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.
Fool on the Hill:That's not the type of value I'm talking about. If I have a $5 bill, I can only exchange it for things priced at $5. Therefore, these things must in some sense be equal.
It's abundantly clear to me, at this point, that the character of your analysis is entirely Marxian. That's not a criticism, just an observation. For example, when you say "that's not the type of value I'm talking about", the implication to me is that you're contrasting between Marxian "use-value" and "exchange-value". Going with this implication, your question can be rephrased thusly:
So when I exchange a piece of green paper with an exchange-value of $5 for a hamburger with an exchange-value of $5, then I am exchanging things of unequal exchange-value?
There is no objective answer to that question, because exchange-value doesn't inhere in things any more than use-value does. Furthermore, exchange-values (prices) are expressions of use-values. If you price a hamburger at $5, that means you prefer having the $5 to having the hamburger in the future. The only difference between exchange-value and use-value is that the former depends on the existence of a money. One could say then that exchange-value expresses a relation between the use-value of money and the use-value of another good or service.
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Fool on the Hill:I didn't say it wasn't. A wage is a payment for a particular type of service. There are also payments for services which are not wages.
Here's what you wrote earlier: "Because that isn't a wage. That's simply a payment for a service." It strains belief to me that you'd expect any one to infer from that that all wages are payments for services, but not all payments for services are wages. It certainly sounds to me like you were claiming that wages aren't payments for services.
Fool on the Hill: Suppose that there is a group of apple trees and three people (A, B, and C). Let's look at different variables: 1. The apple trees are commonly owned and everyone is free to take from them. A "hires" B to pick 10 apples and sell them to C for $10. B then gives the money to A, who then pays B $10 for the service. There's no reason that B would agree to do it for less than $10 since he doesn't have to go through A at all. Therefore, this is a payment for a service, but not a wage. 2. A owns the apple trees. No one can use them without her permission. A hires B to pick 10 apples and sell them to C for $10. B then gives the money to A, who then pays B $8 for the service. B could not have performed the action without A's permission, therefore the payment for his service constitutes a wage. A is profiting off of the transaction. 3. The apple trees are commonly owned. A "hires" B to pick 10 apples, and then A sells them to C for $10. A then pays B $8 for the service. This is simply a payment for a service. B could have sold them to C himself. A is getting money for her service, not for her property. A is not profiting off of the transaction. 4. A owns the apple trees. A hires B to pick 10 apples, and then A sells them to C for $10. A then pays B $6 for the service. This $6 is a wage. A receives $2 for her service--the amount she would have had to pay B to perform it. The other $2 is profit because she owns the land.
Suppose that there is a group of apple trees and three people (A, B, and C). Let's look at different variables:
1. The apple trees are commonly owned and everyone is free to take from them. A "hires" B to pick 10 apples and sell them to C for $10. B then gives the money to A, who then pays B $10 for the service. There's no reason that B would agree to do it for less than $10 since he doesn't have to go through A at all. Therefore, this is a payment for a service, but not a wage.
2. A owns the apple trees. No one can use them without her permission. A hires B to pick 10 apples and sell them to C for $10. B then gives the money to A, who then pays B $8 for the service. B could not have performed the action without A's permission, therefore the payment for his service constitutes a wage. A is profiting off of the transaction.
3. The apple trees are commonly owned. A "hires" B to pick 10 apples, and then A sells them to C for $10. A then pays B $8 for the service. This is simply a payment for a service. B could have sold them to C himself. A is getting money for her service, not for her property. A is not profiting off of the transaction.
4. A owns the apple trees. A hires B to pick 10 apples, and then A sells them to C for $10. A then pays B $6 for the service. This $6 is a wage. A receives $2 for her service--the amount she would have had to pay B to perform it. The other $2 is profit because she owns the land.
In parsing these examples, I notice the following distinctions: who owns the apple trees and who sells the apples. Furthermore, the apple trees are obviously "means of production". However, only one of the distinctions makes a difference as to whether B receives a wage or simply a payment for a service: namely, who owns the apple trees. So we arrive at the following conclusion: if one is paid to employ means of production that are not commonly owned, his payment is a wage; if one is paid to employ means of production that are commonly owned, his payment is not a wage.
One question I have about this is what exactly you mean by "commonly owned". I know this is going outside the scope of your original scenario above, but I'd like to add two more people, D and E, to the scenario. If the apple trees are owned by A, B, and C in common, and they pay D to pick apples, which then D either sells to E or gives back to A, B, and C to sell to E, would you say that D's payment constitutes a wage? I'm predicting your answer will be yes, because this kind of common ownership is still a form of private (i.e. exclusive) ownership. The logical conclusion, then, is that by "commonly owned" you mean "owned by everyone".
Fool on the Hill:If you like, we could call what I mean by wage a productive wage. A payment for a service which does not generate profit would then be an unproductive wage--as in your example. With this terminology, a factory worker would earn a productive wage, while a maid would earn an unproductive wage. My definition of capitalism requires productive wages.
As you indicate later, this terminology comes from Marx. Presumably by "productive" he meant vis-a-vis "surplus value". However, you don't seem to understand what Austrian-school economics means by "profit" in the broad sense. In Marxian terminology, I think the Austrian-school economics notion of "profit" could be defined as "obtaining greater use-values". Does that make sense to you?
Andris Birkmanis: "Paying for risk" was meant to be a shorthand for "paying for taking risk OFF them", not "paying for taking risk ON you". I imagine you pay your insurance company so that you have less risks, not that so they have more risks. Gambling is extremely unlike insurance (or speculation) - it creates risks that didn't exist before, while insurance and speculation try to move risks around to parties that are more capable dealing with them from other parties.
Andris Birkmanis: "Paying for risk" was meant to be a shorthand for "paying for taking risk OFF them", not "paying for taking risk ON you".
I imagine you pay your insurance company so that you have less risks, not that so they have more risks. Gambling is extremely unlike insurance (or speculation) - it creates risks that didn't exist before, while insurance and speculation try to move risks around to parties that are more capable dealing with them from other parties.
And yet the people who pay to have this risk taken off of them seem to be the ones who lose the most in the deal.
Malachi: yes, there is, and its called "sales." they gain this information through participation in markets.
But before the money that is available for purchases is spent, there's no sales. Once the purchases are made, the money is no longer available for purchases. The sales don't occur until after the prices are set.
Prices are a continual feedback loop. The amount of sales a company is getting informs their price-setting decision.
The Anarch is to the Anarchist what the Monarch is to the Monarchist. -Ernst Jünger
Autolykos: So I think the crux of your dispute with Nirgraham is that you consider the goods retained by the capitalists to be "excess production", whereas Nirgraham doesn't. Obviously, if the capitalists keep them (i.e. choose not to sell them), then it follows that they aren't excess. Maybe from the workers' point of view they're excess, because the workers don't want them, but so what? There are more people in the economy than just the workers.
Before he posted the table "refuting" my position, and in the same post in which I asked him to demonstrate his claim, I said the following:
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).
As the post you quoted also indicated, I was assuming that reinvestment only included wages and not productive goods. I have since acknowledged that including productive goods is important to make the scenario realistic.
Asserting that isn't going to convince me, so what's your point? Is this just a way for you to keep feeling good about yourself in this context? Or what?
I am currently devising a way to model this, which I think will prove the Marxian position definitively. I am going to make the following claim: with a single currency, a fixed money supply, a consumer goods sector, a productive goods sector, the price of outputs exceeding inputs, and all goods being sold, the average rate of profit will fall. Do you disagree with my prediction?
By whose definition? It sounds like Marx's. Just saying. But that doesn't obligate the rest of us to follow that (his) definition, now does it? I don't think so. Also, I suggest you keep in mind that Austrian-school economics doesn't follow the Marxian notion of "surplus value". By invoking that notion, you're just going to talk past Austrian-school economists.
By whose definition? It sounds like Marx's. Just saying. But that doesn't obligate the rest of us to follow that (his) definition, now does it? I don't think so.
Also, I suggest you keep in mind that Austrian-school economics doesn't follow the Marxian notion of "surplus value". By invoking that notion, you're just going to talk past Austrian-school economists.
OK, do you have a term that describes an economy where goods are produced by wage labor, where the amount of money charged above the cost to produce the commodity is reinvested, and where the investor can increase his money in this way (I think this covers the essentials of what Marx presupposes)? Do you think a free market would operate in this way? Do you think a free market could operate in this way?
I probably don't need to use the term surplus value anymore. I'm using what I call "price markup," which I think might be the same thing as surplus value, but is not the same as profit.
No, it didn't. It showed that the unsold goods were not necessarily a problem, because "unsold" is not the same thing as "unwanted" or "unpossessed".
No, they're not necessarily a problem if their producers want to consume them. If this means that Nirgraham has somehow "won," I could care less. I'm not trying to score points, but rather seeking to come to an understanding of how the economy works. The reality is that capitalists don't choose to consume their profits. If we are to critique each other's positions, it should be with the goal of bringing them closer to reality.
Actually, Marx's two categories are use-value and value. If I understand it right, exchange-value is the value of one commodity expressed in the form of the use-value of another. If a rock balances on a scale with five bars of lead, the rock's weight is expressed as five bars of lead, but these bars of lead aren't responsible for the fact that the rock has weight. So exchange-values are not the expressions of use-values, but the expressions of values.
However, I've actually been trying to avoid using the term "value." Malachi's reply was simply a red herring.
Me: 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).
Malachi: all voluntary exchange consists of parties exchanging lesser values for greater values.
Come to think of it, Marx probably wouldn't call wages payments for services. Rather a wage is a purchase of labor power which the capitalist then sets to use. I don't care which terms we use, but it is important to have a way to differentiate between these two different concepts.
Yes, I believe you are right. Though maybe it would be better to say unowned rather than commonly owned? What I basically mean is that each person could pick apples from the trees without the threat of violence deterring them.
Austrians don't seem to understand what businesses mean by profits then. Do Austrians have a separate word for profits in the business sense? Why do they choose to equivocate, you think? Is this just an example of newspeak, where you change the meanings of words so your opponents can't articulate their objections?
So the sales of a commodity today tells me how much money will be spent on it tomorrow? Interesting.
Fool on the Hill:Before he posted the table "refuting" my position, and in the same post in which I asked him to demonstrate his claim, I said the following: 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). As the post you quoted also indicated, I was assuming that reinvestment only included wages and not productive goods. I have since acknowledged that including productive goods is important to make the scenario realistic.
Then you're implicitly conceding that Nirgraham did, in fact, refute your original example (which was my point). Why not concede it explicitly?
Fool on the Hill:I am currently devising a way to model this, which I think will prove the Marxian position definitively. I am going to make the following claim: with a single currency, a fixed money supply, a consumer goods sector, a productive goods sector, the price of outputs exceeding inputs, and all goods being sold, the average rate of profit will fall. Do you disagree with my prediction?
If you're implicitly assuming real humans are involved, and not some model of such, then yes, I disagree with it, because I don't think it necessarily holds true.
Fool on the Hill:OK, do you have a term that describes an economy where goods are produced by wage labor, where the amount of money charged above the cost to produce the commodity is reinvested, and where the investor can increase his money in this way (I think this covers the essentials of what Marx presupposes)?
Logically speaking, "an economy where goods are produced by wage labor" means to me the same thing as "an economy where all goods are necessarily produced by wage labor", i.e. there are no goods which are not produced by wage labor in this economy. The same applies to the other conditions you ascribe to that economy. Do you agree with this or not? In any case, no, I don't have a single word or simple phrase that describes such an economy.
As I think Nirgraham and others have pointed out, investors don't increase their money on a permanent basis. When they profit monetarily from their investments, they don't necessarily (and typically don't) remove that money from the economy for the rest of time. Maybe you already understand this, but I just want to point it out in case you don't.
Fool on the Hill:Do you think a free market would operate in this way? Do you think a free market could operate in this way?
I consider it unrealistic for all goods to be necessarily produced by wage labor in a free market. However, I won't say it's impossible, because I don't know - but neither does anyone else.
Fool on the Hill:I probably don't need to use the term surplus value anymore. I'm using what I call "price markup," which I think might be the same thing as surplus value, but is not the same as profit.
My understanding of "surplus value" at this point is that it denotes the average socially necessary labor time embodied in a commodity above and beyond that which is required to sustain the worker(s) who produced it. Is that also your understanding of it?
Fool on the Hill:No, they're not necessarily a problem if their producers want to consume them. If this means that Nirgraham has somehow "won," I could care less. I'm not trying to score points, but rather seeking to come to an understanding of how the economy works. The reality is that capitalists don't choose to consume their profits. If we are to critique each other's positions, it should be with the goal of bringing them closer to reality.
Capitalists never consume any of their profits? Really?
Fool on the Hill:Actually, Marx's two categories are use-value and value. If I understand it right, exchange-value is the value of one commodity expressed in the form of the use-value of another. If a rock balances on a scale with five bars of lead, the rock's weight is expressed as five bars of lead, but these bars of lead aren't responsible for the fact that the rock has weight. So exchange-values are not the expressions of use-values, but the expressions of values.
You're correct. Marx titles Chapter 1, Section 1 of Capital Vol. I "The Two Factors of a Commodity: Use-Value and Value". However, your understanding of exchange-value seems to contradict itself. If exchange-value is the value of one commodity expressed in the form of the use-value of another, then it's contradictory to say that exchange-values are not the expressions of use-values. Marx himself states in Chapter 1, Section 1 of Capital Vol. I that exchange-values are independent of use-values:
As use values, commodities are, above all, of different qualities, but as exchange values they are merely different quantities, and consequently do not contain an atom of use value.
Using Marx's terminology, the Austrian school of economics considers exchange-values to be expressions of use-values. Obviously this is in opposition to Marx. Where Marx would say that commodity exchange is "evidently" abstracted from commodities' use-values, Austrian-school economists would completely disagree. Furthermore, the Austrian school in no way holds to Marx's concept of "value", i.e. "the average amount of socially necessary labor time required to produce a commodity".
Fool on the Hill:However, I've actually been trying to avoid using the term "value." Malachi's reply was simply a red herring. Me: 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). Malachi: all voluntary exchange consists of parties exchanging lesser values for greater values.
It's only a red herring if it's intentional. I don't think Malachi understood that you were referring to a different notion of "value" from his own.
Fool on the Hill:Come to think of it, Marx probably wouldn't call wages payments for services. Rather a wage is a purchase of labor power which the capitalist then sets to use. I don't care which terms we use, but it is important to have a way to differentiate between these two different concepts.
In that case, when the apple trees are commonly owned, how is A not purchasing B's labor power when hiring B to pick apples? Essentially I'm asking what you (and/or Marx) think the difference is between services and labor power.
Fool on the Hill:Yes, I believe you are right. Though maybe it would be better to say unowned rather than commonly owned? What I basically mean is that each person could pick apples from the trees without the threat of violence deterring them.
Right, the idea is that everyone has legitimate control over the apple trees. Although presumably this control would be restrained by common agreement. For example, all or most of the people would agree to not cut down the apple trees and/or to only use them for picking apples.
Fool on the Hill:Austrians don't seem to understand what businesses mean by profits then. Do Austrians have a separate word for profits in the business sense? Why do they choose to equivocate, you think? Is this just an example of newspeak, where you change the meanings of words so your opponents can't articulate their objections?
Austrian-school economists certainly do understand what businesses mean by profits, and they routinely distinguish between "psychic profit" and "monetary/business/accounting profit". See here for a definitive Austrian-school statement on the matter.
Sure. But when I gave my original example, I mistakenly assumed that others were assuming that capitalists would behave in the same way in a "free" market regarding investment vs. consumption. I've now clarified my assumptions. So it is up to you guys to say whether we have reached an agreement or not. I do agree that Nirgraham's example is logically valid.
I wouldn't want to define an economic system in a way that makes it impossible. Would you define an anarcho-capitalists society as a society where no coercion or property rights violations ever happen? In any case, I could say that to the degree that capitalism is prevalent, the problems I've highlighted will occur.
I do. My prediction is that the economy will move towards overproduction/falling-rate-of-profit/inflation/increasing-debt/imperialism faster as the percentage of profits are reinvested vs. consumed.
Do you think a "free" market would have roughly the same amount of wage labor as present? Do you think it would have a business cycle if it had the same or more?
Yes. I'm not sure my "price markup" category is the same as that though.
They do. My assertion is that the problem I've highlighted would still be an issue if they reinvested any of it--it would simply happen at a slower rate.
In exchange-value, the value is expressed in the form of use-values. Use-values, therefore, are the expressions, not what is expressed.
B would be paid according to how much socially necessary labor time was required to pick the apples as opposed to the socially necessary labor time required to reproduce B's labor power.
I just found this video that makes a similar critique of the Austrian definition of profit that I made here. It's also a good intro to Marx's concept of value.