An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
Eye-opening stat from @mikeallen in this morning's Axios AM. https://t.co/JLyuaZQxse pic.twitter.com/AT2ItOirvV— Axios (@axios) January 16, 2017
Eye-opening stat from @mikeallen in this morning's Axios AM. https://t.co/JLyuaZQxse pic.twitter.com/AT2ItOirvV
You have to wonder when the economics profession, politicians and the public at large will take inequality seriously. Those who defend inequality as the rich getting their just desserts never answer this question. I suppose they'll still argue the same case if one person owned 99% of all the world's wealth. Economists are lost in a maze of their own making, but one with no exit. Politicians are on the whole owned by the people they should be doing something about, so they'll say next to nothing or just enough faux populism to get elected. The public are divided between the small minority who are engaged and the majority who just want to watch celebrity television and during commercial bray stupidities they've read in trashy rightwing newspapers about refugees and political correctness.
There probably should be a distinction between individuals with wealth that don't produce anything of value like that Ayn Rand moron who destroyed Sears that Mike brought up in a recent video and others who have actually earned their wealth and have gone through a meritocratic process of sorts. The latter happen to be the true losers and parasites of our society that should be focused on the most if you really wanted to do something about this problem.
Penguin, suppose every meritocratic test has been passed. Should one person own 99% of the world's wealth? When is it time to say enough's enough? Grotesque amounts of wealth in limited private hands is bad for an economy and for the broader public who live in it.
John go play LeBron James one on one you will loose get over it ...
Matt, I don't know who LeBron James is, and I don't think he or she, whoever this person is, should own the planet. I should have thought you being a supporter of a party that calls itself "conservative" should understand that. You know, competition and all that.
"Penguin, suppose every meritocratic test has been passed. Should one person own 99% of the world's wealth? When is it time to say enough's enough? Grotesque amounts of wealth in limited private hands is bad for an economy and for the broader public who live in it."I would agree with the premise. Just like how I wouldn't want to see a concentration of power in one individual, I certainly wouldn't want to see the same thing with wealth either, which said person could use to influence politicians and not always in the ways that are in the interests of the people and constituents. That is when it really becomes a problem in society. In my mind though, I'm trying to figure out ways in which everyone else could benefit and have opportunities to move up without leading to the issue of jealousy and resentment towards others in the lower classes or people having this notion that people on welfare are just simply welfare queens as Ronald Reagan coined the term. The people that make me angriest are individuals in the financial industry who have repeatedly made worthless predictions and forecasts and the Peter Schiffs of the world who have totally decimated their clients with their bullshit. I was talking to a conservative online the other day about single-payer and R&D into rare diseases and conditions and the most striking insight I gained from that conversation when I threw in how I would actually lower payroll taxes or get rid of those altogether is that he'd be fine with any proposal I had as long as he wasn't forced to participate and as long as his taxes weren't jacked up. He had a different idea of what healthcare is as a good and it was mainly semantics there, but I felt like we were able to have some common ground after all. That's what has also made me think about this question more deeply and how it might be more complicated than what it seems on the surface. In the same conversation, when I talked about MMT without mentioning the name of it, I linked to one of the books that gets into a lot of the concepts but from a POV he could understand. I was almost gonna link to Warren's book, but wanted to ease my opponent into conceding a lot of the points I made and let him be able to think about this stuff on his own and come to these conclusions himself.
Also I was gonna bring up a lot of those Hollywood celebrities with talent who have made their money with a talent that people flock to spend money on. I guess you could say the same thing about people who are in MMA like Ronda Rousey who has a net worth of over $12 million. I personally don't take issue with this at all.
Just Googled LeBron James. He plays a game called basketball, unless the photos of the man are meant to mislead me. I suppose if I suddenly grew to ten feet I may be able to compete with this otherwise untalented man mountain. If I suddenly grew to twenty feet, I'd thrash him all day long and people would pay me lots of money for being tall. But in any case, sports and the arts are always not really meant to be included as anything significant. They'll never obtain any obscene levels of wealth, power and influence. And their very talents are so limited as to possibly justify some weird remuneration. The very richest today have done very little to justify their wealth, and a lot of it is inherited.
Hollywood celebrities who make braindead films make a lot of money. There's no talent involved. Is anyone going to seriously argue that the meatheads who star in action films are talented? Do they deserve $10 million per film or whatever it is they make? I suppose if some meathead wants to watch another meathead "lift" a tank and smash a bridge with it, and hand over good money for the supposed enjoyment it brings, then good luck to both of them. But I don't think the action stars of the world are really the problem. They're a limited pool of "talent", and I use the word advisedly.
You have to wonder when the economics profession, politicians and the public at large will take inequality seriously. Those who defend inequality as the rich getting their just desserts never answer this question. I suppose they'll still argue the same case if one person owned 99% of all the world's wealth. This is the problem with conventional economics owing to the standard model. There is no inequality and no involuntary unemployment. It's just an illusion that exists in the imagination of people that can't understand the standard model.
Great wealth is never the result of ordinary income from work without rent, and most of it is from asset appreciation and inheritance.This is a consequence of capitalism as an economic system in which ownership of private property is a right.
'Stars' are product branding for hugely profitable business interests, another form of financial industry. If we all stopped buying this garbage Hollywood would be filled with tumbleweeds instead of wannabes. Same with health insurance - we could have single payer if we all stopped buying the crap. But the corporate welfare system scares us to legislate extortion. After WWII debt to GDP was 120%. Between 1945 and 1979, with top tax rates between 70% and 90%, the US built a nationwide infrastructure of transport, power, and communications; 'won' the space race by putting men on the moon; built the largest, most expensive, and horrendously inefficient military and nuclear arsenal ever conceived; waged multiple wars around the globe; and had a growing, thriving 'middle class' while simultaneously reducing the deficit to 30% of GDP. Then came Reagan ...
Hollywood celebrities who make braindead films make a lot of money.In these cases, high income is a result of access to mass markets.There is a huge divide between those having access to mass markets and enough market power (like fame aka celebrity) to command a significant share of the take. In mass markets even a very small percentage of the take can be huge in absolute terms and relative to ordinary workers.
"Great wealth is never the result of ordinary income from work without rent, and most of it is from asset appreciation and inheritance.This is a consequence of capitalism as an economic system in which ownership of private property is a right."I guess when you put it that way, there is a big difference between a celebrity having $12 million in net worth compared to your typical finance capitalist like Wilbur Ross. That was the point I had in mind. How do you get to a different kind of economic system where rent seeking won't be an issue anymore? The term trust fund baby also comes to mind, where people often piggyback on their parent's wealth and don't end up doing anything of merit themselves. These are the questions I wish mainstream economics would try to answer.
But as many point out, Oxfam are using dodgy calculations."By Oxfam’s measures, the poorest people in the world are recent Harvard graduates with student debt piles."Be careful with articles that fit your narrative view of the world. All is not what it seems.
"You have to wonder when the economics profession, politicians and the public at large will take inequality seriousl"First you have to explain why it matters. Why not let the rich count their coins?It's not the rich that are the problem. The problem are those at the bottom who cannot get the resources they require. And we know that has nothing to do with money. So since the wealthy have the power, and you don't, you won't be able to take anything off them. But if you go to them and say "we'd like to sort out the poor and disposed and it won't cost you anything in financial terms - but you might have to wait to build that new casino" then you might get somewhere.The 'smash the rich' narrative might feel good and makes a great virtue signal, but as a practical plan to help the poor it has serious shortcomings. We have to co-opt the rich and get them to help. And you don't do that by threatening them.
How do you get to a different kind of economic system where rent seeking won't be an issue anymore?There is a range of possible economic systems from a free market capitalistic system (laissez-faire) to a totalitarian command system (technocracy). Generally speaking, debate has been based on the assumption of either/or, b&w, — free market capitalism or communism. Anything less than the former will inevitably slide down the slippery slope into totalitarianism (Hayek, The Road to Serfdom).That is nonsense, of course.Economic systems don't exist independently from social and political systems. Choosing one influences the other. If the economic system is prioritized, then the social and political results follow. If one chooses the social or political as the priority, then the economic system follows from that.From the POV of liberalism the starting point should be political, with government of, by and for the people. Then self-determination will be the deciding factor. Then the people in concert can decide what kind of system they choose to live under and adjust it over time iaw learning and changing conditions. But if economic liberalism is chosen as the highest priority, then ownership of property will be the deciding factor.
BTW, it is never a question of wealth ultimately but rather of power. Wealth is the result of the application of power in some form. Power generates wealth, and wealth augments power.Theoretically, inequality should be generated solely by labor power (knowledge, skill, and experience) in a fair system. There would be some inequality but the distribution would be normal with a low standard deviation. But even here, to be completely fair, equal opportunity would have to apply and there would have to be an absence of privilege.
The 'smash the rich' narrative might feel good and makes a great virtue signal, but as a practical plan to help the poor it has serious shortcomings.If they aren't terrified of the working classes and the poor, no plan you pitch to them will seem practical.
JK Rowling's net worth is around 1 billion. LeBron James' is at 400 million. Who will win in the long run?
Neil they are using the same idiot accounting as the Peterson people... "Modified Accrual"....They accrue the right side of the accounting and use cash basis on the left side... the Degree from Harvard and the earnings potential has no PV (to them)....Its a foundational problem with these people and imo some sort of mathematical violation of the application of the principle of discrete time in the analysis...
'Capitalism' is a mystification that causes nothing but confusion. Inequality isn't some side-effect of 'capitalism' (that's either meritocratic or not); the system IS inequality and has been for over 5,000 years. There's nothing new here. A tiny minority owns essentially everything and how absurd it is to talk about whether or not they obtained this power in some meritocratic way. Regardless, they rule. And this rule must always be existentially hostile for there can be no greater risk to a propertied minority than the propertyless majority.The system of minority power - inequality - is the fundamental problem of mankind.
@ Neill Wilson"First you have to explain why it matters. Why not let the rich count their coins?"Because wealth isn't an innocent hobby of counting coins - wealth is power. And any system of concentrated minority power must always be existentially hostile to the powerless majority. This is not only simple common sense, it has been proven throughout the entire history of civilization.
Neil: "First you have to explain why it matters."The question was whether one person owning 99% of the world's wealth is a good idea, but I can't see how it cannot matter. That much wealth concentrated in the hands of one person equates to tremendous economic and political power. We'd have to concede that markets have essentially been erased. The parliaments of any and every country would answer to this one person. If one is too few, is eight any better? The calculations made by Oxfam may or may not be dodgy, but the replies on the thread show that even if the calculation is or is not accurate there are arguments made that there is nothing wrong with eight people owning half the world's wealth. If so, then there is little wrong with a smaller number of people owning an even larger percentage of the world's wealth. Whether or not Oxfam's calculations are off it's unarguable that there has been a dramatic concentration of wealth over the past three or four decades. I don't think that's good for any democracy and it's not particularly good whatever "market" worthy of the name.
I guarantee these Oxfam people are approaching this thinking that these 8 people have "half the world's money!"....
" That much wealth concentrated in the hands of one person equates to tremendous economic and political power. "Well they are still stupid never the less...
Right. Capitalism is a justification of distribution introduced after the theological era in each it was justified based on the "(super)natural order" of the Great Chain of Being was replaced by the Age of Reason in which science began to replace religion as the arbiter of truth.Then the supernatural order was replace with a supposedly "natural order" based on reason. The result was liberalism based on the inalienable right to life, liberty and the pursuit of happiness, where "happiness" was defined in terms of utility and based on ownership of property.The was the basis for justifying economic liberalism aka capitalism. After the classical economists introduced the concept of economic rent, and the neoclassical explanation of marginalism, including marginal productivity implying just deserts, was introduced as being more scientific, since it was formalized. The rest is history.
The question becomes clearer by clarifying that "wealth" means control of private property, and the greater the wealth the greater the degree of control. Greater degree of control implies greater degree of freedom.In a liberal system an assumption is that all are equally free. Illiberalism rises with greater asymmetry in degrees freedom.A truly free society required equality (all are equally free) and "fraternity" as recognition that humans are one (extended) family (there is only one race, the human race).The matter comes down to reciprocity aka fairness.Interestingly, in capitalism the heroes are the great accumulators. In indigenous societies like the Native American the social heroes were the great distributors.
@TomAn even greater clarification of the real world meaning of "wealth" is needed for it's not just the control of private property but, more importantly, the absence of control and freedom for the great majority. Locke was the great liberal defender of the natural right to wealth but he also had his 'proviso' which has dropped off the ideological map. (Man has the natural right to wealth as long as there's sufficient left in common for everyone else.) Liberalism wants to have its cake and eat it too - the moral righteousness of the proviso and the sumptuous pleasures of inequality that can only be had by ignoring it.Jim
Time for these folks at the top to have a potlatch.
"Privileged classes do not give up their privileges voluntarily."Martin Luther King
It's not the rich that are the problem. The problem are those at the bottom who cannot get the resources they require. And we know that has nothing to do with money.Because those resources are controlled by the rich. Duh. It has everything to do with money.
Bill Mitchell doesn't disagree agrees with a previous 2014 Oxfam report that put the figure at eighty people having half the world's wealth. He elucidates further on wealth inequality: http://bilbo.economicoutlook.net/blog/?p=32127A little of what Bill has to say: "Inequality matters. Why? First, it undermines the notion of a collective in society which is necessary for social stablity and cohesion."Second, rising inequality undermines the growth potential of a nation and introduces greater propensity to economic crisis."Third, taken together, these factors tend to meant that nations will higher levels of income and wealth inequality endure more social violence and higher crime rates, higher rates of suicide, poorer mental and physical health standards, shorter life expectancies, and other pathologies."Fourth, human potential is stifled in nations with higher inequality. Access to education, health and other services are improved when there is less inequality."And moreover: "The market is driven by dollar votes. The more one spends the more power one has. So even at the most elementary level the concept of a free market is flawed. There is no such thing. It is preferences backed by cash rather than the latent desires that the market responds to, even in the abstract theoretical models."But then once the inequality reality is overlaid onto that narrative and we recognise the massive spending that is designed to lobby for particular policy environments, which further distort the market allocations, we realise that the concept of the free market that is taught in economics programs throughout the world is a myth."
If we had Bill's JG, this form of "inequality!" would increase....
iow the Bill Gates and Carlos Slims of the world would make even more munnie...and LeBron's contract would probably double...
All of the arguments do not take away from Neil's other powerful point of inequality in power, which he doesn't disagree is an issue. The wealthy have pretty much all the power and everybody else doesn't. What do we do about it?I'm not sure how Neil's policy would work, but I suppose it can't hurt trying. Trying to use the power of the state to help everybody else will get noticed by those who now own the country and have the power, but we can see how far we can get before they try and kneecap us. But in a case like this, in which the wealthy have perverted politics and economics, I see no reason not to use a core MMT idea: use the tax system to eliminate bad behaviour, in this case the perversion of the nation's politics and its dumbing down, whether educationally or in other ways.
Matt, why would a JG increase wealth inequality? There's every reason to believe that it would be a very minor addition to reversing wealth inequality.
we realise that the concept of the free market that is taught in economics programs throughout the world is a myth."Right. The myth is optimal distribution through spontaneous natural order and therefore optimal social utility as "the greatest good for the greatest number."Opponents claim that the problem is that this is not happening because the working of economic liberalism is being distorted by government so government needs to be reduced. The "No True Scotsman" argument. If only economic liberalism were applied consistently, then distribution would be normalized. It's government's fault, you see.
The wealthy have pretty much all the power and everybody else doesn't. What do we do about it?Solve a problem by addressing the problem not in terms of symptoms but causes.In this instance the cause is some feature(s) of liberal democracy and capitalism as the dominant system of distribution of power and wealth.The problems arise from liberal democracy when democracy is interpreted as democratic republics in which corruption is legalized through campaign finance, lobbying and the revolving door. That swamp needs to be drained.The problem arises in capitalism when capitalism is based on the assumption of an (almost) absolute right to private property regardless of other relevant considerations.The result in asymmetrical power and wealth. The remedy is to institute actual self-determination through democracy as rule of the people, by the people and for the people, and to limit the right to private property based on other relevant factors.These problems are institutional. They are created by institutional design and can be remedied through improving institutional design.However, the ultimate cause is self-interest run amok. The remedy for this is cultural and involves raising the level of collective consciousness. In sociology, the level of collective consciousness is determined based on the cultural characteristics and institutional arrangements of the society.The range of level of collective consciousness runs from selfishness and self-centeredness on the low end to universality manifested in loving-kindness and altruism at the high end.An ideal society is one in which individuals augment the social system in pursuing what they perceive as self-interest and the cultural and institutional of the society promote the interests of the members of the society. This requires a universalization of self-interest in which everyone realizes that promoting the common good and general welfare promotes their own good.
Tom, the No True Scotsman reminds me obliquely of the Congressman in 2008 who tearfully blubbered that he hates interference in the free market, boohoo, every sinew in his body rebels against interfering in the, boohoo, perfect free market, that government was always the problem but to save the, boohoo boohoo boohoo, free market he would vote for unprecedented interference in the free market. Boohoo, it was necessary to give the fraudsters hundreds of billions for starters. It hurt him to do it, boohoo, just as it must hurt the companies in the free market to take the money! It was probably that charlatan Paul Ryan.
Paul Ryan is one of the most detestable politicians bar none. Great, lively discussion on all these matters. I have also heard that JG is supposed to be a means to address the inequality issue combined with Basic Income. Limiting the power of those who have the most influence is really what I care about the most. It should be completely regulated and dealt with, and there may have to be a completely different system than the hypocritical left-liberalism and right-liberalism we have today trying to mix up propertarianism with social liberalism and resulting in all the paradoxes Tom frequently discusses on this blog. My other point was pertaining to getting away from having to need the rich and the powerful to provide services today that can be used to make it easier for those at the bottom to get out of their situation. These were the complex questions that I wanted to get some more answers to in depth, and I still believe those in the financial industry should be dealt with first and putting a lot of those parasites out of business, especially the idiots that want to make a killing in Brexit and use such causes as a means to leverage their power and wealth even more.
Penguin: "These were the complex questions that I wanted to get some more answers to in depth, and I still believe those in the financial industry should be dealt with first and putting a lot of those parasites out of business..."The problems don't have clear cut solutions, but we know what certainly doesn't work (neoliberalism), what works pretty well (post-war "Keynesianism"), and what may work very well (JG, massive government spending, etc). However, these won't get rid of all our problems. But we can incrementally work our way to something better, but many of the institutions will have to be overhauled so that they work for the benefit of the many. There will, however, be very strong resistance: the wealthy and the powerful are never in any mood to give up their wealth and power. They're going to have to be forced, and there's no two ways about it. There's a famous article by Michal Kalecki in which he points out that full employment is a political problem, not an economic one. It is in the economic interests of the wealthy to have full employment, but they oppose it for social and political reasons, although in the long run there may be economic consequences. As for the financial parasites, they've come out of the crisis that they helped cause in a very strong position: they're bigger and more powerful than before. The next time there's a major crisis, they're even bigger to fail than before. That's a problem that works to their advantage, but it can also work to their disadvantage if there's a popular government in place that has made it clear that it will break up the banks and use the power of the central bank to ensure that the country is insulated from their "failing". There are various ways to do this, but it takes the political will to do so. The last time, there was no such political will. Next time could be different, although I doubt it. With a higher "national debt" from bailing out the banks, it'll just be another convenient excuse to privatize what's left of the public sector.
If America had any balls, we would do what Iceland did after their financial crisis as a starter. I like the idea of there being a lot more public banking than what we have now. We don't have the balls or will right now to do it and a lot of that will have to come from activism and writing to local representatives about these issues rather than relying on just voting in elections to see any meaningful change. I agree with the JG and BI people and notions about substantially increasing government spending and massive reforms to the political system so that the people's interests are served in the best means possible.
Here's the left's new policy:1. Outlaw Microsoft Windows and Office...2. Outlaw Oracle RDMS.....THEN the world will be a better place...c'mon....
Oh... and outlaw Facebook...
Tom, the No True Scotsman reminds me obliquely of the Congressman in 2008 .... It was probably that charlatan Paul Ryan.John, were it not for the date 2008 above, I'd swear you were talking about that other free marketer bullshitter Newt Gingrich.
A key assumption of economic liberals is that the monetary incentive that drives entrepreneurism and innovation necessarily leads to inequality of income and wealth based on unequal contribution. However vast the asymmetry, the benefits are assumed to outweigh the negatives. That's Capitalism 101.
"why would a JG increase wealth inequality?"The share price (stock) is a function of earnings (flow) .... so if everybody had higher incomes (flow) from a JG they would spend (flow) it all and not save any (very little) ... meanwhile the increased spending would increase the corporate earnings (flow) so the share prices (stock) would keep going up and up...The JG wage would be a one time linear increase in non-govt income, meanwhile earnings increases accrue non-linear to the owners like Gates and Ellison... Gates has founders shares he never sold... Same with Ellison...If you never sell the value/wealth of your shares just keeps going up (stock) and up if your enterprise remains relevant and maintains market share...These guys know how to make money that is what they do and they are very good at it...
Yes. I should have added that for economic liberals, inequality is a feature rather than a bug and vast asymmetry is a gauge that the system is producing at a high level.
To boil it down, if you want your iPhone and to have it upgraded regularly then Steve Jobs had to have become a billionaire.
Matt: "Here's the left's new policy:1. Outlaw Microsoft Windows and Office...2. Outlaw Oracle RDMS.....THEN the world will be a better place...c'mon....Oh... and outlaw Facebook..."Unfortunately that is not the left's position, although it is mine but without the outlawing. The so-called left is busying itself with gender fluidity education for pre-school children.The world would be a much better place without the trashy Microsoft and Facebook. Who can seriously deny that? All children should learn Linux from the day they enter school! Facebook is a pointless waste of time. What great loss would the world suffer if it suddenly disappeared?
Of course the point isn't Microsoft windows or facebook but that wealth (however achieved) controls our socioeconomy. Is Matt Franko claiming that the kind of software Microsoft puts out wouldn't be written without the incentives to make billions? It's far past time we outlaw wealth.
To boil it down...,Tom, and you know this very well, were it not for the US and European governments, there'd be no internet/computers let alone an iPhone.And how is Elon Musk coming along with his space toys? Oh, that's right -- waiting for more handouts from the US government. Lucky bastard!
commentsongpe, that's exactly right, notwithstanding my personal dislike of Microsoft and Facebook. The idea that something like these products wouldn't have been thought up is not worth taking seriously. It's not as if Bill Gates knew in advance that he would become the richest man in the world. He didn't sit in a garage, messing around with primitive electronics because he thought: "One day this will be all worth it, when I have my gold helicopter, gold private jet and gold houses!" He did it because he liked it. Same with Mark Zuckerface and everybody who ever created anything.
lastgreek, again perfectly said. A lot of this wealth comes straight out of the state sector. Where's our share of that wealth? Steve Jobs put the iphone together out of products that were developed in the state sector. They wouldn't exist otherwise? Is it right that the likes of Jobs and Zuckerface get all the rewards from the efforts that came out of the state sector?
I don’t know how many times I have read Tom mentioning ‘raising the collective consciousness as the only way to reign in self-interest run amok”.Law of the Jungle: Big fish eat little fish.Law of CIVILISATION: Big fish help little fish, and little fish help big fish.For that we have to build a wall, to keep the jungle out. It takes commitment and effort, focus, understanding, intelligence.But instead, we tinker with our systems and vote for predators. Try and screw human fulfilment out of materialism. An ‘I’m alright Jack’ or ‘too big to confront’ attitude prevails. The jungle is in us first; then it percolates through to the society. Without an experience, ‘raising the collective consciousness’ goes in one ear and out the other, with nothing in between. The enduring questions should always be held clearly in view: ‘What does it mean to be huamn’?So, how do you raise an individual consciousness (because raising the collective means raising the individual, one at a time)?I know of only one energy, extant in the human population and human history that can do that. It goes by many labels – but let us call it ‘Peace’. It is an energy at the center of every human heart, as qualitative and qualifiable in its effects as any physical force. It washes the jungle right out of the mind, and opens up an unlimited horizon to the civilised world. That is News! We have already tried everything else.We didn’t come to this earth for corporations, or governments, or technology. We came here because we are human: to live, learn, grow and unfold as human beings (which means breaking free of the jungle). The former are meant to be our tools – not rule over us.
if Bill Gates knew in advance that he would become the richest man in the world.Then story I heard is that Gates did not even originate the DOS system that he leased to IBM rather than selling it. He got to make billions because he was smarter/luckier than the guy that wrote the code he bought it from outright and smarter than IBM in leasing it to them rather than selling it outright.He is a perfect example of being in the right place and the right time and knowing how to do a deal.Capitalism is really the art of the deal.
I don’t know how many times I have read Tom mentioning ‘raising the collective consciousness as the only way to reign in self-interest run amok”.There are basically two ways to do this depending on the approach to reality, horizontal or vertical.Horizontally, on the level of the gross, the way is to increase the level of general education and improve the culture so that it cultures the heart.Vertically, starting on the level at which individuals stand, the way is to affect consciousness directly through what sages have called "self-cultivation." There are many means and entry points based on a person's present level and constitution.A comprehensive approach would integrate the vertical and horizontal approaches to achieve total living progressively as individuals in a society. This is the framework for achieving a good life in a good society.
Facebook should be re-branded as Facepalm. Sorry, couldn't resist :)
All you have to do is never sell and keep acquiring, avoid obsolescence and hopefully you live long enough to accrue $bazillions...
If America had any balls ...Define 'America'. If it's the vast population of indentured servants, then you're correct, they don't have any, mostly because they are scared shitless. If it's the tiny percentage that owns everything including government then they are large, brass and clanking repeatedly.
@Penguin pop & JohnLet me put this thought experiment. You and your twin sister (Penguin mum) are equally capable, equally educated, hard-working, honest, smart, entrepreneurial. You are identical in everything. So identical, in fact, that you both work for the same firm, doing the same work, and earning the same wages/salaries.She, however, won the lottery: $100 million.Mind you, she, like yourself, is not particularly greedy and she loves to work. She doesn't quit her job, instead she puts the money in the bank.Every fortnight she is paid, exactly as you do. One gets $X, the other gets $X. Still, at the end of the month, her savings account includes $Y for interests.The point is that the ownership of those $100 million grants her an income which is unearned. She didn't do anything to get that money. In effect, if it was you who won the prize, it would be you who would earn $Y a month without doing anything. That money would flow to anyone who won the prize: Bob, Jane. That doesn't make her or you or Bob or Jane evil. It's just how things are and will remain like that as long as things don't change.It would be exactly the same if she started a business and hired you to work for her, doing the exact same job she does: she would pay you an amount ($X1) and she would get an equivalent amount for doing the same job ($X1). But she -- as the owner -- would also get $Y1 for the ownership of the firm.That money is as unearned as the $Y she would get from her savings account.There is no big difference between "rent" and "normal profits". Both are unearned. It's only that "rent" includes an excess over the unearned normal profit.That much is plain and evident and indisputable.The only question is where do the goodies that the unearned income (whether $Y or $Y1) buys come from?The come from (1) nature and (2) labour. But that's another story.
Owners are "entitled" to profit and rent - because the law says so.
Magpie, I agree with the broad thrust of what you wrote, but am unconvinced on one point."There is no big difference between "rent" and "normal profits". Both are unearned. It's only that "rent" includes an excess over the unearned normal profit. That much is plain and evident and indisputable."But there is a big difference between "rent" and "normal profits", no? I mean it could be true that there is no "big difference" and that we're just seeing it the wrong way, but it isn't obvious to me that this is the case.The Marxist conception could be true (nature and labour), although if it is it has to be updated to take in a lot of things that Marx missed or barely touched upon before he died. But again this has to be shown. I'm not averse to it. The truth is the truth, at the end of the day, but it is just as likely or more likely to be untrue because, as far as I can see, no one has been able to adapt the theory to take in all the developments since the late 19th century. More likely, no one can be bothered because the great prophet was always right. As I said above, we know what doesn't work (nearly everything), we know what works rather well, and we have a very good idea of what could work extremely well although it naturally wouldn't solve every problem under the sun. Let's do the best we can. A guaranteed job and putting the likes of Goldman Sachs permanently out of business would be a good start.
Magpie, I read through your thought experiment and see what you're getting at. There's a lot of things you can do in our present society to be able to accumulate a lot just by having investments in savings accounts, stocks, IRAs, index funds and etc with what you take in from a job, and I do think about how there are even some politicians that claim to be against certain industries yet have holdings in those same industries they decry. One recent example was the criticism that Green Party candidate Jill Stein got for what she had in her investment portfolio. I'm pretty open to this conception of examining profits and rent in this manner, though John also has me thinking about how well to apply this analysis with all the historical developments we have had since then.
This is a pretty good statement of Econ 101 on profit.Ludwig von Mises,In a Free Market, No Profit is "Excessive"
Bob said...Owners are "entitled" to profit and rent - because the law says so.As my mate Brad W. says in his best Aussie: abso-fucking-lutely!All of this is done legally. In other words, the law allows this to happen; it could outlaw it, as well.By the way, it is, in fact, the law that makes some businesses legal and others illegal, too: think of the Prohibition and the current War on Drugs, or slavery. Which goes to show that the law is not written in stone.John said...But there is a big difference between "rent" and "normal profits", no? I mean it could be true that there is no "big difference" and that we're just seeing it the wrong way, but it isn't obvious to me that this is the case.There may be a big difference, but, frankly, I can't see it, John. What's the difference you see?Penguin pop said...having investments in savings accounts, stocks, IRAs, index funds and etc with what you take in from a jobYou are absolutely right: all those are ways to get money without having to work for it. But those are not the only ways. A capitalist, any capitalist (a banker, an industrialist, a big farmer or miner, a trader) as capitalist, doesn't have to work to make money out of his staff's effort. The modern and best incarnation of the capitalist is the shareholder: people who get money from a business because a paper says they are entitled.A capitalist may be a nice fellow, a good father, wonderful friend, and excellent weekend cook; he could be a serial killer. All of that is irrelevant to the fact he earns profits without working for them.He may even work (as Penguin mum did in my experiment): two different sources of income (work and ownership) for two different flows of income (wage/salaries and profits).
Take Steve Roth, from the Evonomics website, for instance.I don't know him personally. I have no reason to believe he is a bad bloke. For all I know, he isn't.His profile says he is a "serial entrepreneur", and he is clearly not a Marxist. He, however, finds the possibility of having the wage labour relationship outlawed distasteful:Are you allowed to make profits based on the sweat of those employees’ brows? Crucially, if not: is jail time the punishment for doing so?http://evonomics.com/democracy-capitalism-socialism-choose-three/.I don't blame him for being concerned and finding that outrageous. If I were in his shoes, I'd probably be equally concerned.But I'm not in his shoes. I suppose neither of you are. I'm one of those literally sweating so that people like him make a profit.
Here is Friedrich Nietzsche acknowledging that some people need to break their backs, to that others can have an easier life:“Slavery is of the essence of culture, a truth of course, which leaves no doubt as to the absolute value of existence. This truth is the vulture that gnaws at the liver of the Promethean promoter of culture. The misery of toiling men must still increase in order to make the production of the world of art possible to a small number of Olympian men. Here is to be found the source of that secret wrath nourished by Communists and Socialists of all times, and also by their feebler descendants, the white race of the 'Liberals', not only against the arts, but also against classical antiquity.” (Nietzsche, "The Greek State")That's what Marxists and "Marxian Sraffians" call the surplus.----------Here are the words of John C. Calhoun, once a Vice President of the US, saying these words in Congress in 1836:"It would be well for those interested to reflect whether there now exists, or ever has existed, a wealthy and civilized community in which one portion did not live on the labor of another; and whether the form in which slavery exists in the South is not but one modification of this universal condition … Let those who are interested remember that labor is the only source of wealth, and how small a portion of it, in all old and civilized countries, even the best governed, is left to those by whose labor wealth is created."
This why education, knowledge, technology, and innovation are key to freedom. Rising wages coupled with technological innovation result in substitution of capital for labor, providing more space for distributed leisure. The problem is with the highly asymmetrical distribution under capitalism.
@TomThe problem is with the highly asymmetrical distribution under capitalism.The distribution of anything has to be asymmetrical within capitalism: capitalism is based on having (1) people who have capital and (2) people who have only their ability to work.The latter (2) have to work for the former (1), so that the former (1) don't have to work.One can diminish that asymmetry and I'm all for it, but as long as there is an asymmetry, the above holds true.
From Steve Roth article linked by Magpie:If you run a record store or a plumbing business, are you allowed to hire employees for hourly wages?If he weren't allowed to use the wage system, then another option might be to offer them profit share or a commission. If he were running an auto dealership, he obviously wouldn't pay his sales staff a fixed wage.Ironic that he is in favor of democracy, except when it concerns property he owns. This is part of the ownership mentality - claiming privilege, wanting to dictate terms such as the wage contract - because that is what the owner believes is in THEIR best interest.
Magpie: "There may be a big difference, but, frankly, I can't see it, John. What's the difference you see?"My clumsily made point was that within the Marxist conception, as far as I understand it, was that there is a difference between the two, although both are considered exploitative. I would also add that one can make a theoretical argument, but it is the practical evidence that is what's required. The evidence - what we can measure - is not clear. If it is, I've not heard it, but to be honest I haven't really looked. However, more broadly, and outside the Marxist conception, one could argue that it isn't obviously the case that the two are on the whole synonymous. I may be misguided in saying this, but the argument you've made is not heard outside of Marxism. It may be right, but the case has to be made empirically, not stated theoretically. A lot of perfectly reasonably sounding theories have been proven to be wrong time and time again. Evidence must be shown that in practice there is very little difference. Economics isn't a science and these things can't be proven in the way the sciences treat proof, but we can provide enough evidence for an overwhelming case to be made. If this burden of evidence (not proof) can be met, then it's time to move to another socioeconomic system. We should then move the socioeconomics and the institutions as far as they can go within the misnomer that is called "capitalism", because no one knows what system to work towards and what would be effective. I can't remember who said that there are no blueprints for what society should look like. Humans are funny creatures, and human societies may be even odder still. That's why I sympathise with Tom when he says that what is really required is essentially an overhaul of human social consciousness. That would be helped along with an overhaul of social institutions, but the reverse is also the case. So the two have to move in tandem.
Perhaps this is related:https://en.wikipedia.org/wiki/Superprofit
Why ‘Know thyself’?If you have no idea what a human being is then you have no idea what a human being should do.The rest is imagination. Ever watched little kids playing; making stuff up. Then we ‘grow up’ and play with real dolls, planes and guns. Experts.Imagine instead (another little ‘mind workout’) what the world would look like through those eyes.My favourite one: imagine you go to the bathroom this morning, press the button and the whole universe disappears – including your body. There you are, just a consciousness, floating in some Infinite Void. Now, what do you want? I think you would want to know the Self – really fast? I don’t think the monetary system or geopolitics or blog comments would matter one little hoot. You would realise that Self - in nanoseconds.The rest you realise, is just a gigantic distraction (Ageless Wisdom 101).Then, we have to come back and live in the world. With all of the people hypnotised by the world; the endless chatter. But at least there is a point in reality, awake inside of us, from which to process, create, the play.$bazillions = bazillions problems. I would rather be me, than one of those eight men.
@John and Bob,Thanks for the comments and questions and sorry I didn't reply earlier. I thought that everybody had lost interest.I would also add that one can make a theoretical argument, but it is the practical evidence that is what's required. The evidence - what we can measure - is not clear. If it is, I've not heard it, but to be honest I haven't really looked.That's a good point.The basic Marxist claim is that profits in aggregate come from excess labour performed but unpaid.As you might imagine, this total or partial lack of payment may take infinitely many forms, some of them obvious, some of them not so obvious, some of them legal, some of them illegal.Just by sheer coincidence the Australian came today with this:The report by the Commonwealth Department of Employment is the first to look at exactly how common unpaid work experience (UWE) has become in Australia. It found 58 per cent of 18 to 29-year-olds had done UWE in the past five years. It also found that internships are not only for young people - 26 per cent of 30 to 64-year-olds had done UWE in this period.That's an official report by the Commonwealth (i.e. Federal) Department of Employment: equivalent to a British ministry or an American department.That would be a legal and obvious lack of payment.During the last year, there were several obvious but illegal high-profile cases of non/underpayment reported by the Australian media. I touch two of them in posts like these:Super Pay Scam?http://aussiemagpie.blogspot.com.au/2016/12/super-pay-scam.htmlRevealed: How 7-Eleven is Ripping Off its Workers.http://aussiemagpie.blogspot.com.au/2015/09/revealed-how-7-eleven-is-ripping-off.html(I have written more about 7-Eleven, but that was the first publication of the news. You can search Google News with the search string "7-Eleven Australia" for more and more recent results. And there is even a video where you literally can see the worker handing back the money to her boss).As you'll understand, it's difficult to come up with precise official statistics about this kind of thing, even if the underpayment is obvious: in many cases it involves breaking the law. Even when it doesn't, no employer is eager to publicise that information.There are, however, cases that are both not obvious and legal. In fact, this is more generalised than the cases above. This is what Marxists refer particularly with "exploitation".It's difficult, but not impossible, to find data corroborating that. This chart, in my opinion, offers good evidencehttps://anticap.files.wordpress.com/2016/11/12065.pngObserve that productivity (output per hour worked) increased 62.7% for the US economy since 1980 (that's the red line). Out of the six categories of workers, the one that experienced the highest increase in hourly wage was white women (the blue line): 30.2%. All other categories experienced less growth and even decreases in hourly wages.Who got the excess output produced by white women but not covered by hourly wage increase and therefore unpaid (i.e. 62.7% - 30.2%)?
What follows is anecdotal and we all know that anecdotal evidence doesn't, strictly speaking, count. So, you are free to take it for what it is worth.Some 18-20 years ago I worked for a small tradesman. His business was his van, his gear, and yours truly.He would quote a job, with items like materials, disposal of garbage, and such. And a number of hours of labour (to be performed by both of us).Because we were always together, we became friendly and even after all these years, we remain friends. I often saw him preparing the quotes. He would charge a small "markup". Never more than 10% over the overall cost of the job.The problem was the tender process. Those quotes were used to bid for jobs and the market for that kind of trade was difficult: there was plenty competition and the markup was the first to suffer (POOF).I asked him why he remained in the market? He was a candid fellow (I'm not trying to sound reasonable when I say that a capitalist doesn't need to be a bastard).He, for one, had no choice. That trade was what he knew. And there was a way of making a profit.Believe it or not, he told me that the secret was to finish the work faster: he would quote 10 hours because that was what everybody else would quote, but he would try to finish the job in less time (say, 8 hours). His profits had to come from saving from wages.You may ask why did I accept that? Well, because as bosses go, he wasn't bad. He always took care of safety and health concerns, never forced me to do dangerous or unhealthy things. Always paid on time and correctly. If I tried with other bosses (as I eventually did), I would have faced the same thing and I may be not so lucky.That's the day-to-day difference between normal profits and rent.I wrote, years ago, a couple of posts on this:Land, Rent and Wages (II)http://aussiemagpie.blogspot.com.au/2011/01/land-rent-and-wages-ii_11.htmlLand, Rent and Wages (III)http://aussiemagpie.blogspot.com.au/2011/01/land-rent-and-wages-iii.html
Oops. The link for today's story (it contains the link to the Department of Employment report):http://www.abc.net.au/triplej/programs/hack/unpaid-internship-trend-may-penalise-poorer-job-seekers/8188976
Post a Comment