Ship of Fools: Tea, scones and weapons: Economic morality

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Posted by lilBuddha (# 14333) on :

From a tangent in the Chemical Weapons thread, and from whence this title was stolen, the concept of economic morality.
Where does one's rights to create revenue supersede another's right to live, be healthy, succeed, etc.?
Weapons manufacture was brought up on that thread.

Weapons kill but also defend. Neutral?

Coal is the dirtiest form of energy on the planet, people voted in Trump to defend its continuance. It cannot be instantly replaced, but not actively reducing it does great damage. Mixed?

Tobacco. Really, these days, are you not selling your soul for a pay-cheque?

Many more things have a less obvious cost and some are complex, so evaluation isn't always easy.

But where is, or should be, the line?

Posted by Leorning Cniht (# 17564) on :

quote:
Originally posted by lilBuddha:

Tobacco. Really, these days, are you not selling your soul for a pay-cheque?

Not sure about that. Tobacco is addictive, and has well-known health consequences, but is also apparently enjoyable.

If somebody wishes to choose the enjoyment, and accept the health consequences, must I tell him he's wrong? Yes, it's more complicated than that, and there are real questions about how much the choice is a free one when we're talking about an addictive substance, but still.

Posted by mr cheesy (# 3330) on :

I was contemplating this earlier today whilst thinking about Unilever, who have announced that they're dropping their margarine brands.

Unilever was set up in the 1920s as a joint venture between Lever Brothers and a Norwegian company and one of their main bulk products was Whale Oil, which they used to make margarine.

And of course the massive trade in Whale Oil led to the decimation of the whales and near extinction.

Most people today, I'd argue, would puzzle over the idea of catching whales to make margarine.

The problem is that the capitalist system is screwed. In order for profits to be made, someone or something has to be exploited. There is no way to do it without that, so even if one can see some benefits from it (eg someone is earning a living, margarine is available on the shelves at a price that people can afford), at a deeper level there is always something darker.

Posted by Ricardus (# 8757) on :

quote:
Originally posted by mr cheesy:

The problem is that the capitalist system is screwed. In order for profits to be made, someone or something has to be exploited. There is no way to do it without that, so even if one can see some benefits from it (eg someone is earning a living, margarine is available on the shelves at a price that people can afford), at a deeper level there is always something darker.

Why do you say this?

Are you referring to surplus value? To my mind surplus value is not inherently exploitative, it is the worker trading the possibility of higher pay in exchange for the security of a fixed wage. It is similar to a farmer selling pork futures; on average one would expect the farmer to make a loss by doing this, and yet they still consider it worthwhile for the security it brings.

I agree that in practice corporations tend to be more powerful than their employees, which makes it likely that employees will be exploited to some extent, but that is a consequence of the imbalance of power, rather than of the existence of profit.

Posted by Pigwidgeon (# 10192) on :

quote:
Originally posted by Leorning Cniht:
Not sure about that. Tobacco is addictive, and has well-known health consequences, but is also apparently enjoyable.

Tobacco affects those anywhere near the smoker as well. If we're sharing a home or office* you're endangering my health. Even if you're not smoking directly near me, if you are a smoker I don't want you sitting next to me on a plane or in a theater, etc.

(*I don't know if any workplaces allow smoking these days, but in the past I have been forced to breathe co-workers' second-hand smoke.)

Posted by Crœsos (# 238) on :

quote:
Originally posted by lilBuddha:
Coal is the dirtiest form of energy on the planet, people voted in Trump to defend its continuance.

[pedantry] Technically the electoral college voted in Trump. The American people voted for Hillary Clinton. [/pedantry]

Posted by lilBuddha (# 14333) on :

quote:
Originally posted by Leorning Cniht:

quote:
Originally posted by lilBuddha:

Tobacco. Really, these days, are you not selling your soul for a pay-cheque?
If somebody wishes to choose the enjoyment, and accept the health consequences, must I tell him he's wrong?

I am not talking about the user, but the manufacturers of tobacco products and their employees.

Posted by lilBuddha (# 14333) on :

quote:
Originally posted by Crœsos:

quote:
Originally posted by lilBuddha:
Coal is the dirtiest form of energy on the planet, people voted in Trump to defend its continuance.
[pedantry] Technically the electoral college voted in Trump. The American people voted for Hillary Clinton. [/pedantry]

My understanding is that the people in the coal mining areas, and those with sympathy for them, cast their ballots for Trump. This helped him swing states that would have more traditionally gone Democrat.

Posted by mousethief (# 953) on :

quote:
Originally posted by lilBuddha:
My understanding is that the people in the coal mining areas, and those with sympathy for them, cast their ballots for Trump. This helped him swing states that would have more traditionally gone Democrat.

Hmm. I don't believe the coal mining states have traditionally gone Democrat, at least since the Southern Strategy.

Posted by Enoch (# 14322) on :

quote:
Originally posted by Crœsos:
[pedantry] Technically the electoral college voted in Trump. The American people voted for Hillary Clinton. [/pedantry]

That's not pedantry. It's an important point. Trump has become president, but he doesn't have a popular mandate to rule. This should be repeated on every possible occasion even if people get sick of hearing it.

Posted by Boogie (# 13538) on :

Why can't all companies be not-for-profit?

Wages yes, profits no.

It seems to make perfect sense to me.

Posted by lilBuddha (# 14333) on :

quote:
Originally posted by mousethief:

quote:
Originally posted by lilBuddha:
My understanding is that the people in the coal mining areas, and those with sympathy for them, cast their ballots for Trump. This helped him swing states that would have more traditionally gone Democrat.
Hmm. I don't believe the coal mining states have traditionally gone Democrat, at least since the Southern Strategy.

Illinois and Pennsylvania are southern? Wyoming isn't in the South, but IIRC, is still Republican though. I did say with sympathy for meaning keeping jobs.

Posted by mousethief (# 953) on :

The Southern Strategy didn't just affect southern states. Don't be fooled by the name. I am not familiar with the coal mining areas of PA (roughly east central PA) so it's harder to say. But most of southern Illinois and Indiana and Ohio are effectively "South" in all but latitude.

Posted by Snags (# 15351) on :

quote:
Originally posted by Boogie:
Why can't all companies be not-for-profit?

Wages yes, profits no.

It seems to make perfect sense to me.

It gets a bit complex, as profit != money trousered by fat cats, necessarily. In some (many? most?) cases a lot of post-tax profit will be retained and re-invested to keep the business going, particularly in R&D heavy sectors, or in long term projects etc.

Posted by lilBuddha (# 14333) on :

quote:
Originally posted by mousethief:
The Southern Strategy didn't just affect southern states. Don't be fooled by the name. I am not familiar with the coal mining areas of PA (roughly east central PA) so it's harder to say. But most of southern Illinois and Indiana and Ohio are effectively "South" in all but latitude.

OK, perhaps I got that bit wrong. I do seem to rennet that states which would typically vote Dem voted Rep. So throwing away the voting commentary, coal is still a problematic industry, ethically speaking.

quote:
Originally posted by Snags:

quote:
Originally posted by Boogie:
Why can't all companies be not-for-profit?

Wages yes, profits no.

It seems to make perfect sense to me.
It gets a bit complex, as profit != money trousered by fat cats, necessarily. In some (many? most?) cases a lot of post-tax profit will be retained and re-invested to keep the business going, particularly in R&D heavy sectors, or in long term projects etc.

This is an interesting tangent and I hope I'm not dooming my own topic by commenting on it.
Not-for-profits are a tax designation, not an ethical one. A not-for-profit may still encompass most or all the negative traits associated with for profits.

Posted by Brenda Clough (# 18061) on :

In a very small way, I am a business owner. I own a house, a second one in addition to the one I actually live in. It's about half a mile from my residence, and I rent it out.

It was a considerable gamble for me to purchase this house (a long story, too) and to not be able to profit from it would be disturbing to the larger economy of my family. A large investment has to be put into the purchase of a house; the money I used could have been in theory used for other things. I made a deliberate decision to invest it here rather than in the stock market or in taking a vacation to France. I doubt that it has yet paid back my investment completely, but there is hope it will do so in my lifetime. More importantly, it will pay a small but steady sum until I die, entirely separate from my savings and Social Security (which the current US administration may gut just when I need it).

If there were -no- possibility of return for my investment here I would certainly have done other things with it.

Posted by lilBuddha (# 14333) on :

Mayhap I phrased my OP poorly, if so, I apologise.
This thread isn't about the evils of capitalism.
It was intended to be about those business that by their nature cause harm, all or in major part.

[ 07. April 2017, 21:47: Message edited by: lilBuddha ]

Posted by no prophet's flag is set so... (# 15560) on :

quote:
Originally posted by Boogie:
Why can't all companies be not-for-profit?

Wages yes, profits no.

It seems to make perfect sense to me.

This is an interesting question. Which I would like to bend just a little.

My family is member of 3 co-ops. One is a grocery, which also sells auto fuels, where they have 6 local stores and work with a consortium of other co-ops for distribution (Federated Co-op). The second runs grocery, gas stations, home building supply (like a Home Depot), and a general hardware; they use the same distrib network as the first, but as a co-op, they are locally owned by members. The third sells clothing and sporting goods mostly.

What they do is try to project revenue, ensure there are decent and good jobs for workers, and when there is a surplus, they give it back to the members (you get a cheque in the mail). It works pretty well. The slogan is "we all own the co-op". Co-ops are the largest grocery retailer in Saskatchewan.

The problems that not for profits run into is that they are often not business-like enough to compete in the mixed economies we have. They go under. We saw this with a couple of grocery outlets which tried the model. You cannot have an ideological board running a business, even if the aim is not profit.

FWIW, we also have no private auto insurance IN Sasktchewan, no private electric companies, no natural gas, water and landline telephones. These are all citizen-owned as Crown Corporations. Such that any profits are turned back into the provincial budget, reducing taxes, funding infrastructure and funding things citizens want. Crown Corps also own the largest cellphone network (about 1/3 cheaper than other provinces), cable TV, DSL internet, home security alarms. Again, not 'not for profit' but surplus isn't going to some rich people elsewhere. Some companies from away do try to compete, but they generally cannot provide the level of service at the same price because they are looking to profit more. Small business is the largest employer in the province, with favourable tax treatment so as to encourage it.

The economic conservatism of the last decades have challenged the Saskatchewan ownership models for businesses and services. So far so good. If you want to have some fun, read The Regina Manifesto. The political party which wrote it ran Saskatchewan for most of the the 20th century, and changed it's name to the NDP (New Democratic Party).

Posted by Fëanor (# 14514) on :

quote:
Originally posted by Ricardus:
To my mind surplus value is not inherently exploitative, it is the worker trading the possibility of higher pay in exchange for the security of a fixed wage.

But let's not forget that Capitalism only works because we're *not* talking about a worker trading a variable income of between 120% and 180% of a living wage for a steady 150% -- this would meet the criteria of "not inherently exploitative". Rather, the worker's choice is between taking the "best" offer for their labor (which in all but a few industries is considerably less than the value of said labor), or destitution. Sell your labor or starve is the very definition of exploitative.

quote:
Originally posted by lilBuddha:
Mayhap I phrased my OP poorly, if so, I apologise.
This thread isn't about the evils of capitalism.
It was intended to be about those business that by their nature cause harm, all or in major part.

But, because of the evils of capitalism, it is the nature of *all* businesses to cause harm. Or this a less direct way of saying "Marxists not welcome, please move along"?

Now to address the points in your OP: what is this "right to create revenue," and who has it? You speak of complexity, but it seems to me that things get a lot simpler if one treats people's rights to life, health, etc as actual *rights* inherent to their humanity, rather than as code for "these are things you can have if we deem you a productive member of society". For example, the question of how to move beyond coal is made much simpler if thousands of people's livelihoods were guaranteed independent of their ability/opportunity to work in a mine.

Also, why should any sort of moral line be different just because "business" is involved? I mean, just because forming a corporation limits one's civil liability doesn't mean that it limits one's moral liability.

Posted by lilBuddha (# 14333) on :

quote:
Originally posted by Fëanor:

But, because of the evils of capitalism, it is the nature of *all* businesses to cause harm.

Inaccurate. Because of the nature of people, it is difficult, if not impossible, for a capitalistic society to treat all its citizens fairly. It does not follow, however, that all who participate are evil.

quote:

Or this a less direct way of saying "Marxists not welcome, please move along"?

We do not live in a communist society, so changing this is a different subject.
BTW, communism has proven to be exploitive and detrimental to its people in every instance it has occurred. The best it has managed is that nearly everyone suffers the same.

Posted by Fëanor (# 14514) on :

quote:
Originally posted by lilBuddha:
Inaccurate. Because of the nature of people, it is difficult, if not impossible, for a capitalistic society to treat all its citizens fairly. It does not follow, however, that all who participate are evil.

But you're not addressing what I actually said: "It is the nature of all businesses to cause harm". ITTWACW and all that, but we don't need to go as far as Marx to tell us that evil is inescapable. And I do love that here you're saying capitalism isn't perfect because of "human nature"...

quote:

We do not live in a communist society, so changing this is a different subject.
BTW, communism has proven to be exploitive and detrimental to its people in every instance it has occurred. The best it has managed is that nearly everyone suffers the same.

...But here, it's the system itself that is to blame. Double-standard much?

Posted by Russ (# 120) on :

quote:
Originally posted by lilBuddha:

Where does one's rights to create revenue supersede another's right to live, be healthy, succeed, etc.?

I think what you're asking is something like:

"If I'm willing to sell you something at a price, and you're willing to buy it at that price, under what conditions should we be free to make that trade ? Or conversely, what conditions have to be met for everyone else to have a right to prevent us from making that trade ?"

Is that what you mean ?

The examples you give suggest that such grounds might include:

- Harm to yourself (am I selling you something like an addictive drug that will deprive you of the free will to resist future sales ?)

- Harm to others (am I selling you something like a poisonous chemical or an explosive substance that could hurt people if you're not responsible about using it properly and keeping it secure from people who are less responsible ?)

- selling something that will help you break the law (like a lockpick or a bugging device)

- selling something whose production damages the environment in a way which the producer doesn't have to pay for.

What did you mean by the reference to "succeed ?" Are you suggesting that they should prevent me selling you a book on exam technique which would increase your chances of success in a competitive market ?

Posted by lilBuddha (# 14333) on :

quote:
Originally posted by Fëanor:
But you're not addressing what I actually said: "It is the nature of all businesses to cause harm".

This is leftist bullshit.* It is in the nature of humans that some will exploit others. To varying degrees, of course. It does not follow that all will.
All forms of human endeavour are susceptible to this.
Extreme forms, such as capitalism and communism, are the most susceptible.

quote:
...But here, it's the system itself that is to blame. Double-standard much?

Cute, but no. In theory of communism could be beneficial. Unfortunately, our species will never likely be able to implement one that does not turn dictatorial and oppressive. Because, humans.

Social Democracy is my government of choice. The balance of state and private is a delicate one, but the one that has the most promise.

*ETA: I'm pretty left of centre, but I am also a realist.

[ 14. April 2017, 01:50: Message edited by: lilBuddha ]

Posted by Ricardus (# 8757) on :

quote:
Originally posted by Fëanor:
But let's not forget that Capitalism only works because we're *not* talking about a worker trading a variable income of between 120% and 180% of a living wage for a steady 150% -- this would meet the criteria of "not inherently exploitative". Rather, the worker's choice is between taking the "best" offer for their labor (which in all but a few industries is considerably less than the value of said labor), or destitution.

I think it's important to distinguish between capitalism and free market economics. In an unfettered free market, power will tend to concentrate in the hands of a minority of the population, who, by virtue of their power, will be able to exploit the rest of us. But that is a separate issue from capitalism, which is largely concerned with property rights.

As an example, the people we mostly imagine to be 'fat cats' are mostly employees. (This is why I am sceptical of the PM's occasional threats to crack down on executive pay - she's not trying to protect Ordinary Working Families, but shareholders, i.e. the bourgeoisie.)

quote:
Sell your labor or starve is the very definition of exploitative.

I would say it is the definition of human. It is built into the human condition. 'In the sweat of thy face shalt thou eat bread, till thou return unto the ground,' as the Good Book says.

However, it's worth pointing out that the simplest way of overcoming this problem - a universal basic income - was proposed not just by the Greens and Mr McDonnell, but by that well-known anti-capitalist protester, Milton Friedman.

Posted by Dafyd (# 5549) on :

quote:
Originally posted by Ricardus:
I think it's important to distinguish between capitalism and free market economics. In an unfettered free market, power will tend to concentrate in the hands of a minority of the population, who, by virtue of their power, will be able to exploit the rest of us. But that is a separate issue from capitalism, which is largely concerned with property rights.

I don't think I'd divide that line quite that way.
Capitalism is an economic system structured around capital. Capital is an accumulation of resources which the owner has no immediate need for; because owner has no immediate need for it the owner is able to invest either by starting a business themselves or by funding someone else's business. So in a capitalist system the engine that drives most economic activity is capitalists getting returns on their investments.

A free market is normally defined as one in which there is no interference from outside actors such as the state. Although that does raise the question of why some parameters are defined as inside the market and some parameters defined as outside. One could also observe that a market can be made unfree by accumulations of power within a market: most orthodox economists concede that monopolies within the market make the market at least as unfree as government 'interference' from 'outside'.

quote:
As an example, the people we mostly imagine to be 'fat cats' are mostly employees.

They're employees who these days usually own a lot of shares.
There's an inherent conflict of interest within shares between an interest in short-term rises in share value and in long-term sustainability. Cutting costs by sacking 'surplus' staff for instance increases short term profits. But the 'surplus' staff were there in case more staff than usual went down with flu, had childcare crises or so on, so in the long term the company goes down as all the staff suffer from stress. Paying senior management in shares encourages them to go down the short term route.

Posted by chris stiles (# 12641) on :

quote:
Originally posted by Ricardus:

As an example, the people we mostly imagine to be 'fat cats' are mostly employees. (This is why I am sceptical of the PM's occasional threats to crack down on executive pay - she's not trying to protect Ordinary Working Families, but shareholders, i.e. the bourgeoisie.)

To a point - but labeling things in that particular way distorts rather than enlightens.

Shareholders include things like pension funds and large unit trusts these days - further, as Dafyd points out, a lot of the so-called fat cats are shareholders themselves.

It's true that some shareholders go after the pay of some executives on occasion, but in general even the so-called 'activist' investors are remarkably relaxed about high executive pay, benefits and pay rises (http://highpaycentre.org/pubs/10-pay-rise-thatll-do-nicely ), usually their beef is with short to mid term performance of a particular company.

Top executives themselves are treated as part of the ruling class, to all intents and purposes, see who they associate and interact with both in the UK and the US.

This is one of the reasons why I'm fairly confident that May's words and promises are empty and just smoke and mirrors. Even if she believes her words in some narrow sense, I'm guessing they only apply to some mythical set of top executives that she and her ilk are not personally connected to.

Posted by Ricardus (# 8757) on :

I don't disagree with any of that.

The Marxist critique of surplus value, AIUI, is that if a business's owners are able to make a profit, the business's workers must collectively be paid less than than the sum total of the value of their labour.

This presupposes a fairly sharp distinction between owners and workers, which, as you say, is blurred by such matters as pension funds, insurance funds, remuneration in stocks, etc. Which isn't because Marx was wrong, but because society has evolved since the nineteenth century.

Posted by chris stiles (# 12641) on :

quote:
Originally posted by Ricardus:

This presupposes a fairly sharp distinction between owners and workers, which, as you say, is blurred by such matters as pension funds, insurance funds, remuneration in stocks, etc. Which isn't because Marx was wrong, but because society has evolved since the nineteenth century.

Sure, but fundamentally there's still a distinction where the profits from business have gone. Generally workers share of profits have declined - even if you account for their pension investments - whereas the share of profits flowing to the wealthiest has increased dramatically.

Top executives further benefit from a kind of Lake Woebegone effect, where a lot of compensation boards take the view that they should be paying in the top quartile.

Posted by Brenda Clough (# 18061) on :

Is it moral to be rich? This article argues that there is a point after which you really have enough money. At that point, any further millions you hoard are funds that could be better used.

Posted by Lamb Chopped (# 5528) on :

I'm guessing the line on when "this rich is too rich" will vary from person to person. I'm the kind of person who would very easily transfer my trust from God to my bank account, being a major worrier. So God can't trust me with large amount of $. Someone else would probably do better.

Posted by Brenda Clough (# 18061) on :

It is also clear to me that a lot depends upon where you live. If I lived in a nation with universal health care, I would not feel compelled to save money for the costs of my end-of-life care. As it is, I would be foolish not to sock away funds, just in case I develop cancer or something.

Posted by Moo (# 107) on :

quote:
Originally posted by Brenda Clough:
Is it moral to be rich? This article argues that there is a point after which you really have enough money. At that point, any further millions you hoard are funds that could be better used.

I think very few rich people 'hoard' their money. They invest it in stocks or businesses that create or maintain jobs.

Moo

Posted by Dafyd (# 5549) on :

quote:
Originally posted by Moo:
I think very few rich people 'hoard' their money. They invest it in stocks or businesses that create or maintain jobs.

That's the problem. Not all investment opportunities create and maintain jobs at the same rate. A business that cuts jobs or sells off assets increases its short term profits and thereby increases its value to investors over the short term. It loses value over the long term, because the staff are overworked and it cuts its operating costs too close to the bone. But by then the investors may have left with their cut.

Those who have a lot of money to invest are able to get particularly good investment terms (since they control a relatively large quantity of the total investment funds). That means they can get investment opportunities with shorter pay offs and higher liquidity. That means that the value of their investment in terms of jobs created and maintained is low: shorter pay offs for the reasons stated above, and liquidity because if you can withdraw your money at an instant's notice less use can be made of it to invest.

Finally, a lot of wealthy investors are investing in property. That's creating a property boom in London and Britain. But that property boom isn't funding much economic activity: the property is just accreting value while sitting there.

It's better for the economy for savings to be distributed over a large number of people rather than concentrated in the hands of fewer people.

Posted by Fëanor (# 14514) on :

quote:
Originally posted by lilBuddha
This is leftist bullshit.* It is in the nature of humans that some will exploit others. To varying degrees, of course. It does not follow that all will.
All forms of human endeavour are susceptible to this.
Extreme forms, such as capitalism and communism, are the most susceptible.

Oh dear, between this and the shocking revelation that Milton Friedman advocated for a form of UBI, you've done told me, haven't you now. Perhaps if you could do so without confusing terms or shifting the target, you wouldn't have to resort to vulgarity to get me to shut up already. Or maybe I'm communicating poorly, let me restate the point: A capitalistic society ensures that any act of production/consumption necessarily entails (at the very least) a perpetuation of exploitative relationships i.e., "harm". We could quibble over which actors are morally culpable for the harm, and to what degree (which seems to be what you're after?), but in the meantime I maintain that the terms in which you've stated your original question are artificially narrow.

quote:
Originally posted by Dafyd
They're employees who these days usually own a lot of shares.
There's an inherent conflict of interest within shares between an interest in short-term rises in share value and in long-term sustainability.
<snip>
and associated replies by chris stiles and Ricardus

Not just this, but there's an important distinction between those people who have no need to work (by virtue of their capital income) but choose to do so, and those people who must work to survive. Given this, perhaps we could collapse some of the distinctions between a business owned by a single wealthy capitalist versus one owned by a set of legal fictions. The problem is that there are still those who profit as a result of people being forced to sell their labor for less than its value. Mutual funds, corporations, dividend schemes, and shareholder meetings might make the pill easier to swallow for some; a strong welfare state might be able to make restitution for some of the harm caused; heck, a politician/preacher with a fancy suit and a posh (or deliberately déclassé, even) accent might try to tell you that its simply a consequence of human nature and unavoidable; but, none of this makes it any less true.

Likewise, the interests of those in the first group are necessarily at odds with the interests of those in the second group. "Morality of wealth" arguments like Brenda Clough linked to are good and important, but (as both Brenda and Moo pointed out) there exist a number of societal constraints that have the effect of reminding us that if one chooses to buck the system (by, say, giving a large percentage of one's income away) the "stakes of the game" aren't just material comforts, but life and limb.

There are lots of solutions that don't involve re-forming the CCCP: mandate that the controlling interest (e.g., "majority shareholder") of corporations above a certain size (15 employees?, gross annual revenue of >$19M?) be democratically comprised of that corporation's employees. Have the State participate in markets representing the interests of the people via a sovereign wealth fund (as in the example of Norway or Alaska).

Posted by sharkshooter (# 1589) on :

quote:
Originally posted by Fëanor:
... the worker's choice is between taking the "best" offer for their labor (which in all but a few industries is considerably less than the value of said labor), or destitution.
...

Where did you come up with this fiction? The definition of value, in this sense, is the amount of money that can be received for the labor. To state that the best offer is less than the value is simply untrue.

Posted by Dafyd (# 5549) on :

quote:
Originally posted by sharkshooter:

quote:
Originally posted by Fëanor:
... the worker's choice is between taking the "best" offer for their labor (which in all but a few industries is considerably less than the value of said labor), or destitution.
...
Where did you come up with this fiction? The definition of value, in this sense, is the amount of money that can be received for the labor. To state that the best offer is less than the value is simply untrue.

One source would be Adam Smith. Karl Marx in many ways shares more with Adam Smith than many modern economists who regard themselves as Smith's heirs.

I'll note that modern economics pays a price for declaring that value means nothing more than the price that could be received for something. Because it then has a great deal of difficulty in handling bubbles. If value simply equals market price then nothing irrational happens when a bubble happens, which makes it hard to explain what happens when the market suddenly decides to cut the price of whatever is in the bubble.
Some modern economists go so far as to deny that bubbles can ever happen which seems to represent a triumph of theory over evidence.

Posted by Fëanor (# 14514) on :

quote:
Originally posted by sharkshooter:

quote:
Originally posted by Fëanor:
... the worker's choice is between taking the "best" offer for their labor (which in all but a few industries is considerably less than the value of said labor), or destitution.
...
Where did you come up with this fiction? The definition of value, in this sense, is the amount of money that can be received for the labor. To state that the best offer is less than the value is simply untrue.

I find your line of reasoning both unsound and unconvincing. "The amount of money that can be received for the labor" is the value? First of all, the limiting factor here isn't how much the worker can receive, but how much the employer is willing to spend. Second, it seems that you're confusing the notions of value and price. The *price* is what someone is willing to pay. If this were not the case, that is, if what you claim is accurate, then why would anyone ever trade money for labor? If the value of the labor is only ever exactly the value of the money expended to obtain it, then how does the business buying the labor profit?

Edited to Add: Oops -- cross-posted with Dafyd's (much better) response.

[ 19. April 2017, 19:36: Message edited by: Fëanor ]

Posted by Dave W. (# 8765) on :

quote:
Originally posted by Dafyd:
I'll note that modern economics pays a price for declaring that value means nothing more than the price that could be received for something.

Has it declared such a thing? That seems hard to square with such concepts as consumer and producer surplus.

Posted by lilBuddha (# 14333) on :

quote:
Originally posted by Fëanor:
Perhaps if you could do so without confusing terms or shifting the target,

You have done nothing else in your engagement in this thread.

quote:

but in the meantime I maintain that the terms in which you've stated your original question are artificially narrow.

Let me introduce you to a concept called discussion or conversation. It is rare someone enters a room and merely says "Discuss!" One begins with a particular subject, often "narrow" in order to have a conversation.

You have chosen to alter the conversation, but it is no more natural. Your shifting tracks is less practical or meaningful, IMO.

Posted by Kwesi (# 10274) on :

Dafyd

quote:
I'll note that modern economics pays a price for declaring that value means nothing more than the price that could be received for something. Because it then has a great deal of difficulty in handling bubbles. If value simply equals market price then nothing irrational happens when a bubble happens, which makes it hard to explain what happens when the market suddenly decides to cut the price of whatever is in the bubble.

I’m not sure what Dafyd is arguing. ISTM that in a market economy the value of a commodity at any given point is what the buyer is prepared to pay, which may vary from minute to minute, hour to hour, day to day, and so on. It’s not obvious to me why a bubble calls that into question. Nor is it clear to me why a bubble, however dangerous and undesirable, should be considered irrational, or, for that matter, rational. A bubble is simply one of the numerous potential downsides to a market economy that needs to be anticipated as far as possible in the construction and regulation of the market.

Of course, one might conclude that bubbles, along with other deficiencies, are so egregious that economies are better organised on non-capitalist principles. Experience, however, suggests that capitalist-based systems, within which are included social democracies, have proved far better at raising standards of living for most people than their alternatives. The criticism of the system, however, is that its success in creating consumer societies threatens the sustainability of the planet. Perhaps we should look to the Kalahari Bushmen, the polar Inuits, and the Australian indigenes for solutions to our economic problems. Regrettably, I must confess, such ways of life are not for me.

Posted by lilBuddha (# 14333) on :

quote:
Originally posted by Kwesi:

Of course, one might conclude that bubbles, along with other deficiencies, are so egregious that economies are better organised on non-capitalist principles. Experience, however, suggests that capitalist-based systems, within which are included social democracies, have proved far better at raising standards of living for most people than their alternatives.

Which is why, IMO, that proponents of other systems have a massive burden of proof and why blanket condemnations of capitalism ring hollow.

quote:

The criticism of the system, however, is that its success in creating consumer societies threatens the sustainability of the planet.

And the harm is what I wished to address at the beginning of this thread. Not only to the planet, but to each other. The ethics within the system we have.

quote:

Perhaps we should look to the Kalahari Bushmen, the polar Inuits, and the Australian indigenes for solutions to our economic problems. Regrettably, I must confess, such ways of life are not for me.

Nor are they practicable on with the populations we currently have.

Posted by Dafyd (# 5549) on :

quote:
Originally posted by Dave W.:

quote:
Originally posted by Dafyd:
I'll note that modern economics pays a price for declaring that value means nothing more than the price that could be received for something.
Has it declared such a thing? That seems hard to square with such concepts as consumer and producer surplus.

See Kwesi's post for an example.
Consumer surplus is defined simply in terms of what the consumer is willing to pay. (I assume from the article that consumer surplus is different for any given individual consumer. Otherwise I don't think it's coherent.) Producer surplus does look more coherent, but it is relative to the cost of production without any question raised as to whether that cost is artificially high or low.

Posted by Dafyd (# 5549) on :

quote:
Originally posted by Kwesi:
Dafyd
quote:
I'll note that modern economics pays a price for declaring that value means nothing more than the price that could be received for something. Because it then has a great deal of difficulty in handling bubbles. If value simply equals market price then nothing irrational happens when a bubble happens, which makes it hard to explain what happens when the market suddenly decides to cut the price of whatever is in the bubble.

I’m not sure what Dafyd is arguing. ISTM that in a market economy the value of a commodity at any given point is what the buyer is prepared to pay, which may vary from minute to minute, hour to hour, day to day, and so on. It’s not obvious to me why a bubble calls that into question. Nor is it clear to me why a bubble, however dangerous and undesirable, should be considered irrational, or, for that matter, rational. A bubble is simply one of the numerous potential downsides to a market economy that needs to be anticipated as far as possible in the construction and regulation of the market.

Adam Smith argued that the value of a commodity was the labour that went into producing it. (So famously did Marx, who simply took the idea over from the economic orthodoxy of his day.) Now if you think that the value of a commodity is something other than the price someone is prepared to pay for it then you are able to define a bubble: a bubble happens when the market price of a commodity significantly exceeds its value. If you think the value of a commodity is simply the price that people are prepared to pay for it all you can say is that a bubble is defined retrospectively when the market suddenly decides it isn't willing to pay as much for the commodity as it previously was.
Modern economics assumes that economic actors are rational: they don't suddenly decide that they're only willing to pay a substantially reduced sum for something unless there is an underlying change in the circumstances. So bubbles are a problem for that assumption.
(Smith incidentally also believed that the markets would clear bubbles quickly - it's a problem for his theory too. Marx did have an explanation in terms of market cycles. I'm not saying that his explanation is fully convincing but at least he was aware of a problem that required an explanation.)

quote:
Of course, one might conclude that bubbles, along with other deficiencies, are so egregious that economies are better organised on non-capitalist principles. Experience, however, suggests that capitalist-based systems, within which are included social democracies, have proved far better at raising standards of living for most people than their alternatives.

I think the problem here is that you're lumping together capitalist-based systems including social democracies with capitalist-based systems that are not social democracies. Experience suggests that social democracies run along Keynesian lines deliver rising standards of living for more people than capitalist systems with heavily reduced socialist elements. Capitalist systems with little to no socialist elements produce higher standards of living only for the already wealthy.

[ 22. April 2017, 10:24: Message edited by: Dafyd ]

Posted by sharkshooter (# 1589) on :

quote:
Originally posted by Fëanor:
... First of all, the limiting factor here isn't how much the worker can receive, but how much the employer is willing to spend. ...

Actually, the value is defined by two limiting factors - how much the or employer will pay, and how much the employee is willing to accept. If there is no intersection, there is no transaction, thus no determined value.

If someone offers me a job at $10/hour, but I won't do it for less than $15, then there is no transaction, thus no value can be said to be determined. It cannot reasonably be said that the value of my labor is either $10 or $15.

Your argument seems to be that if I think I am worth $15/hour that is the value of my labor. I'd argue that is an incomplete analysis of value.

Posted by Dave W. (# 8765) on :

quote:
Originally posted by Dafyd:

quote:
Originally posted by Dave W.:

quote:
Originally posted by Dafyd:
I'll note that modern economics pays a price for declaring that value means nothing more than the price that could be received for something.
Has it declared such a thing? That seems hard to square with such concepts as consumer and producer surplus.
See Kwesi's post for an example.

An example of someone who shares your idea that modern economics equates price and value, perhaps. Can you suggest a more formal reference to support your assertion that this is what modern economics teaches?

quote:
Consumer surplus is defined simply in terms of what the consumer is willing to pay. (I assume from the article that consumer surplus is different for any given individual consumer. Otherwise I don't think it's coherent.) Producer surplus does look more coherent, but it is relative to the cost of production without any question raised as to whether that cost is artificially high or low.

Sure - and both of these ideas illustrate that modern economics is entirely comfortable with concepts of value that are not identical to the market price. The value of a product needn't be the same for each consumer, or for each producer; it's their aggregated preferences and abilities yield the demand and supply curves. The gap between those curves is the difference in value to the consumer and producer, and it's the whole reason the sale happens at all; consumers buy a product if its value to them is greater than the price, and producers sell if the price is greater than what it costs them make it. Only for the marginal consumers or producers is the value really equal to the price.

Posted by Dafyd (# 5549) on :

quote:
Originally posted by sharkshooter:
Your argument seems to be that if I think I am worth $15/hour that is the value of my labor. I'd argue that is an incomplete analysis of value.

According to Adam Smith the value of a worker's labour is the amount that the business owner pays for that labour plus the profit the business owner makes on that labour.
If the worker is making pins and the raw materials and rent and so on cost £5 per thousand pins and the pins sell for £15 per thousand pins then the value of the worker's labour is £10 per thousand pins. If the worker is only getting £9.5 per thousand pins then the worker is not being paid the full value of the worker's labour.

[ 22. April 2017, 12:44: Message edited by: Dafyd ]

Posted by sharkshooter (# 1589) on :

quote:
Originally posted by Dafyd:
...According to Adam Smith the value of a worker's labour is the amount that the business owner pays for that labour plus the profit the business owner makes on that labour.
...

First, Adam Smith has been dead for over 200 years. I'm not so sure his ideas are still perfectly applicable to modern times.

Secondly, it is not necessarily true that the profit is entirely attributable to labour. Surely there are other factors, such as the use of technology, intellectual property, capital, etc. Many concepts which might not have been known, understood, or relevant in the 1700s.

Posted by Dave W. (# 8765) on :

I suppose Dafyd is referring to Smith to provide an example of a respected capitalist economist with a labor theory of value to contrast with what he says is the declaration of modern economics that value is identical to price [citation needed.]

But according to the essay on the history of the labor theory of value which informs the relevant Wikipedia article, Smith included a number of ideas on the topic in his Wealth of Nations which are suggestive but mutually incompatible. There doesn't seem to be anything nearly as straightforward as the example Dafyd suggests; the reference to pins is cute, but that famous story was meant to illustrate the usefulness of specialization, and said nothing about the relating the value of a worker's labor to the price of pins.

Posted by lilBuddha (# 14333) on :

quote:
Originally posted by sharkshooter:

quote:
Originally posted by Dafyd:
...According to Adam Smith the value of a worker's labour is the amount that the business owner pays for that labour plus the profit the business owner makes on that labour.
...
First, Adam Smith has been dead for over 200 years. I'm not so sure his ideas are still perfectly applicable to modern times.

Secondly, it is not necessarily true that the profit is entirely attributable to labour. Surely there are other factors, such as the use of technology, intellectual property, capital, etc. Many concepts which might not have been known, understood, or relevant in the 1700s.

Oh, no, they were. The concept of intellectual property dates at least to BCE Greece. Legal protections of technology date back at least hundreds of years before Smith and capital is a component of capitalism that Smith is the father of.
If you mean that he, because of his time and place, did not thoroughly understand the complexities and problems that would arise from his theory; that is why we have Marx. And, more importantly, Keynes.

Posted by Russ (# 120) on :

quote:
Originally posted by Dafyd:
Adam Smith argued that the value of a commodity was the labour that went into producing it. (So famously did Marx, who simply took the idea over from the economic orthodoxy of his day.)

I'm fairly sure that Adam Smith was familiar with the concept of three factors of production - land, labour, and capital.

Now, it's possible to argue that land is wilderness until processed by labour, and capital is the accumulated fruits of past labour, so that there is in effect only one factor of production.

But that doesn't mean that the employees who make widgets contribute all the value of the widgets. That's a false conclusion reached by confusing the direct labour inputs with the total inputs (which include land and capital elements that can perhaps be viewed as indirect labour inputs).

quote:

Now if you think that the value of a commodity is something other than the price someone is prepared to pay for it then you are able to define a bubble: a bubble happens when the market price of a commodity significantly exceeds its value.

If I'm buying something for my final consumption, then what I'm prepared to pay for it is its value to me. If I can buy it for a price less than that, the difference is my consumer surplus. If the price is higher than that value, I don't buy.

If there are only producers and final consumers, there are no bubbles.

Bubbles happen when consumption isn't final. When for example I want to live in a house for 5 years and then sell it on, the price I'm prepared to pay depends not only on the value to me but also my expectation of the value to other people in 5 years time. A rising price then increases the desirability of the good, leading to a bubble.

That doesn't mean there's some mythical "real value" that is independent of anyone's willingness-to-pay. It means there are system-behaviour outcomes when different people's willingness-to-pay values interact.

Posted by lilBuddha (# 14333) on :

quote:
Originally posted by Russ:
It means there are system-behaviour outcomes when different people's willingness-to-pay values interact.

Not exactly. Markets don't simply exist, they are created. Housing prices rose because sections of the financial market became based on real estate and its continued rise in value. When the natural* market forces could no longer support this rise, it was artificially modified to allow the participation of those who could not naturally participate. The bubble this created was beyond the simple willingness to sell/pay.
This is true of times of need, such as housing, even without market complications.

*For certain definitions of natural, of course.

Posted by Russ (# 120) on :

quote:
Originally posted by lilBuddha:
it was artificially modified to allow the participation of those who could not naturally participate. The bubble this created was beyond the simple willingness to sell/pay.

Agree that governments can act to make things worse.

Posted by Dafyd (# 5549) on :

quote:
Originally posted by sharkshooter:
Secondly, it is not necessarily true that the profit is entirely attributable to labour. Surely there are other factors, such as the use of technology, intellectual property, capital, etc. Many concepts which might not have been known, understood, or relevant in the 1700s.

Technology, intellectual property, and capital don't spring out of nowhere. They are themselves the results of labour. (Not necessarily the labour of the person who owns them.)
In addition, they don't produce any wealth or profit by themselves. It's only when somebody does some work and puts in the hours that they start producing things.

I'm not an economist. I suspect that a strong version of the labour theory has too many problems. At the same time, it seems to me that the rejection of even weaker versions of the theory by mainstream economists has more to do with the use Marx makes of it than to do with the problems with the strong theory.

There's a strong tension in conservative thought between the idea that you ought to work hard to deserve to get ahead and the idea that even if you work hard you don't deserve any share in the products of your work.

[ 23. April 2017, 12:45: Message edited by: Dafyd ]

Posted by Dafyd (# 5549) on :

quote:
Originally posted by Russ:
If there are only producers and final consumers, there are no bubbles.

Bubbles happen when consumption isn't final. When for example I want to live in a house for 5 years and then sell it on, the price I'm prepared to pay depends not only on the value to me but also my expectation of the value to other people in 5 years time. A rising price then increases the desirability of the good, leading to a bubble.

That doesn't mean there's some mythical "real value" that is independent of anyone's willingness-to-pay. It means there are system-behaviour outcomes when different people's willingness-to-pay values interact.

This is I think irrelevant to the precise point, but modern economics largely works on the basis that markets are rational. That is, actors in the market on average accurately estimate the expected value of people down the line.

More relevantly, I don't think the concept of use value is sufficiently defined in modern economics to distinguish between the cases. If value is subjectively defined there's no difference that registers in the market between value assigned by use and value assigned by the expectation of future profit.

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