A "Wild and Dangerous" Scheme! — Sandwichman

I was hunting for the exact location of "Prince's Tavern" in Manchester in 1833 when I stumbled upon an Economist article from March 30, 1844 addressing the "practical consequences" of reducing the length of the factory working day from 12 hours to 10. I am always fascinating by the profound and enduring hostility of a faction of employers -- amplified by their mouthpieces in academia and the press -- to the reduction of working time. I'm amazed how often their bile and zeal leads them to compound the error of biased, unfounded assumptions with boneheaded accounting mistakes.

Sound like criticism of MMT today.

Econospeak
A "Wild and Dangerous" Scheme!

Sandwichman

Hegel [and Marx] on labor and freedom — Daniel Little

So does labor fulfill freedom or create alienation? Likewise, does technology emancipate and fulfill us, or does it enthrall and disempower us? Marx's answer to the first question is that it does both, depending on the social relations within which it is defined, managed, and controlled.

It would seem that we can answer the second question for ourselves, in much the same terms. Technology both extends freedom and constricts it....

Adding to what David Little says in this post, Hegel and Marx were chiefly interested in the expansion of human freedom, although they provided different analyses that appear to be at odds. Marx was writing in reaction to Hegel but also operating strongly under Hegel's influence, adopting his dialectical method, for example.

Daniel Little draws a connection between them through Alexandre Kojève's commentary on Hegel's Phenomenology, specifically the master-slave passage that he regarded as highly influential on Marx. When I was studying Hegel in grad school, I recall the professor strongly emphasizing this. We were expected to know that passage from the Phenomenology in detail.

Hegel, following the ancient Greeks, distinguished freedom from constraint, freedom to chose, and freedom for self-determination. Hegel emphasized that genuine freedom requires only freedom from constraint and freedom to chose but also freedom for self-determination. Human's share "natural freedom" — freedom from and freedom to — with other animals. This is the "law" of the jungle as set forth by Hobbes. The human challenge is to reach ethical and political freedom and this requires the application of rationality. This occurs in the liberal state.  (This is obviously a thumbnail sketch that needs elaboration. Here is short article on this. Hegel's view is still quite relevant to contemporary liberal societies.)

Hegel held that these conditions are met in the rational state, ideally in a state governed by the rule of law based on due deliberation. Self-determination occurs in a state in which those governed by the rule of law chose the laws in contrast to a state governed by dictate. Hegel is thinking here of the Greek polis or "city-state," and more specifically of Athens, where citizens voted after debating the issues publicly in the agora.

A central question in Greek political thought was, what does it mean to be a good person in a good society. Greeks considered themselves not only individuals but also citizens. Or better, they could not consider themselves other than as citizens. This distinguished the civilized as those that lived in city states from those that did not – the barbarians.

While Greeks provided the foundation for the subsequent Western intellectual tradition, a considerable superstructure was erected on this foundation based on may influences whose interaction were aspects of a historical dialectic, which Hegel attempted to trace. (Incidentally, the American founding fathers also read the Greeks and Romans on politics, and they were familiar with the great orators and statesmen as well as thinkers. The American founding documents and the debates that led up to their writing and adoption show this influence.)

For the Greeks it was not a great challenge between a person's will as individual and as a citizen. This was not so in modern times. Then the challenge became one of reconciling personal liberty with community. The motto of the French revolutionaries was liberty, egality and fraternity, where egality means absence of privilege, and fraternity means solidarity in community. This is still a driving force in the historical dialectic and far from resolved. Hegel did not think that the Prussian state was "the end of history," as many American exceptionalists do of the US. He saw the Prussian state only as the epitome of the time, to be transcended as the concept of freedom expanded through the historical dialectic and became objectified in ongoing historical moments.

Marx rejected Hegel's view that the individual wills of the members of a society merge, so to speak, into the collective will of the society that is expressed in the rational state. Marx viewed Hegel's rational state being the locus of a people's ethical and political life as inherently bourgeois.

In this sense, Hegel was a liberal in the broad sense, albeit a German one that presaged the later German adoption of ordoliberalism, while Marx was a left libertarian.

While Hegel was a "liberal" in the broad sense of the Enlightenment, he would likely be regarded as conservative like Edmund Burke. But both Hegel and Burke sought to synthesize and harmonize liberalism and conservatism. As did John Maynard Keynes. Conversely, Marx rejected the assumption that all are equal as persons before the law but are so varied as individuals that only the most qualified should govern as essentially a bourgeois rationale for the continued rule of a few on the shaky ground of "rationality."

But while the analyses differed, the objective of expanding human freedom was essentially the same as the "Zeitgeist." This remains true in the West, but now it is beginning to be questioned as liberalism and traditionalism clash on the world stage.

Marx presents somewhat of a dilemma that needs to be mentioned. On one hand, he agreed with Hegel that the historical dialectic was foundational and events are dependent on the timing owing to changing conditions. On the other hand, he also assumed that this process could be commanded by working actively on changing mode of production that he viewed as foundational. Since this is a historical process, "only time will tell."

But at least we can say that Marx apparently got the timing wrong in that he looked for this to happen in the capitalist (industrialized) countries in the near future. That did not happen. On the other hand, the march of time was accompanied in the expansion of freedom, the remnants of the feudal era of aristocracies were all but eradicated in the West post-WWI.

In my view, Hegel and Marx are not necessarily far apart in terms of the ideal. They both viewed the direction of history as involving the expansion of freedom, with the contradiction between individual will and social requirements resolved by expansion of collective consciousness toward altruism as expressed in the golden rule that Kant made rational in his categorical imperative to act on the principle of universal reciprocity. This has a scientific basis now as research shows that reciprocity is an evolutionary trait and that human morality is a rational form of it.

Recurring to David Little's post, the labor-technology dichotomy is directly relevant to the degree that increased productivity and technological innovation make greater distributed leisure possible, and leisure is foundational for the expansion of freedom as the uniting of freedom from, freedom to, and freedom for. The future of humankind is bright if we can get beyond the challenges emerging with the opportunities. This will require concerted action and coordination in adapting to swiftly changing conditions.

Understanding Society
Hegel [and Marx]  on labor and freedomDaniel Little | Chancellor of the University of Michigan-Dearborn, Professor of Philosophy at UM-Dearborn and Professor of Sociology at UM-Ann Arbor

Thomas Piketty — Re-thinking the capital code

All these studies have one thing in common: they demonstrate that reflection on power relationships and property, which for a moment was thought to have been annihilated after the Soviet disaster, in reality is only beginning. Europe and France must take their rightful place.

The magic work — "power."

 Le blog de Thomas Piketty — English
Re-thinking the capital code

Thomas Piketty | Professor at EHESS and at the Paris School of Economics

David F. Ruccio — Why human capital is not capital

Neoclassical economists folded land into capital to obscure land rent. Now the push is on to fold labor into capital to obscure expropriation and exploitation as conditions in the creation and distribution of surplus value across the traditional factors or production — capital, land and labor.

Occasional Links & Commentary
Why human capital is not capital
David F. Ruccio | Professor of Economics, University of Notre Dame

Neil Wilson — Labour Hours and Labour Services

Neil posts an analysis of the job guarantee. Must-read.

Employment is about buying the former and generating the latter. How does that relate to the Job Guarantee?

Modern Money Matters
Labour Hours and Labour Services
Neil Wilson

Robert Paul Wolff — The Connection Between Expropriation and Exploitations, Part Two

… “Clearly,” I said to myself, “workers in a capitalist economy are getting the short end of the stick, but Marx’s explanation, invoking the distinction between labor and labor-power and all the rest, is wrong. So what is the explanation? What is more, how can we capture in our explanation the central feature of capitalism to which Marx devotes so much time in the opening chapters of Capital, namely its mystification of what is going on?”

So I went back to Marx’s text and looked again. And there it was, as plain as day. The workers in a capitalist economy get only a portion of what they produce by their skill and labor, because by a long historical process of expropriation, they have been denied ownership of their own means of production – of their tools, of their machinery, even of their skills – until all they have left is their labor, which if they wish to live they are compelled to sell in the marketplace as though it were a commodity whose natural price is the cost of its reproduction. Why don’t farmers get to eat all the food they grow, after setting aside what is needed for seed? Because they do not own the land and the farm tools. Why don’t factory workers get to wear the clothing they make or to sell it to buy the food they need? Because they do not own the wool or the cotton or the thread or the machinery with which they turn these materials into clothing.

How, I asked, can we capture this situation in a set of formal equations that explains exactly how the workers are getting screwed and simultaneously explains why in a capitalist economy it seems as though the workers are getting a fair return for their labor? Here is what I came up with:

The Philosopher's Stone
The Connection Between Expropriation and Exploitations, Part Two
Robert Paul Wolff | Professor Emeritus, University of Massachusetts Amherst

Bill Mitchell — Towards a progressive concept of efficiency – Part 1

Before I present the second part of my discussion about the relevance of re-nationalisation to what I would call a truly progressive policy agenda, we have to take a step backward. I note after the first part – Brexit signals that a new policy paradigm is required including re-nationalisation – there were a few comments posted (and many more E-mails received – apparently readers are happier berating me personally rather than putting their ideas out in the public domain) that I was advocating a return to the ‘bad’ old days of nationalisation where cronyism, inefficiency and trade union bastardry were the norm. The obvious next point was – how can I claim that is progressive and part of the future. In this two part blog (the second part will come tomorrow), I offer a framework for assessing these claims. Today’s blog foscuses on the neo-liberal vision of efficiency and reveals how narrow and biased towards private profit it is. In Part 2 (tomorrow) I will present the progressive vision and how it conditions the way we think of efficiency. Once we break out of the neo-liberal constructs and refocus our attention on Society rather than the individual then the way we appraise policy options also changes – it becomes enriched with new possibilities and understandings. We enter the progressive world and leave behind the austerity nightmare that neo-liberalism has created. We are then able to see how our old conceptions of nationalised industries or public sector job creation are tainted with these neo-liberal biases. And we are then able to see how policy initiatives that invoke scorn from the conservatives and many so-called modern progressives (obsessed with post modern constructs) have a vital role to play in a truly progressive manifesto. I split the discussion into two parts because the blogs are too long as they are.

This blog is part of Part 3 of next book (with co-author, Italian journalist Thomas Fazi), which is nearing completion. Part 3 will present what we are calling a ‘Progressive Manifesto’ to guide policy design and policy choices for governments that are struggling to see a way beyond the neo-liberal macroeconomics which we posit blights any hope of mounting a progressive agenda.

We also hope that the ‘Manifesto’ will empower community groups by demonstrating that the TINA mantra, where these alleged goals of the amorphous global financial markets are prioritised over real goals like full employment, renewable energy and revitalised manufacturing sectors is bereft and a range of policy options, now taboo in this neo-liberal world, are available.…

Bill Mitchell – billy blog
Towards a progressive concept of efficiency – Part 1
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

V. Ramanan — Kalecki And Keynes On Wages

Some good quotes.

The Case for Concerted Action
Kalecki And Keynes On Wages
V. Ramanan

Carlos Joly — Why We Should Stop Talking About ‘Human Capital’

Capital goods depreciates with age and use. Financial capital is eroded by inflation and is subject to risk. 

Human learning and expertise increase with age and experience.

Social Europe
Why We Should Stop Talking About ‘Human Capital’
Carlos Joly

Yves Smith — Martin Wolf on the Low Labor Participation as the Result of the Crapification of Jobs

The underlying pathology is not hard to describe: employers (enabled by the Fed which has since the 1980s been only too wiling to provide for higher levels of unemployment so as to curb labor bargaining power to keep inflation tame) have succeeded in eliminating labor bargaining power. That program has been aided and abetted by the popularization of libertarian ideologies, which encourage many to see themselves as more in charge of their destiny than they are and thus see success and failure as the result of talent and work, as opposed to circumstance.…

More on precarity and the Anne Case and Angus Deaton study, too.

Naked Capitalism
Martin Wolf on the Low Labor Participation as the Result of the Crapification of Jobs
Yves Smith

Michael Hudson — The Paradox of Financialized Industrialization

Congratulate Michael Hudson, Distinguished Research Professor of Economics at the University of Missouri, Kansas City, on his new appointment as Guest Professor at Peking University.

These remarks were made at the World Congress on Marxism, 2015, at the School of Marxism, Peking University, October 10, 2015. The presentation was part of a debate with Bertell Ollman (NYU). I was honored to be made a permanent Guest Professor at China’s most prestigious university.

What follows is a summary of Marx's contribution to understanding the present global crisis in terms of finance capital, which Marx called "fictitious capital," and industrial capital, with workers having largely been successfully suppressed by both preventing them from pursuing the interest of the class or tricking them into not doing so. What he has been saying for a long time summarized in terms of the present in relation to China and the West.

Michael Hudson Blog
The Paradox of Financialized IndustrializationMichael Hudson | President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City, and Guest Professor at Peking University

Claire Goldstene — The Rise of the Underground Economy

This is not the underground economy. It is the under the table economy. Huge difference.

Inequality.org
The Rise of the Underground Economy
Claire Goldstene

Merijn Knibbe — Bob Solow, Matt Rognlie, Paul Romer, Mason Gaffney, the economic statisticians and rent incomes.

Important. How and why economic rent is back on the table after being excluded by neoclassical economics in reaction to Henry George.

It's short. Read the whole thing. This is potentially a game-changer, as Michael Hudson has been saying. 

Once rent comes into the picture, it becomes clear how the game is rigged by power, since power is required to extract rent. 

If one wants to continue claiming with neoclassical economists that economics is based on laws of nature, then it is necessary to include laws of power in the equations.

Real-World Economics Review Blog
Bob Solow, Matt Rognlie, Paul Romer, Mason Gaffney, the economic statisticians and rent incomes.
Merijn Knibbe

Randy Wray — Occupy Germany!

Germany is a short train ride away for 300 million EU citizens. Borders are open. Occupy in the name of the 99%. Stop austerity NOW. 

Go in peace. Obey all laws. Support the German Labor Unions. Do not leave until the Neoliberals are thrown out. 

Latest news from the front....

Economonitor — Great Leap Forward
Occupy Germany!

L. Randall Wray | Professor of Economics, University of Missouri at Kansas City

The neoliberals gloat over Occupy Hong Kong, but ignore Occupy Wall Street and other such protests against neoliberalism. Well, now it's neoliberal Germany's turn.

Sandwichman — What In Hell Is Capital?

The question is, whence and how does capital arise to become separate from labor? The answer of Marx is that it arises from a monetary economy that enables M - C - M', that is, using existing money to make money by purchasing capital goods and the necessary inputs including labor offered for rent by those free to do so, that is those who are neither slaves nor land-bound serfs that toil for subsistence from their own produce for the landowners' benefit as rent. That is to say, capitalism has certain preconditions that make it possible.

The human capital debate that is now taking place on the blogs is based on Gary Becker's view that capital and labor are actually not separate. The other side is based on refuting this view. At bottom the issue is over economic rents.

Econospeak
What In Hell Is Capital?
Sandwichman

Robert Paul Wolff — Human Capital

Enter Gary Becker, who resurrected the concept of "human capital" to take account not of the worker's body or her food and clothing but rather to incorporate into Economic Theory the important fact that in a modern capitalist economy, some categories of workers regularly earn wages significantly higher than the standard pay for semi-skilled machine operatives, as a consequence of their educational credentials and the skills supposedly thereby represented. These workers, it is suggested, have invested in themselves by holding themselves off the labor market while they acquire further education, often at considerable expense, thereby accumulating "human capital." . They are thus like business owners who use a portion of their profits [or take loans] to purchase more sophisticated machinery, the cost of which, amortized over the life of the machines, is a good deal less than the market value of the additional product churned out by the improved capital goods. 

This modern version of the old notion of human capital allows economists to blame the low wages of unskilled workers on their own improvident failure to invest rather than consume, an interpretation of poverty that is quite comforting to those sitting atop piles of accumulated capital. 

But the analytical concept of human capital has other interesting uses in our attempts to understand modern capitalism, which exhibits a segmented and highly pyramidal wage structure. It can, for example, be deployed to make sense of the notion of relative exploitation. High wage workers can be understood as both exploited by their employers and exploiting lower wage workers, a construal that seems to comport with our intuitive sense that corporate executives, lawyers, professors, and such like high wage employees occupy a social position more akin to the owners of capital than to hourly wage earners at the bottom of the income pyramid.

The Philosopher's Stone

Human Capital

Robert Paul Wolff | American political philosopher[ and professor emeritus at the University of Massachusetts Amherst

Max Sawicky — Noah and Nick, Too

Follow up from Max Sawicky that makes some further good points what labor should be treated as labor and not capital.

It's a category mistake aka category error, and it's a logical fallacy.

A category mistake, or category error, is a semantic or ontological error in which things belonging to a particular category are presented as if they belong to a different category,[1] or, alternatively, a property is ascribed to a thing that could not possibly have that property. An example is the metaphor "time crawled", which if taken literally is not just false but a category mistake. To show that a category mistake has been committed one must typically show that once the phenomenon in question is properly understood, it becomes clear that the claim being made about it could not possibly be true. — Wikipedia 

Not only is "human capital" a category error, so is the economic view it is based on. And this is the fundamental problem with conventional economics. There is no problem in choosing any modeling method as along as it contributes to the task one is undertaking, to think about some issue heuristically but precisely, or even just for fun. But that is not the use to which conventional economic models are put. They are used for policy formulation, or at least recommend for such use. Moreover, they are based on a world view that their advocates advance. The model is taken to be not only a simplified model of economics relationship but also a key piece in an ideology that expresses as world view. 

This is a jump from economic modeling to philosophy that is based on huge unacknowledged assumptions about ontology, epistemology, ethics, and social and political philosophy, as well as ignoring in put from relevant disciplines such as psychology and cognitive science, anthropology, sociology and history, all of which deal more critically with what economists tend to assume uncritically. Worse, The economic approach is used to plead for a point of view being representative of reality that favors the interests of a privileged social, political and economic class.

MaxSpeak
Noah and Nick, Too

Max Sawicky

Max Sawicky — For Noah and Nick

Max Sawicky rejects the need for and appropriateness of "human capital."

The traditional factors have traditionally been decompose as needed into types of capital, and types and uses of land such as agricultural, resource extraction, commercial and residential, as well as types and grades of labor, with the distinction of salaried versus wage, management versus worker, white collar versus blue collar, skilled versus skilled. The supposed need to introduce a new distinction or to fold land into capital are an unnecessary and confusing aggregation that clouds modeling instead of clarifying it.

Do firms use the concept of human capital? For sure. It's a buzz word. Management attempts to produce metrics on the dollar value employees produce over time, which is the ROI with respect to the cost of employing them. But they are still employees even if the firm seeks to capitalize them for management purposes, e.g., retention and promotion and compensation. They are still part of labor and not capital goods. Labor is not fixed investment and it is not depreciated. In fact, unlike capital, labor tends to appreciate over time rather than depreciate, especially in modern environments that don't wear down workers, although some business models are still based on this, especially for foreign labor in developing countries where protections are slight to non-existent.

MaxSpeak
For Noah and Nick

Max Sawicky

Matthew Martin — Is human capital capital?

More thoughts on human capital.

Of course, human capital is not capital. If it were, we'd just call it capital and lump it in with the rest--the purpose of the term "human capital" is to distinguish it from actual capital.

So, if it's not capital, what is human capital? At most, I'd say it's a modeling insight. The vague notion of "skills" and knowledge that it stands in for are very real, but when it comes to modelling we are really just pretending it's a kind of capital stock. The key insight was in recognizing that skills and knowledge share a few of the same kinds of intertemporal dynamics as capital, and that we can obtain accurate predictions by modeling them as such, even though they differ in lots other ways.…

Separating Hyperplanes — A blog between the spheres of Economic Theory and Policy Analysis
Is human capital capital?

Matthew Martin | health economist and programmer for the Cancer and Blood Diseases Institute at Cincinnati Children’s Hospital Medical Center

Noah Smith — Is human capital really capital?

Depends on context and modeling choices.

For some applications, actually, you can actually represent anything as capital - just calculate its expected present discounted value, and voila, you're done.

This is the financial aspect of capital rather than capital as a factor of production. It's sort of like the difference between firm investment as a type of expenditure versus financial investment as a form of saving.

Using the same sign for different symbols is an ongoing problem in economics. See, for instance, the running controversy over saving and investment. This is the second capital controversy and the first one is not agreed upon yet in the profession.

Bonkers for a "science." If you can't even get your definitions specified, what hope is there for clarity and consistency? No wonder economics is in such a mess if anything can mean whatever one wants it to mean.

Noahpinion
Is human capital really capital?
Noah Smith | Assistant Professor of Finance, Stony Brook University