without selling these goods. So the trend is inevitably towards centralization and recession.
Fool on the Hill:That was the problem with his example. In real life, capitalist do seek profit and not simply surplus goods.
It's not a problem with his example, because it's irrelevant to the point he made. Surely you see that, don't you?
Fool on the Hill:In my example, both capitalist groups price their goods at 10% above what they paid to produce them. Group A sells all of their goods at each step, so they make 10% profits. Group B shows a loss each time.
I can't find anywhere that you specify this. It seems that this is a hidden feature of your example.
Fool on the Hill:Until you show that it would result in an outcome without overproduction, I will assume that such a modification wouldn't make any difference.
That wasn't my point. My point was to show how your example is not deterministic, contrary to your claim.
On the other hand, why simply make that assumption? Surely you can work it out for yourself? Why aren't you willing to do so, if it'll expand your understanding either way?
Fool on the Hill:Sure. But by overproduction, I meant unsold goods.
I believe I know exactly what you meant. As I said previously, Nirgraham's example already shows unsold goods - namely those retained by the capitalists. Furthermore, it shows an increasing amount (in absolute terms) of unsold goods. Did you actually read what I wrote? Or are you being deliberately obtuse here?
It was a problem in that he was claiming to refute my point, which he didn't.
[Time2B, group A/goods] : "and new goods of 261.25k of payments (priced at 287.375k)" plus [action] "workers use 287.375k to buy 100% of market goods from A" . The profit can be calculated from these numbers.
Certainly I could throw in any number of variables, occupying my time for the rest of my life, but what's the point? I've already illustrated serious flaws in the Austrian conception of the market. In order for it to be by definition capitalist (that is an economy with wage labor and people seeking "surplus value"), then over time a greater value of (unsold) goods must enter the economy than exit.
Sure. He gave a pretty good example of how our economy would work if capitalists acted like feudalists. I think s/he did good work with the example--it helped illustrate my point.
Just to clarify: why at Time 2 do workers buy 100% of A's goods, but only 80% of B's goods? The price being the same, I presume that B just prefers to withhold the remaining 20%? Then why does B prefer to sell goods to A at Time 2a - for the same price?
I guess the understanding of your example would be greatly enhanced by describing in details the preferences of all actors.
Birthday Pony:Workers cannot afford said product.
Why can't the workers afford the product? Furthermore, why does it matter?
edit: Damn these forums. There were 3 more pages it didn't bother to show me....
The workers only have money to buy 90% of the goods. The distribution in terms of percentages between the two could vary in a number of ways. I chose to make them unequal in order for one of them to be able to make profits.
I've rethought this a bit, and I've concluded that adding production goods into the equation would make the scenario more realistic. Capitalists do spend a large portion of their profits on productive goods, and this itself averts the problem I've highlighted for the short term--since unlike wages, spending money on productive goods does not produce value greater than what is spent. However, the value of the productive goods must ultimately make its way into the consumer goods. Thus, all capitalists may be able to realize profits at first, but the profit rate would have a tendency to fall until there is a crash. I'd like to model this, but I think I'll have to figure out a way to do it using function in excel. The math is quite difficult. If you mess up early on, everything later gets messed up as well.
Fool on the Hill:...spending money on productive goods does not produce value greater than what is spent.
Then why do it?
On the whole "wage workers can't afford to buy their own product" problem, if A paid B a wage in return for weekly massage, how exactly is this two-person economy on the verge of collapsing because B cannot afford to purchase weekly massage from A (or from anyone else, for that matter)?
Well, we could assume that it does if you like (you might be right, actually). If anything, it would just make my main point even stronger. The problem would only be diverted if the productive goods transferred less than their value into the consumer goods.
Because that isn't a wage. That's simply a payment for a service. A makes no profits in that scenario.
A capitalist doesn't simply exchange one thing for a completely different thing. Ultimately, a capitalist exchanges a thing for a greater quantity of that same thing (i.e. money).
all voluntary exchange consists of parties exchanging lesser values for greater values.
So when I exchange a piece of green paper valued at $5 for a hamburger valued at $5, then I am exchanging things of unequal value?
(Note: I didn't even use the term value.)
Fool on the Hill:So when I exchange a piece of green paper valued at $5 for a hamburger valued at $5, then I am exchanging things of unequal value? (Note: I didn't even use the term value.)
Exactly. You value the burger more than the green paper.
(You used it three times!)
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