Re-Framing Capitalism

[Loren Pechtel]

I think that IS how capitalism works. Production is always going to be divided among unskilled labor, skilled labor, land and capital. Today's pay discrepancy between unskilled labor and highly skilled labor is huge. And high populations naturally push down the amount of scarce land the average person can hope to own.

There has been huge increase in accumulated capital (factories, robots, etc.). Figure 6.2 in Piketty's book shows the split of income between capital (incl. land) and labor in France. In 1860 it was 57/43 — labor still got almost half the "pie." In 2010 it was 74/26 — capital's income was almost thrice labor's. And a lot of the labor income goes to highly-skilled labor. A lot of "capital" is intellectual or intangible property: I don't know how Piketty handles this.

In the olden days, wheat, barley and eggs were a large share of income; and the farm laborers who produced this food got a largish share of its value. But today a smart-phone is almost a necessity: people expect more than cereal, bread and eggs.

I hope the developed democracies come to their senses soon and realize some form of UBI is needed to cope with new economic realities. (Europe is already well along this path; in European countries both rich and poor tend to be relatively content.) Otherwise the gap between haves and have-nots will bring dystopia.

Of course the share that goes to "capital" has gone up. The problem is that the model is wrong. It is not capital/labor, but capital/tooling/labor. When you look at how much labor gets you inherently lump tooling with capital and get a distorted picture. At this point in the amount of money invested in means of production is several years of median income per worker. (Obviously, some fields have more, some have less.) Until you model three divisions rather than two your numbers will be nonsense.

Note, also, that skilled labor is actually subject to this same thing--just count education as tooling. The skilled worker has to pay the costs of their education and they get fewer working years because some of their time is spent learning rather than working. An unskilled worker gets about 45 years in the labor force, a field that requires a PhD is more like 35.

 

[bilby]

The skilled worker has to pay the costs of their education

Not in the civilised world, they don't.

The idiosyncrasies of your nation are not laws of nature.

 

[lostone]

Who claimed our nation was civilized? Those who want to make it less so? What it is is powerful. Some of us think powerful is al it needs to be. Might makes right, some say.

 

[DBT]

I think that IS how capitalism works. Production is always going to be divided among unskilled labor, skilled labor, land and capital. Today's pay discrepancy between unskilled labor and highly skilled labor is huge. And high populations naturally push down the amount of scarce land the average person can hope to own.

There has been huge increase in accumulated capital (factories, robots, etc.). Figure 6.2 in Piketty's book shows the split of income between capital (incl. land) and labor in France. In 1860 it was 57/43 — labor still got almost half the "pie." In 2010 it was 74/26 — capital's income was almost thrice labor's. And a lot of the labor income goes to highly-skilled labor. A lot of "capital" is intellectual or intangible property: I don't know how Piketty handles this.

In the olden days, wheat, barley and eggs were a large share of income; and the farm laborers who produced this food got a largish share of its value. But today a smart-phone is almost a necessity: people expect more than cereal, bread and eggs.

I hope the developed democracies come to their senses soon and realize some form of UBI is needed to cope with new economic realities. (Europe is already well along this path; in European countries both rich and poor tend to be relatively content.) Otherwise the gap between haves and have-nots will bring dystopia.

Yet the government must prop it up whenever it fails, bailing out wall street, 2008..... subsidizing low incomes to prevent a social catastrophe, general unrest or even a revolution, although that seems unlikely, it can happen if people are pushed far enough and feel they have nothing to lose, no stake in the game, a game rigged in favour of the top end of town.

 

[Loren Pechtel]

The skilled worker has to pay the costs of their education

Not in the civilised world, they don't.

The idiosyncrasies of your nation are not laws of nature.

In a country where you don't pay for your education there would be less difference but there's still the time out of the labor force issue.

 

[bilby]

The skilled worker has to pay the costs of their education

Not in the civilised world, they don't.

The idiosyncrasies of your nation are not laws of nature.

In a country where you don't pay for your education there would be less difference but there's still the time out of the labor force issue.

Not really. A large fraction of low-skilled work is very physically demanding. The nominal 'retirement age' becomes meaningless for someone who is physically unable to work past 45 or 50 years of age; And is equally meaningless for someone whose physical condition has little impact on their ability to work. My dad took 'early retirement' from his University job at 60, and is still doing occasional industry consulting work today, at the age of 85. He even negotiated ongoing access to the university's libraries and facilities, as part of his severance package, so his 'retirement' consisted of stopping the part of his job he liked least (teaching undergraduates), and continuing the part he liked most (research), while moving his income from a salary to consulting fees (which are often more lucrative).

The PhD might give the ditch digger a ten year head start on his working life, but he can easily get thirty years more at the end of the process.

 

[Bomb#20]

I wouldn't have thought I'd said enough about stone age cultures for it to register on a reductionism scale. What specifically did I say that you think is wrong or misleading?

I don't think it's controversial to say hunter-gatherer societies are generally more egalitarian than farmer societies. The whole point of the "gathering" part of hunting and gathering is to take the plants you find back to the community base and share them with others instead of eating them on the spot like a chimp. And when a hunter brings back game, everybody gets some; the hunter doesn't sell cuts of meat off to the highest bidders.
...
Haven't read it. Has the part you read said something that conflicts with what I said?

"At best misleading" was a euphemism for "WRONG." I'll trouble myself to type in words from the Dawn book now in front of me and opened to page 99.

. . . the Nambikwara lived in what were effectively two very different societies. During the rainy season they ... practiced horticulture; during the rest of the year they dispersed into small foraging bands. Chiefs ... during the 'nomadic adventures' of the dry season ... gave orders, resolved crises and [were] authoritarian. [During the wet season life was more anarchistic and socialistic]

I'm much too lazy to type in an entire paragraph, let alone the whole book. But even before I read Dawn I thought it was well-known that early farming societies tended to be collectivist, while hunters and especially herders were more likely to develop notions about property rights.

Curious; I thought it was well-known that hunters tended to be collectivist, while early farming societies and herders were more likely to develop notions about property rights*. So relying on what we respectively thought was well-known isn't serving us any more.

Hunter-gatherers
Insights from a golden affluent age seems to back up my contentions about the unimportance of property to hunter-gatherers.

The Neolithic Agricultural Revolution and the Origins of Private Property seems to back up my contentions about the importance of property to Neolithic farmers.

If you know of papers that say early farming societies tended to be collectivist, post a link.

Of course what you relate about the Nambikwara is interesting; but one thing we know for sure about culture is that it's highly variable and there are usually exceptions to general patterns. Half-and-half cultures are rare; the great majority are heavily dominated by one or the other subsistence method. Moreover, the circumstance that it's the same people going back and forth between economies every year makes me doubt if they're a good psychological model for a permanent shift in one direction that happened gradually over many generations. In a typical farming or hunter-gatherer community the people will have no memory of the other lifestyle.

(* Of course everybody had notions of property rights; that goes all the way back to chimps. The cultural differences we're talking about are matters of degree -- what sorts of things are perceived as ownable, and the relative importance of privately owned stuff versus shared stuff.)

There is good evidence of English prices and wages. ...14th century...

If you mean, why am I talking about stone age cultures in the first place, it's for context. A lot of people, especially leftists, make arguments that rely on zero-sum-game reasoning, even though it should be painfully obvious to everyone, from the fact that today eight billion people have a much higher standard of living than 400 million people had in the 14th century, that economies are not a zero-sum game, and haven't been a zero-sum game since people figured out you can bury a bag of grass seed, wait six months, and fill ten bags with new grass seed.

According to the website Measuringworth, the average annual real wage in England was £2682 in 1389, compared with barely half that level (£1449) in 1801. Even by 1867, 80 years after James Watt's perfection of the steam engine, England's real wage was only £2991, about 11% higher than the 1389 wage.

Well, in the first place, that's cherry-picked data. 1801 was the poorest year since 1729, while 1389 was the richest year in the whole 14th century: workers had the full benefit of economic recovery without population recovery after the Plague. I see only two years in your chart prior to the Plague when your table shows average earnings higher than your 1801 figure. And in the second place, your 19th-century numbers are a 106% increase in 66 years. That's a heck of a lot better progress than most 66-year periods in your table. Clearly steam engines are helping the workers quite a lot.

This suggests to me that the meme "A rise in productivity raises all boats" is an over-simplification of economic reality.

And in the third place, I wasn't even arguing "A rise in productivity raises all boats". "A rise in productivity raises all boats" does not need to be true for zero-sum-game reasoning to be false. As your own examples illustrate, population is also a factor in the equation. The population of England fell about 25% in the Plague; but from 1801 to 1867 it tripled. Even though people had the same real income in 1867 as in 1492, that amount of wealth was being provided to vastly more people.

 

[Bomb#20]

Well, sure -- so if you want to unionize, unionize. But the circumstance that it would be prudent for workers to unionize doesn't magically turn a subsidy to a worker into a subsidy to the employer.

The issue is not whether the company expects the government to do anything, but a power imbalance between individual workers and their employer.

A power imbalance that enables the employer to offer ... rates, which the employee takes or leaves With no other option, many persevere by applying for food stamps and government assistance,

As has been repeatedly pointed out by multiple people upthread, the government assistance isn't what's causing the power imbalance, isn't what's causing the employer to offer low rates and isn't what's causing the employee to take them rather than leave. Quite the reverse -- the assistance gives employees more options, which improves their power and helps them negotiate higher pay.

You missed the point entirely.

I have never made the claim that government assistance is causing the power imbalance between management and workers.

The power imbalance existed long before government assistance and it is the reason why unions were formed in the first place. I've been through all this.

I didn't say you claimed government assistance is causing the power imbalance; I was making the point that your argument has a huge gaping hole in it. You would need to show government assistance is causing the power imbalance in order to get from your premise that the power imbalance enables the employer to offer low rates to your conclusion that the government subsidy enables the firm to keep paying their workers low rates for their time and labor.

You made the latter claim; I challenged you to support it; you keep changing the subject to power imbalances and the need for unions; and then you accuse me of missing the point.

The point is that government assistance should not be necessary for full time workers.

Why shouldn't it be necessary?

Your original argument appeared to be that it shouldn't be necessary because a subsidy to a worker is a subsidy to the business, and the government shouldn't subsidize businesses. But as we've seen, you keep failing to support your claim that the government subsidy enables the firm to keep paying their workers low rates -- and when I poke holes in that argument you talk like you've forgotten that's what we were arguing about.

So do you have any other reason for why it shouldn't be necessary?

It seems perfectly obvious to me that it should be necessary, in this chaotic world we're born into. Some workers have more valuable skills than others; some workers have more needs than others. It would be asking too much of a godless universe of indifferent physical laws to expect it to have magically arranged for the people with the most needs to be the same people with the most in-demand skills. If somebody has a chronic health problem then she may need $100,000 of care every year, so she'll need government assistance even if she's skillful enough to hold down an $80,000/year job by delivering $80,000 of marginal revenue to some production operation. Likewise, if somebody has a chronic skillset problem and doesn't know how to deliver more than $15,000 of marginal revenue to any production operation, and therefore can't hold down a $20,000/year job, then he'll need government assistance even though he has no medical issues. The world is too complicated and varied for it to be reasonable to expect the wage-for-labor exchange to be a one-size-fits-all solution to everybody's individual problems.

 

[Bomb#20]

... his 'retirement' consisted of stopping the part of his job he liked least (teaching undergraduates), and continuing the part he liked most (research)...

"The sight of an undergraduate makes me physically ill." - One of my dad's colleagues.

 

[Bomb#20]

Yet the government must prop it up whenever it fails, bailing out wall street, 2008.....

"Must"? The bail-out was a political choice by a parliament of whores. Insolvent financial institutions could have been taken over by bankruptcy courts and handed over to their creditors. That would have served as an object lesson to any bankers tempted to go on gambling on incomprehensible derivatives. That's what's supposed to happen in a capitalist economy. That's what would have happened if we had a capitalist government to go with our capitalist economy.

 

[DBT]

Well, sure -- so if you want to unionize, unionize. But the circumstance that it would be prudent for workers to unionize doesn't magically turn a subsidy to a worker into a subsidy to the employer.

The issue is not whether the company expects the government to do anything, but a power imbalance between individual workers and their employer.

A power imbalance that enables the employer to offer ... rates, which the employee takes or leaves With no other option, many persevere by applying for food stamps and government assistance,

As has been repeatedly pointed out by multiple people upthread, the government assistance isn't what's causing the power imbalance, isn't what's causing the employer to offer low rates and isn't what's causing the employee to take them rather than leave. Quite the reverse -- the assistance gives employees more options, which improves their power and helps them negotiate higher pay.

You missed the point entirely.

I have never made the claim that government assistance is causing the power imbalance between management and workers.

The power imbalance existed long before government assistance and it is the reason why unions were formed in the first place. I've been through all this.

I didn't say you claimed government assistance is causing the power imbalance; I was making the point that your argument has a huge gaping hole in it. You would need to show government assistance is causing the power imbalance in order to get from your premise that the power imbalance enables the employer to offer low rates to your conclusion that the government subsidy enables the firm to keep paying their workers low rates for their time and labor.

You made the latter claim; I challenged you to support it; you keep changing the subject to power imbalances and the need for unions; and then you accuse me of missing the point.

The point is that government assistance should not be necessary for full time workers.

Why shouldn't it be necessary?

Your original argument appeared to be that it shouldn't be necessary because a subsidy to a worker is a subsidy to the business, and the government shouldn't subsidize businesses. But as we've seen, you keep failing to support your claim that the government subsidy enables the firm to keep paying their workers low rates -- and when I poke holes in that argument you talk like you've forgotten that's what we were arguing about.

So do you have any other reason for why it shouldn't be necessary?

It seems perfectly obvious to me that it should be necessary, in this chaotic world we're born into. Some workers have more valuable skills than others; some workers have more needs than others. It would be asking too much of a godless universe of indifferent physical laws to expect it to have magically arranged for the people with the most needs to be the same people with the most in-demand skills. If somebody has a chronic health problem then she may need $100,000 of care every year, so she'll need government assistance even if she's skillful enough to hold down an $80,000/year job by delivering $80,000 of marginal revenue to some production operation. Likewise, if somebody has a chronic skillset problem and doesn't know how to deliver more than $15,000 of marginal revenue to any production operation, and therefore can't hold down a $20,000/year job, then he'll need government assistance even though he has no medical issues. The world is too complicated and varied for it to be reasonable to expect the wage-for-labor exchange to be a one-size-fits-all solution to everybody's individual problems.

It wouldn't be necessary for the government to subsidize low incomes if the business paid a fair and reasonable wage, a rate that reflects the contribution that workers make in the running of the company.

They don't pay what should be paid in terms of market value because they get away with paying SFA because they can, ie, individual workers have very little to no leverage, hence no negotiating power.

Which is something that can be addressed through unionization and collective bargaining, which elevates negotiating power and enables better pay and conditions.

Something that has been actively discouraged by both business and government, which panders to big business and basically shafts the average worker, on the one hand while offering crumbs in the form of food stamps and other subsidies on the other.

 

[Swammerdami]

. . . the Nambikwara lived in what were effectively two very different societies. During the rainy season they ... practiced horticulture; during the rest of the year they dispersed into small foraging bands. Chiefs ... during the 'nomadic adventures' of the dry season ... gave orders, resolved crises and [were] authoritarian. [During the wet season life was more anarchistic and socialistic]

I'm much too lazy to type in an entire paragraph, let alone the whole book. But even before I read Dawn I thought it was well-known that early farming societies tended to be collectivist, while hunters and especially herders were more likely to develop notions about property rights.

Curious; I thought it was well-known that hunters tended to be collectivist, while early farming societies and herders were more likely to develop notions about property rights*. So relying on what we respectively thought was well-known isn't serving us any more.

We do agree that HERDERS had notions of property rights, as I stated earlier. As for early farmers, I think there's ambiguity. At some point governments developed in which a King might be the "owner" of everything. But for many contexts this is the opposite of what we want to imply by "property rights."

Hunter-gatherers
Insights from a golden affluent age seems to back up my contentions about the unimportance of property to hunter-gatherers.

The Neolithic Agricultural Revolution and the Origins of Private Property seems to back up my contentions about the importance of property to Neolithic farmers.

Thanks for the links! I will read them when I have a chance.

If you know of papers that say early farming societies tended to be collectivist, post a link.

I don't have time for proper study but a quick Google came up with this paper:

Using detailed data on the date of adoption of Neolithic agriculture among Western regions and countries, the empirical findings show that the regions which adopted agriculture early also value obedience more and feel less in control of their lives. They have also had very little experience of democracy during the last century.

This Google search used "collectivist." Better Googlings are surely possible.

Of course what you relate about the Nambikwara is interesting; but one thing we know for sure about culture is that it's highly variable and there are usually exceptions to general patterns. ...

According to the website Measuringworth, the average annual real wage in England was £2682 in 1389, compared with barely half that level (£1449) in 1801. Even by 1867, 80 years after James Watt's perfection of the steam engine, England's real wage was only £2991, about 11% higher than the 1389 wage.

Well, in the first place, that's cherry-picked data.

I use an awk script to do some sort of averaging when I examine such data. But I didn't want to add a paragraph explaining that, nor to cope with possible complaints. So I used actual data points from the cited data. Of course I then "cherrypicked" the numbers (Wouldn't you? ) So, yes, in 1802 the average was £1758 according to that source — still well below the 1389 wage, or even the less cherry-picked £2125 wage in 1380.

 

[Politesse]

Curious; I thought it was well-known that hunters tended to be collectivist, while early farming societies and herders were more likely to develop notions about property rights*. So relying on what we respectively thought was well-known isn't serving us any more.

This is why archaeologists tend to prefer evidence-based hypotheses over philosophy-inspired models.

 

[steve_bank]

Its is looking like OBE, overcome by events.

Change will be forced upon us.

1. Fragile global supply chain developed in pursuit of absolutely maximizing priut.
2. Income disparity.
3. People no longer accepting bare minimum wages.
4. Rising affordable housing costs based in supply and demand.
5. Consumer based economy. Spending based on subjective feelings.
6. Adherence to supply and demand free markets on all things,
7. Inability of govt to act nationally for the common good.

In short, a house of cards. It may open the door for a Trump like despot.

 

[Bomb#20]

The point is that government assistance should not be necessary for full time workers.

Why shouldn't it be necessary? ... when I poke holes in that argument you talk like you've forgotten that's what we were arguing about.
So do you have any other reason for why it shouldn't be necessary?

It wouldn't be necessary for the government to subsidize low incomes if the business paid a fair and reasonable wage, a rate that reflects the contribution that workers make in the running of the company.

Sorry I was so slow to get back to you. How much is "the contribution that workers make in the running of the company"? That's an unobservable metaphysical construct, like the "qi" from traditional Chinese medicine. Production is a synergistic operation -- if the contributions of workers, managers, owners, customers, suppliers, inventors, road crews, legislators, judges, cops, scientists, soldiers or sailors were left out, the goods and services wouldn't be produced. How can anyone possibly separate out all those contributions and calculate "a rate that reflects" any of them, except by basing the calculation on his own prejudices?

They don't pay what should be paid in terms of market value because they get away with paying SFA because they can, ie, individual workers have very little to no leverage, hence no negotiating power.

How much is "what should be paid in terms of market value"? Market value of what? Market value of the labor they're selling? That would appear to be by definition exactly what they're paid, since the "market" is exactly what they're selling their labor in. If the market value of their labor were higher they could quit and go elsewhere and sell their labor for more.

If you mean what they're paid for their labor should be some amount paid in terms of market value of something other than labor, what is that other thing?

Which is something that can be addressed through unionization and collective bargaining, which elevates negotiating power and enables better pay and conditions.

Well sure; I'm not arguing against unions. Unionizing is a classic case of working smarter, not harder; and if there's anything an economy needs more of it's people being smart. But if you mean workers need collective bargaining in order to get market value for their labor, that's not how it works. Workers get the market value of their labor whether they have a union or not. The union enables better pay and conditions not by enabling them to get the market value but by increasing the market value, by restricting the supply. You can see this by inspecting a supply & demand chart. Like pretty much everything else in economics, labor is subject to the Law of Diminishing Returns. The more you have of something, the less benefit you derive from getting an additional unit of it; consequently, the more supply of something, the less its market value. This is how DeBeers convinces people to keep paying precious gem prices for semiprecious diamonds.

 

[Jarhyn]

The more you have of something, the less benefit you derive from getting an additional unit of it; consequently, the more supply of something, the less its market value. This is how DeBeers convinces people to keep paying precious gem prices for semiprecious diamonds.

So, this is totally a hit and run. But, it sure looks like you're saying you praise them for it. Why is it that I get the feeling like you want to be in the position to milk people for precious resource prices by sitting on most of a semiprecious resource?

Why on earth do would anyone think anyone should let anyone else do that?

It is an insult and an outright threat.

It is a statement that you should be prevented from it by all legal costs!

 

[Bomb#20]

The more you have of something, the less benefit you derive from getting an additional unit of it; consequently, the more supply of something, the less its market value. This is how DeBeers convinces people to keep paying precious gem prices for semiprecious diamonds.

So, this is totally a hit and run. But, it sure looks like you're saying you praise them for it.

Who, DeBeers?!? I was praising unions for it. I don't give a rat's ass one way or the other whether DeBeers does it -- it's a move in a chess game and who wins that game doesn't matter to me since people don't need diamonds.

Why is it that I get the feeling like you want to be in the position to milk people for precious resource prices by sitting on most of a semiprecious resource?

Oh, that? You most likely get that feeling because you're into hate-mongering and strawman arguments, and when you make up positions for people you dislike it makes you feel better about yourself when you delude yourself into thinking what you say about them is true, and remaining the hero of your own narrative is more important to you than whether you have evidence for your beliefs about others.

Why on earth do would anyone think anyone should let anyone else do that?

Wouldn't you? Aren't you in favor of allowing unions to milk employers for skilled labor prices by sitting on most of the supply of semi-skilled labor? It's pretty much unions' entire point. Those of us in favor of it are in favor because we want the workers to win the chess game they're playing across the contract negotiation table, and because the shareholders are allowed to put up a common front on the other side of that table and fair's fair, and because it's a free country.

When other people do that, it depends on the situation. We should let DeBeers do that because if DeBeers wants to pay Australia to leave its diamonds in the ground, and if the voters of South Africa and the voters of Australia feel that's in their mutual best interests, why the devil should the rest of the world have any say in the matter? The diamonds are theirs and if you don't want to pay a ruby price for a diamond, don't buy one. We shouldn't let Martin Shkreli do it with an antiparasitic drug because people need it and he had no rightful claim to it and the governmental regulatory regime that said he had ought to have been reformed long before Shkreli ever figured out how to game the system. Life isn't one-size-fits-all. This isn't rocket science.

It is an insult and an outright threat.

Sometimes it is and sometimes it isn't. How do you figure you're threatened by artificially inflated diamond prices?