Economics Questions

Re: Wealth centralization in a free-market?

Anenome — Sun, 04 Mar 2012 10:56:30 GMT

Wealth is unconsumed production. What's the problem with accumulating it? There is none.

Wealth turns into investment seed-money. That's a very good thing. The US is still the cheapest and safest place to invest money. That accounts for a great deal of our economic success. Try to invest in physical capital in Africa; it will probably get stolen before you can make your money back.

Re: Wealth centralization in a free-market?

Autolykos — Wed, 29 Feb 2012 15:32:30 GMT

Fool on the Hill:
In exchange-value, the value is expressed in the form of use-values. Use-values, therefore, are the expressions, not what is expressed.

That directly contradicts what Marx wrote. He wrote that exchange-value is the expression of value (average amount of socially necessary labor time) under commodity production and exchange. Value and use-value are independent of one another.

Fool on the Hill:
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.

And why would that be? B only needs to be paid enough to reproduce his labor power, right?

Re: Wealth centralization in a free-market?

Autolykos — Wed, 29 Feb 2012 15:27:57 GMT

Fool on the Hill:
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.

Thank you. I don't know why it was so difficult for you to explicitly concede that his example is logically valid.

If you made a mistaken assumption in your original example, why didn't you come out and say that afterwards? You didn't do that. Instead you countered Nirgraham's claim by changing the context. That's not intellectually honest, if you ask me.

Fool on the Hill:
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.

You're going to have to try a lot harder to side-step my point than this. When you refer to "an economy where goods are produced by wage labor", are you referring to an economy where all goods are necessarily produced by wage labor, or are you referring to an economy where some goods are sometimes produced by wage labor? In other words, are you implicitly using the universal quantifier or the existential quantifier? My reaction to your phrase has been to assume that you're implicitly using the former, but I could be wrong. Since I'm not a mind-reader, it's up to you to clarify.

Fool on the Hill:
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.

Okay, and what reasoning do you have to support that prediction? What is it based on? Quotes from Marx don't count IMHO.

Fool on the Hill:
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?

As a follower of the Austrian school of economics, I don't think the business cycle is caused by any amount of wage labor. Whether a free market would have roughly the same amount of wage labor as present doesn't matter to me.

Fool on the Hill:
Yes. I'm not sure my "price markup" category is the same as that though.

Well then.

Fool on the Hill:
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.

Did you or did you not previously write that capitalists don't consume their profits?

Nirgraham's example, which assumes capitalists consuming all of their profits, doesn't show the problem you've highlighted. So in that case, how would the problem happen at a slower rate if they don't consume all of their profits? That's a complete contradiction. Let me remind you that you conceded earlier that Nirgraham's example is logically valid.

Re: Wealth centralization in a free-market?

Fool on the Hill — Tue, 21 Feb 2012 03:46:25 GMT

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.

Re: Wealth centralization in a free-market?

Fool on the Hill — Mon, 13 Feb 2012 03:50:22 GMT

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:

In exchange-value, the value is expressed in the form of use-values. Use-values, therefore, are the expressions, not what is expressed.

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.

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.

Re: Wealth centralization in a free-market?

Fool on the Hill — Mon, 13 Feb 2012 03:36:34 GMT

Then you're implicitly conceding that Nirgraham did, in fact, refute your original example (which was my point). Why not concede it explicitly?

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.

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.

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.

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.

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.

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.

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?

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?

Yes. I'm not sure my "price markup" category is the same as that though.

Capitalists never consume any of their profits? Really?

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.

Re: Wealth centralization in a free-market?

Autolykos — Sun, 12 Feb 2012 15:46:43 GMT

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.

Re: Wealth centralization in a free-market?

Autolykos — Sun, 12 Feb 2012 15:34:23 GMT

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.

Re: Wealth centralization in a free-market?

Autolykos — Sun, 12 Feb 2012 15:12:00 GMT

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?

Re: Wealth centralization in a free-market?

Fool on the Hill — Fri, 10 Feb 2012 04:12:05 GMT

Prices are a continual feedback loop. The amount of sales a company is getting informs their price-setting decision.

So the sales of a commodity today tells me how much money will be spent on it tomorrow? Interesting.

Re: Wealth centralization in a free-market?

Fool on the Hill — Fri, 10 Feb 2012 04:08:16 GMT

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.

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.

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".

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.

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?

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?

Re: Wealth centralization in a free-market?

Fool on the Hill — Fri, 10 Feb 2012 03:47:08 GMT

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.

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.

Re: Wealth centralization in a free-market?

Fool on the Hill — Fri, 10 Feb 2012 03:12:27 GMT

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.

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.

Re: Wealth centralization in a free-market?

Jargon — Fri, 10 Feb 2012 02:42:32 GMT

Prices are a continual feedback loop. The amount of sales a company is getting informs their price-setting decision.

Re: Wealth centralization in a free-market?

Fool on the Hill — Fri, 10 Feb 2012 02:28:18 GMT

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.