In one of the recent threads, someone asked about Marxian exploitation theory. I unwittingly linked to a great rebuttal to it:
I had also read a similar thought by Rothbard in an excerpt from MES.
I still have a comment, however. My question came when first reading the Rothbard piece:
Rothbard says that capitalists are useful because through capital accumulation they allow workers to be paid before the final product comes to market. However, why couldn't some collective or the government do the same? Yes, capitalists accumulate capital which can be used to pay workers during production, yet they are not the only ones inherently able to do this.
Wheylous:Rothbard says that capitalists are useful because through capital accumulation they allow workers to be paid before the final product comes to market. However, why couldn't some collective or the government do the same?
You've never heard of the calculation problem?
As emphasized by Austrians when talking to socialist anarchists, the point is the function, not the person who does it. We can identify the roles which are important within a market, but the very non-descript nature of praxeology is because we cannot predict the exact structure that markets will take. What is the most effective method of production within markets depends upon the factors which are relevant at the time, rather than actual economic law. There is no reason why a single capitalist must be a lender, indeed the fact is that more often than not they are not! Banks are the preferred method of investment, and the funds they use are the result of many thousands of "investors" in the form of people who give money to the bank to lend (we'll ignore the fraudulent nature of fractional reserve banking and the reality of credit expansion for the sake of this example). So basically the answer is that collectives currently handle the affair, and there's no reason that the collective could not be a collection of workers who set aside some of their funds to last a firm in later days.
As for the other aspect of the question, of course the government could perform this role. There's no reason why the government could not run the shoe industry, but that doesn't mean that it would be good at it or that we want it to. There's no reason that the government couldn't funnel off a good deal of tax revenue and then lend it out to workers at interest. The government could perform this role with no issue, and indeed one could argue that state banks already do this, but the problem is that you run into one simple fact: The government isn't very effective at doing anything except for wasting resources. A fact which one could certainly argue is what this entire site is dedicated to.
1. why couldn't some collective or the government do the same?
They don't have the talent to know what will make money. The capitalist does. That's why he's the capitalist, by definition.
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It's easy to refute an argument if you first misrepresent it. William Keizer
The idea he's countering is that of exploitation by not giving laborers the marginal product, though. Theoretically, we could force capitalists' time preferences down by law.
I guess the response to that would be that the most skilled would not go into the industry.
Then the question is whether we can quantify how much this would affect production and standard of living.
Wheylous, you are a better economist than this!
What is the result of a price ceiling?
This is tantamount to a radical increase in the interest rate because this means that some firms just plain won't be able to get loans, and therefore literally entire sections of the economy collapse because they cannot afford to fund themselves. Those firms which survive will be those with the most certain business plans, I.E big business in rather certain industries like food. Times of prosperity, and therefore times of a greater demand for loanable funds, will be ruthlessly held down, and starting up new businesses will be all but impossible, unless some non-monetary means of exchange such as ownership within a company is utilized.
There is a very very very good reason why governments don't dictate the interest rate by law but instead do so through market forces! Price controls don't work!
"The idea he's countering is that of exploitation by not giving laborers the marginal product, though."
You are smarter than this.
Marginal product only exists because there is product at all, which in turn relies upon a pool of loanable funds, which in turn comes from capitalists. If there were simply laborers and no capitalists, then there would be no product to sell because the laborers would not work and therefore there would be no marginal product at all. Therefore through loans laborers, in the long run, will be paid their marginal product.
Marxian theory is superficially one of the most compelling ideological doctrines ever formed, oftentimes because it plays to emotion, but this does not mean that it's true, and a real analysis can prove it to be little more than fallacy.
Neodoxy, I just wanted to say that I enjoy your posts.
Thank you! I'm quite glad to hear that