Post by Jonah ThomasSo the economic worth of air, water, sunlight etc depends on how much
human labor it takes to get them back after we pollute them? I'd
consider that a false economy.
If one attempts to sell air in a bottle, one's customers had best be
on the moon, or planning to do some depth swimming. Selling sunlight
in a bottle would be tricky even on the moon. Either way, the worth of
the commodity, if it is actually socially necessary (sunlight in a
bottle is not), is determined by the human labor that goes into
making, filling, storing and transporting the bottles, and likewise
for the machinery and raw materials necessary for the above
processes, not the air, water or sunshine themselves.
If pollution has gotten to the point that air needs to have human
labor applied to it to make it pleasantly breathable, then it has
value. There is a boutique industry for pure oxygen. Water however has
always been at that point, if anything more so in a pre-industrial
society, so bottled water is an industry.
Of course some wells etc. are better than others, which gets us into
differential rent. (See another posting on a different thread).
Post by Jonah ThomasPost by John HolmesPost by Jonah ThomasPost by John Holmes...
Historically, by the way, this process of appropriation almost
always took place through dubious means of doubtful legality and
even more doubtful morality.
That looks like the start of a moral argument. I'm not particularly
interested. I don't care whether people got forced into it or
tricked into it.
A valid point of view from the standpoint of economics. Not even
anti-Marxist. That's why I said "by the way." However, when one slops
over into politics, which is inevitable, it becomes rather important.
It's a divisive issue. Dogs used to be wolves but we domesticated them.
Do you scold a dog for having wolfish ancestors? No, you praise him when
he's a good dog. Cats on the other hand domesticated us.
Dogs and cats have a certain interest in morality in their own way,
but none in politics or economics.
When one group of humans wishes to domesticate another group of
humans, this is another matter. Even worse if they wish to use them as
livestock.
Post by Jonah ThomasPost by John HolmesPost by Jonah Thomas...
Early economists were moral philosophers who were obsessed with
ideas of fairness. People will pay what they can afford for what
they need. Anybody who figures out how to buy low and sell high can
do so until he gets too much competition or it stops working. The
same material can be worth more one place than another, and if a
limited number of people are transporting it then they can make
money. Etc.
That is precisely mercantilist economic theory. It is inadequate to
explain a modern capitalist economy.
It's a start. You need homeostasis, if you go through all the motions
and afterward you have less stuff to sell than you did at the start,
then you had a bad cycle. Too many bad cycles and you're out of the
loop.
Well, it's sufficient for the needs of a merchant. But not if you want
to understand the economy as a whole.
Post by Jonah ThomasYou don't actually have to make a profit. You can continue the same
activities over and over until you die and your sons take your place,
provided you can maintain it. Humanity did that for about a million
years. Sometimes it's better, sometimes it's worse, no reason to expect
things to keep getting better on average. In general, when things were
good enough for humans to increase population size, they promptly
degraded their environment until the population stabilised.
Civilization began when enough of a social surplus was generated that
one class of society could live at the expense of another, so that
they would have leisure for science, art, culture, philosophy,
politics, economics etc.
In pre-capitalist societies this is overt, in a capitalist society
this is disguised, forced labor or feudal dues to the lord or whatnot
becomes "profit." The basic idea of socialism is to end exploitation,
in the more sophisticated versions *without* going back to primitivity
as with Pol Pot or your more extreme deep ecologists and whatnot.
Post by Jonah ThomasIt's only improving technology that lets us continue to create economic
wealth beyond what we already have. If you want to profit beyond the
gains from new technology, you need a way to take stuff away from
somebody else.
True. There is also the question of *who gets* the gains from new
technology. They are not distributed equally.
Post by Jonah ThomasPost by John HolmesPost by Jonah ThomasThe same raw materials
can be worth more if they come as a bundle with instructions for a
do-it-yourself kit. People who don't want to figure out how will pay
for the convenience.
Figuring it out requires labor. So does bundling with instructions.
So if it comes with a do-it-yourself kit, it is worth more in Marxist
economic terms. Without the kit, the value is less and, all other
things being equal, so will the price be.
Sure. But you can figure it out once and sell the knowledge many times.
Or give it away.
http://www.wikihow.com/Recycle-an-Old-T-Shirt-Into-a-Sexy-Bikini
Knowing how to do things is as central as the labor that actually does
them.
Knowledge, as the saying goes, wants to be free. From which comes
patent laws, copyright, bans on downloading music, and other such
reactionary and uneconomic barriers to progress.
Post by Jonah ThomasPost by John HolmesPost by Jonah Thomas...
Post by John HolmesProfit is now
seen as something normal and automatic, never even thought about,
which it is not. Without profit the system would not perpetuate
itself for a second.
If there's no benefit to anyone, why do it? A porpoise will jump out
of the water for a fish, but when the fish is so small it barely
pays the metabolic cost of the jump then the porpoise won't do it
after all.
Right. So if there is no profit they won't do it. During the Great
Depression, when there was no profit, factories closed down right and
left.
Sure. We had a money economy, where everybody worked for tokens. The
token supply got disrupted. People had everything they needed -- all the
raw materials, sunlight, a big labor supply, and they knew how to do
stuff -- but they couldn't get it organized because nobody who had
tokens was spreading them around.
I've seen various explanations for that. One is that banks were set up
to manipulate tokens, they created more tokens as needed, and for one
reason or another the banking got disrupted. Another is that Henry Ford
didn't trust banks and put his vast profits into vaults in his basement.
Nobody knew where the money was going, it just wasn't there.
The above is the monetarist fallacy. Stupid monetary policies, like
Hoover's, can make depressions worse. They have much deeper causes.
The immediate cause of the Great Depression was overproduction. The
tremendous expansion of production in the USA in particular in the
Roaring '20s had overrun the world market. First in agricultural
goods, there was a farm depression in the USA in the 1920s already,
then industry.
As to why the world market was incapable of absorbing American
production, there is a lot of European history involved here, Europe
being then the primary foreign market. Europe was having its problems
too, to say the least.
The solution, for both the Germans and the Americans, was military
production. Worked well for America and badly for Germany, as once the
stuff is produced it has to be used or it is just waste, and the USA
won WWII and Germany lost.
Post by Jonah ThomasThere's a story that the persians did something like that a long time
ago. Somebody told me it was in Herodotus though I don't remember it
from there. The claim was that over a period of generations they'd
collect gold and just pile it up in the desert. The supply of gold would
decrease all around the mediterranean. Then they'd do something sudden
and shocking like try to conquer the world and there would be lots of
gold. They'd take their big army and conquer a neighbor. Whether the
neighbor surrendered gracefully or not, the neighbor's army would have
to join theirs and help them conquer the next neighbor, and the
neighbor's economy would get diverted to supporting the army. And they
could pay! Then the next neighbor, and the next. Eventually they'd have
such a large army that they could barely supply it even when they took
all the food from the places they conquered. And the gold was
inflationary. Then at the last minute the best part of the persian
army would bug out on ships, leaving behind a giant mass of disorganized
men who were difficult to feed after they were enslaved. The persians
profited not so much by the conquest as by debilitating all the
competing economies.
The Romans were more efficient. When they conquered a country, they
imposed huge taxes, forever. Drained the conquered provinces, but made
Rome very, very rich.
After five-six centuries or so of this, however, civilization
collapsed and you had the Dark Ages, as they had drained their empire
dry. The barbarians were welcomed by the slaves.
Post by Jonah ThomasPost by John HolmesThat doesn't answer the question of why there is profit however. It
assumes what is in fact to be proved, that a capitalist economy can in
fact function successfully most of the time.
Capitalist economies function successfully *some* places. Capitalism in
mali works OK, I guess. They didn't do a good job of government-run
industry, so now they try to let capitalists skim off the best of the
productivity and they create some fine-looking statistics. They're
successfully switching from subsistence agriculture to getting most of
their farmers to grow cotton etc, becoming one of those places that
exports a few things and imports many. Their statistics looked a lot
better than you'd expect when cotton prices fell and the former
subsistence farmers were left with a lot of cotton they couldn't sell,
because they had capitalists mining gold and those profits offset the
widespread losses when you average the two together.
Capitalism is great for economic development in an underdeveloped
country, if that country can first be freed from the weight of
thousands of years of pre-capitalist ways of doing things, which means
invariably freed from the weight of the pre-capitalist ruling classes
through land reform etc. In fact, it's the first way of doing things
in human history that does further rapid economic and technological
development. Pre-capitalist ways of doing things did not.
Usually revolution is the only way to get that, though sometimes there
are other possibilities, like the radical land reforms the USA imposed
on Japan and its former colonies like South Korea and Taiwan because
the Americans *did not care* about the welfare of the landlords, as
they were foreign occupiers, and did care very much about the
peasantry not following the Chinese and Vietnames examples.
It's when you have a fully developed capitalist economy that problems
develop.
Post by Jonah ThomasResults vary. There's no place in the world that runs a 100% capitalist
economy. Places where things don't work can potentially be explained as
not enough capitalism.
Nowadays, the only place that is running really well seems to be
China, and that is ultimately because it *is not* a capitalist
society, or rather the export sector selling goods to Americans is
capitalist and doing very very well, but banking, finance, and
industries vital to the actual *Chinese* economy are not. So they,
temporarily, get the best of both worlds. How long this balancing act
can work so well is another question, ultimately determinable by
politics not economics.
Post by Jonah ThomasPost by John HolmesIn the days of the mercantilists, this was a real question. When Adam
Smith argued that capitalism actually worked, he was seen as
innovative. Now of course that it has been functioning more or less
successfully for a century or two, nobody except Marxists gives it
much thought. But on the theoretical plane, it cannot be explained
without one or another version of the labor theory of value.
What is there to explain? "Results vary." Why would we expect otherwise?
What is there to explain? Namely, what is the actual source of profit.
Where does it come from? Divine benevolence? How is it that a
businessman can sell his goods for more than what he puts into making
them? The mercantilists thought it was through cheating the customer.
That doesn't work over the long term.
Post by Jonah ThomasPost by John HolmesPost by Jonah Thomas...
A lot of computer-chip factories are mostly automated, and they are
kind of profitable.
Actually they are not, in and of themselves. They make a profit
because they are socially necessary, and because due to competition in
the investment market, the rate of profit of all socially necessary
capitalist enterprises has to be more or less the same, give or take
the usual supply and demand fluctuations, etc. If not, then the low
profit sector would not be invested in, and there would be major
disruptions if it is for something society actually needs, like
computer chips.
They make a profit because averaged over the lifetime of a factory
people pay enough for the chips. Maybe governments subsidise them some?
That distorts the economy but we'd make some chips regardless. They have
to be mostly automated because human beings are filthy animals that shed
various sorts of chip-destroying dust and if we tried to make them by
hand the yield would go down to approximately zero.
True. And under a socialist system the fact that such factories do not
in and of themselves generate social surplus in value terms is
irrelevant.
Meanwhile, under capitalism, if they have to be subsidized by the
government, like highways, bridges, railroads, airports and dam
levees, then they have to be paid for from taxes, which are an
evergrowing drag on the economy.
And, in a capitalist setup, the government will naturally want to
skimp on the necessary when they have wars to pay for and whatnot.
This goes on long enough, and you get New Orleans.
Post by Jonah ThomasThere's "supposed to be" a feedback loop involved -- low-profit sectors
get less investment, and when their products become less available
people do without or they bring up the price, restoring profits and
investment. In practice one way this can work is that weaker competitors
are removed until a degree of monopolistic pricing restores profits.
Right. For Marxists, that "feedback loop" is what is behind the law of
equalization of profits, which I discuss elsewhere. As Marxism arose
in the 19th century not the 21st, Marxists prefer in positivist
fashion to talk of laws rather than feedback loops, but that's
essentially just terminology.
It is ultimately extra-economic factors that determine whether people
do without products that are produced less. If they don't need them,
they ain't socially necessary and are economically irrelevant, if they
do then then as they get scarce, the price goes up and producing them
becomes more profitable.
It is demography, technology and sociology, not economics, that
determines whether something is socially necessary and how much of it
is necessary. All economics can do is figure out how the current
social configuration is reflected in the marketplace.
Post by Jonah ThomasPost by John HolmesSo in fact what is really happening is that you have an overall
societal rate of profit for the capitalist class as a whole, so that
is what all capitals get, whether or not they are actually generating
social surplus in their particular sector of the economy.
This isn't true in practice, in the short run. Whole industries get
overinvested and under-monopolized for long periods. For a very long
time the plastics industry was low-profit. High-tech work, vast
quantities of plastics produced for many purposes, central to the
economy, but they had too many surviving competitors in an industry
with high fixed costs and low variable costs. And too many large
competing companies that each refused to give up the market.
Yes, monopolization does slow investment flows down, rendering the
system less efficient. Imperialism is in a sense the ultimate example
of this, as explained below.
Sooner or later though, if this didn't change, the banks would stop
investing, stock prices go down so individuals stop investing, and the
companies would slowly start going bankrupt. And when less plastic
ends up getting produced than the market requires, the price goes up,
and the situation slowly, perhaps molasses-slowly, reverses.
Post by Jonah ThomasPost by John Holmes(This gets further complicated by rent in its various forms, which I
only mention as it is key to understanding imperialism. Because you
have more invested in labor and less invested in capital in Third
World type lo-tech industry, you get what is called "absolute rent" in
technical terms in the pockets of First World corporations investing
in the colonial sector, given that the flow of investment is unfree.
Then of course there is outright monopoly rent too...)
This creates another one of your big disputed issues in technical
Marxist economics, the "transformation problem." Prices are not
directly dependent on value, but on a "price of production" generated
by the interaction between economic value in labor terms and the
equalization of profit. So the result is that price is *immediately*
determined according to Marxist economic theory exactly as it is in
standard non-Marxist, by capital, raw material and labor costs plus
profit.
We talk about "price" as if it's a thing. But that's only true for
commodities in a stable market. Sellers continually try to establish
unique value for their products, they don't want to compete mainly on
price. The less comparable the products, the more the price can vary.
Similarly they try to stratify the market. Sell a new product first at a
high price to those who'll pay that much, then gradually drop the price
to get more customers. Sell minor variations to special markets. The
same product can be worth more in certain markets if it has a Dallas
Cowboys logo, a confederate flag logo, or a Jesus logo. Large purchases
get individually negotiated. Sell to the federal government and you can
set your own price. You *have* to set your own price and they decide
whether to accept it. Nice work if you can get it.
Price fluctuate according to supply and demand. What they fluctuate
*around* is the "price of production," a concept that I think is
common both the Marxist and non-Marxist economics, isn't it?
The difference is how the "price of production" is determined. Is the
profit component something the capitalist gets by some weird god-given
right, or is it created in the manner Marxists believe it is?
Post by Jonah ThomasSometimes you can say "the price" and sometimes it doesn't make sense.
In my area gasoline prices seldom vary by more than 10 cents or so, gas
station to gas station. But milk prices vary by more than 30%. Right now
I can go to two stores that are within 3 miles of each other and buy a
gallon of milk for $3.18 at one and at $4.25 at the other. Vegetables
vary by 50% or more. Identical-looking tomatoes cost $1/pound at one
store and $2/pound at another 1.5 miles away. Is it because some
customers feel uncomfortable going to a store where the checkout girls
and some of the advertising are korean? I don't know. Prices vary
widely. In time, in distance, in lots of variables. There's only "the
price" in one particular market. And that's a highly artificial
situation, where a market-maker establishes a price and stabilises (or
destabilises) it.
But meanwhile, food prices and gas prices are going up worldwide.
Marxist economists are quite disinterested in the fluctuations from
one store to another, but extremely interested in the worldwide price
rises, which are not random, but have causes.
Post by Jonah ThomasPost by John HolmesPost by Jonah ThomasPost by John Holmes...
You have just hit on the classic Marxist technical argument about
the> rate of profit, namely that the fall should be counterbalanced
by a> rise in the rate of exploitation.
Sure. You put in a lot of sunk costs that are supposed to make
things more efficient. With your special machines the workers don't
have to be so highly trained, and you can use less labor and cheaper
labor. That's one of the main ways to make the process more
efficient.
And whereas you can save on labor and even save on raw materials, it
is a lot tougher making the *machines* cheaper, or at least relatively
cheaper to the other components of capital. So if the labor theory of
value is valid, a declining rate of profit over time is a logical
consequence.
I'd expect the machines to get cheaper too, but at a slower rate.
Because you make things more durable etc by testing them and then
redesigning, and the slower the rate of turnover the slower the
testing and the slower the effective redesign. You can make improvements
without testing and sometimes have them work, but until you test them
you don't know whether you've solved problems or created problems.
Sure. But the factories keep getting bigger and bigger and more
expensive, especially as they automate.
Post by Jonah ThomasPost by John HolmesPost by Jonah ThomasPost by John HolmesMy position is that it doesn't matter, as even if the rate of
exploitation reaches infinity, the rate of profit still goes down,
as if v, how much the laborer is paid, equals zero, then the rate
of profit at the limit becomes s/c, and s, even if s/v is infinite,
is limited by the size of the workforce, whereas c has no limits,
so the rate of profit still goes down.
I'm not sure I caught that. Ideally you want to pay off your sunk
costs, to get back the money you spent on them. You don't really
make profits if your factory is wearing out and you aren't paying to
repair or replace it. So, you spend a lot of money to set up your
automated factory, and you can produce things for the cost of raw
materials plus energy plus interest and taxes etc. And if everybody
does it, there are no laborers to get wages to pay for your
products.
That's how it looks from the circulation side. Marxists follow
Ricardo, Marx's favorite non-Marxist economist, and always try to look
from the production side.
Why not look at it more than one way? How does this look from the
production side? Why is s limited by the size of the workforce?
Because a single worker can only work so many hours in a day, namely
24. If he lives on air, never sleeps, and works all the time, he
generates 24 hours of s a day. No matter how badly he is paid and
treated, he cannot possibly generate more than that.
But the amount of capital is limitless.
By the way, Marx does not ignore the circulation side, he just regards
it as secondary. Vol. 1 is production, 2 is circulation, 3 does the
whole shebang plus rent and interest, etc.
Post by Jonah ThomasPost by John HolmesPost by Jonah Thomas...
Chip makers have mostly-automated factories. They spend a whole lot
of money building the factory, and then they make a whole lot
selling a new generation of chips. Then somebody else builds a newer
factory and the old factory's products get cheaper. Eventually the
old factory is producing almost at variable-cost for embedded
applications where price is tremendously important. Then the time
comes to close down the old factory and build another new one.
Hope springs eternal in the human breast. As long as your new factory
is more productive than the other fellow's factory, this is doable. If
not...
If your factory is newer than the other guy's, it will be more
productive. It will do things his can't. The problem comes if somebody
new enters the competition. You're all selling as much as you can now,
he'll have to cut into somebody's sales if he sells some.
It will be more productive if technology is advancing. If not, not.
That is why capitalism spurs technological advancement, whereas
precapitalist social formations often did not.
Post by Jonah ThomasAnother problem comes if a breakthrough technology arises. The variable
cost for a standard chip is somewhere around $2. What if you get a
technology that allows a variable cost of 10 cents, with a reduction in
fixed cost too? Eventually the market will respond, the market for 10
cent chips might be far more than 20 times the market for $2 chips. But
in the short run the market will implode, and income will be down
something like 95%. There will be a strong interest among chip makers to
make sure they all avoid that technology.
To make that work requires cartels or monopolies. And sooner or later
breaks down, as in the sad state of the American auto industry, which
tried to avoid bringing in better cars for too long, to the benefit of
the Japanese etc. Really extreme now, as they have been caught out
cranking out SUV's as gas prices go up.
So now Detroit has finally broken down and GM is finally trying to
produce an electric car. Too little too late most likely.
Post by Jonah ThomasPost by John HolmesIf there was just one company producing everything on an automated
basis with no employees, besides the problem that there is nobody to
buy the products except the stockholders I suppose, you have the
problem that if the products are being sold at their values, there is
no profit, and the company goes out of business.
Let's explore that. You have one company that produces everything. Let's
say it's a private company, owned by one man. He can give his products
away as he chooses. He can give lots of stuff to the people who keep his
machines in repair. He can give some stuff to everybody else and get
whatever gratitude they give him. He can cut off people who offend him.
Why should he go out of business? If he goes out of business he can't
pay his police or his army. He can't pay his judges or his politicians.
Why should he give up all his power just because he isn't making a
profit?
If he gives all that stuff away, who is he selling to?
This does get back to circulation, because if he is selling to his own
stockholders and employees, they can only pay with the dividends or
wages he pays them, so he is selling to himself.
It collapses as an exchange system ultimately. No buying or selling,
he is the Sun King.
Post by Jonah ThomasPost by John HolmesAnd given that profit equalization is unnecessary that is what they
have be sold at. Since there are no middlemen to cheat, commodities
would have to be sold at their actual value, or not sold at all.
So? He could, if he wanted, give everybody tokens. the more they please
him the more tokens. They exchange tokens for products he offers them,
and from their choices he decides how much of each product to make and
which products to create new varieties of. He could make some of the
tokens exchangeable while others could only be cashed by the original
clients for basic necessities.
Why bother? Simpler in that case for him to just give people what he
thinks they need and tell them what he thinks they should do. There is
no real market as there is no competition, so how do you determine how
many tokens get what? Randomly?
Post by Jonah ThomasPost by John HolmesSo the economic system ceases to exist.
Yes. I wouldn't mind owning a system like that, though I'd prefer not to
live in it.
Post by John HolmesPost by Jonah Thomas...
Leontieff? I played with his stuff. He assumed no economy of scale,
that everything was linear. It found some use in the defense
department. I played with it a little bit. The problem I had was
that for ten products and ten raw materials you get a hundred
parameters to estimate. A lot of noise in the system.
Right, Leontieff is the name. Haven't studied him myself, but I have
been told that his formulae are extremely compatible with Marxist
economics.
No marginal returns. No economy of scale. I guess. His work is decidedly
incomplete, but it needs to be done.
The economy of scale thing sounds like a problem. Marginalism is of
course a dirty word to Marxists, which we assume one is better off
without. Perhaps an oversimplification.
Post by Jonah ThomasPost by John HolmesAs for noise in the system and multiple parameters, well, I know
nothing of the details but that sounds like the kind of thing
computers are good for dealing with.
GIGO. If you try to predict things and your numbers are wrong, it won't
work. To do Leontieff analysis correctly you need to know a lot of
numbers. For 1000 items -- raw materials, products, various-skilled
labor etc -- you need 1 million facts about how much of each one it
takes to produce each other one. These numbers are hard to come by.
That's why it works well with the council system, where you have 1
million producers plugging those 1 million facts into their computers.
Post by Jonah ThomasInstead, we run mostly on tradition. Each planning period you produce
about the same as you did last time, maybe changing it a little if the
price or volume has changed. You know you don't know what's going on,
but you can hope the fluctuations will average out. Tradition, not
price. Things vary, and every now and then we sacrifice an unlucky
executive to the volcano gods to encourage the others.
That was exactly the Soviet system, except that sometimes the changes
were not so small. The central planners got the figures on how much
was produced last year, and raised them (rarely lowered them)
according to how much more steel for example was needed to build the
factories slotted for this year of the Five Year Plan.
As it was a very bureaucratic system with little input from below,
they often got it wrong, though obviously some planners were more
talented than others.
Never computerized it! When this was suggested in the 1970s and 1980s,
Brezhnev's people saw the idea as a destabilizing threat to their
sclerotic system.
The key element in planning was not price but "material balances,"
which is exactly what it sounds like. How much steel, how much coal,
this year?
Post by Jonah ThomasPost by John HolmesPost by Jonah ThomasPost by John Holmes... >>>> It has to be a social process in which the entire human
race is involved at one level or another. That's why it's called
socialism.
Find a way for it to work. Some people claim that markets let you
collect all the available information efficiently. They are wrong.
That is of course the hard part. Can't be done abstractly in advance,
rather through trial and error. There were lots of errors in the
Soviet Union.
OK, can you find a way to do it by trial and error on a small scale, and
then scale up? I hate solutions where you have to bet the farm on trial
and error, over and over again.
Trouble is that it works so much better on a big scale than a small
scale. The larger the scale, the bigger the problem, the better it
works, and vice versa. The real talent of the Soviet system was always
military production. They were also good at dealing with disasters
(including disasters caused by their own incompetence, famously
Chernobyl).
The Cubans got hit by Katrina just as bad as New Orleans was. No
problem. Evacuated an entire city in two days, after it was over,
everyone went back. No muss, no fuss, nobody drowned, city up and
running in weeks.
Keeping a local grocery store stocked nicely? That's another matter.
Post by Jonah ThomasPost by John HolmesA zillion complaining producers and consumers all with input into and
control over how the system works seems like an ideal information
collection mechanism. Of course that results in much noise, but how to
do with that noise is ultimately more a problem of politics than
economics.
What do you do with the information?
Raw material for the planners, who use it to come up with plans and
then argue for them against each other, with the voters deciding which
is best.
Post by Jonah ThomasThere's a classic classroom economics experiment where they have
students simulate a distribution chain. One makes beer, others serve as
middlemen of various sorts, etc. At the start, each turn the GMs provide
the same fixed demand. Then they increase the demand, once. Each
middleman assumes that demand is increasing and increases their order
for next time, relative to the increased order they receive. A fairly
small increase at the demand side can result in a more than doubled
increase at the producer. I don't have the link handy.
People who are actually involved in the process have to hope that price
fluctuations will average out, and be very conservative about reacting
to them. It's gamblers who latch onto the changes and amplify them in
the hope of big wins.
It takes minimal information to assume the future will be like the past.
As long as business runs on stable relationships, businessmen can rely
on that stability.
If we switch to a system where somebody actually needs to understand
things, how can we hope it will work?
Education of course. *Everybody* will need the equivalent of college
degrees, in fact graduate degrees.
On the job education is also good. I don't know if you've been
following the thread here on apst on energy, but the main protagonist
is a long-time power plant worker, who doesn't as far as I know have
any degrees in the relevant sciences, but he definitely knows his
stuff.
The actual farmers know more about farming and the actual factory
workers know more about factory production than do the college
professors. Even when they don't know they know. Combine the
book-learning with practical experience and things will run better.
Post by Jonah ThomasPost by John HolmesPost by Jonah ThomasPost by John Holmes...
If we continue to rely on the feedback loops that have naturally
evolved over time, the human race is doomed.
It might make sense to use the loops we have and change them in a
minimal way to get them to work better. What we have at least sort
of works, and it's hard to build new stuff. When they designed the
Federal Reserve they wanted it to damp the business cycle. Then when
the Great Depression happened the Fed wasn't sure just what to do
and they reacted too strongly, making the recession deeper and
longer.
This is the ultimate question. Does the economic system we have sort
of work and just need some repairs?
Or is it broken, and we need a new one?
If you can persuade important people that the current system is broken,
they'll look at the particularly thing you prove is broken and fix just
that.
The particular thing Marx thinks is broken is that profit rates
inevitably decline over time, leading to bankruptcies, depressions,
wars and so on and so forth. And it's intrinsic to the way the system
functions. So if he is right, it is unfixable. Whole damn system.
Not a sudden collapse, but an inevitable everything getting worse,
sometimes slowly, sometimes rapidly, to the point of unbearability.
Sometimes you have to stop trying to fix the old car and get a new
one.
Post by Jonah ThomasIf you can't persuade them, then presumably we'll continue until we get
a giant crisis and *then* we'll be receptive to ways to change the
system.
That is how things usually go. During the Great Depression, Marxism
was very popular. After WWII, it lost popularity for a while. Came
back in in the '70s, then lost it in the '90s.
So the question is indeed the direction of motion of the system. If
the Marxist diagnosis is right, it will regain popularity. If not,
not.
Post by Jonah ThomasAnd if it actually is broken to the point it collapses and is difficult
to rebuild, then the situation is ripe for a new system.
If you want a new system you do better to get it running than to argue
about whether it would be better. If you can get something that runs and
that keeps running when the rest collapses, you'll be in *excellent*
position to expand it during the crisis. While others are arguing about
what to do, you're providing services and recruiting people to help you
expand. Who's ahead?
Except, as explained above, it just doesn't work that way with
socialism.
There have been many attempts to create cooperative islands of
socialism within capitalism. They always go bankrupt, because they
operate within a capitalist market, and are less profitable than a
capitalist enterprise, because their purpose is not to obtain profit,
and moreover because banks and investors for perfectly obvious reasons
do not favor them, as why should they?
The Soviet Union is the ultimate example of this on a huge scale.
Post by Jonah ThomasPost by John HolmesMarxists, at least your revolutionary Marxists, go with option #2.
Marx's three volumes of Capital were devoted to proving the
theoretical validity of option #2.
Theory. Complex theory that only convinces people who study it
carefully. I wonder if it would help to build a computer model of an
economy according to Marx, and show it breaking. Then people could look
at the assumptions and decide whether they were reasonable. Maybe change
some of them and see what difference it makes. That might help.
I think there have been efforts on those lines. It might be impressive
for scholars, but socialism gets its best support from the poor, who
generally in our system have less education.
Post by Jonah ThomasPost by John HolmesYou are clearly well-read in economics already. If you are serious
about economic transformation, you should really not just stop with
the simple downloads I recommended off MIA but tackle Das Kapital. You
are in the position of somebody trying to reinvent the wheel if you do
not. If you want to develop your own innovative critique, you first
have to deal with the most widespread and influential critique of
capitalism so far developed in human history, the Marxist critique.
There's an important place for reinventing wheels, but I'll look at Das
Kapital anyway.
Good, I look forward to hearing your critique of it in a few months.
Post by Jonah ThomasPost by John HolmesBy the way, as for the Great Depression, none of the things FDR did
realy helped. Keynesianism is better than monetarism, the true
economics of primitive barbarism, but still doesn't really work.
FDR vastly increased the size of the federal bureaucracy, with the
result that the federal government was prepared to do things it could
not have done with a smaller staff. Throughout his term, public
authorities consistently underestimated the rate of growth of Washington
DC with the result that sewage treatment facilities were inadequate for
the whole time.
Soviet Union had the same problem. Both it and Washington more or less
survived.
Post by Jonah ThomasIt isn't clear to me what "work" means for FDR's policies. They didn't
end the depression, but he had the Federal Reserve opposing him on that.
It's hard to end a depression when the banking system is hell-bent on
extending it.
Problem wasn't that the interest rates were too high, problem was that
investors didn't see that investment would gain them profits so they
didn't invest. Monetary policy can do absolutely nothing about this.
Right now the Fed has desperately tried to reduce home loan rates near
to zero, but the lenders just don't want to lend, as they are too
afraid of defaults.
And thye can't reduce the Fed rates too far, or the Chinese will stop
buying U.S. government bonds...
Post by Jonah ThomasPost by John HolmesPost by Jonah ThomasThe problem was systemic. The solution was World War II. It got
capitalism going again, at the cost of huge destruction and loss of
life. And that's with an ideal ending. If it had ended differently...
If nothing else, smashing Europe and Japan flat did certainly lower
the worldwide organic composition of capital, therefore, in accordance
with the laws of Marxist theory, raising the rate of profit. And it
sure worked out real good for America, which wasn't smashed flat.
And it got us used to the idea that improving science and engineering
would pay off. We had people claiming that money put into colonial
ventures couldn't possibly pay off as well as R&D would. And for their
time they were right. It took us a long time to use up the technological
advantages we got from those years.
Yeah, Silicon Valley got a huge boost from the Cold War. Without
computers, it's really hard to plan a nuclear strike on the Soviet
Union, you worry about the Dr. Strangelove problem if nothing else.
Post by Jonah Thomas...
If you can't do it small and scale up, you can't do it.
If you can't get a simple system that works and evolve it into something
more complex, then you can't do it.
In that case you can't do it, and we should just all give up. Eat,
drink, and be merry, for tomorrow we die...
Post by Jonah Thomas"Complex systems that work have always evolved from simple systems that
work. Complex systems designed from scratch do not work and cannot be
made to work."
Post by John HolmesThe upside, from the socialist POV, is that socialism can after all
only be obtained through revolution, which has its downsides, there is
a lot of violence, but also results in major transformations of human
consciousness. People who have worked together and sacrificed their
lives, fortunes, sacred honor etc. for a cause are less inclined to
selfishness.
After a revolution you take pot luck. Some few people wind up in random
positions of lnfluence and things unfold from there. After the various
revolutions since WWII how was it determined which of them would be
communist? Maybe largely by whether the USA came out against them, then
they had nothing to lose by getting russian aid. For example there was
no particular reason for Castro to take over after general public
disgust got rid of Batista. But he was ready to do it and nobody was
ready to stop him, and while he had generally talked like socialism was
a good thing (reasonable since lots of cubans thought so) he didn't
actually declare for socialism until after the USA said he was a
communist and started opposing him.
The Cuban Revolution was a good thing, but it's not really the kind of
revolution I am thinking about. The old system collapsed, and a band
of guerillas in the hills took over and were running things. They
copied the Soviet model, which seemed to be very successful at the
time. The Castro brothers run Cuba, not the working class.
The Marxist idea of socialism comes through a workers' revolution. The
Russian Revolution was just that. Cuba and China, no, at best peasant
revolutions. Peasants are small-scale capitalists. The Marxist idea is
that socialism is objectively in the interest of the working class,
whether they actually realize it or not, so if they can be made to
realize this, they can make a socialist revolution and construct a
socialist society.
Post by Jonah ThomasPost by John HolmesPost by Jonah ThomasPost by John HolmesWhy is it that socialist nations can't compete when there are >>>
capitalists present?
Competition is the essence of capitalism, not socialism. A
socialist nation is, at one level, a contradiction in terms.
OK, then build something that doesn't have to compete with capitalists,
and get it running in parallel.
No can do, we are in a global village remember? By the time technology
was developed enough for socialism, the world was already ultimately a
single economic unit.
Post by Jonah ThomasPost by John HolmesPost by Jonah ThomasNo good. You need something that can take over from capitalism, not
something that only works after every capitalist seed has been
stamped out. Think ecological succession. Hardwoods take over from
pines because hardwood seedlings can grow in the shadow of tall
pines when pine seedlings can't. If you don't have something that
can take over from a capitalist society you don't have anything.
The trouble with that is that economics is not ecology. We do indeed
live in a global village, in which everything is interconnected with
everything else. Globalism, don't you know?
True within limits for ecosystems too. Economics is extra stuff built on
top of ecology. It's a specific sort of ecology, not a nonecology.
Post by John HolmesCapitalism does in fact generate socialism within it, but not in the
spreading seeds model. A better analogy is the caterpillar becoming a
butterfly. It is precisely as corporations get huger and huger and
spread over more of the world that it makes less and less sense for
them to be privately owned, and their internal structures become
easier and easier to transform into socialist ones.
You have an example of this working?
Well, that's why East Germany was the most successful Eastern Bloc
country economically. Economically the transition was so much easier.
Even though it is even harder to build socialism in half a country
than a whole one.
Post by Jonah ThomasPost by John HolmesHowever, the caterpillar does not naturally transform into a butterfly
all by itself. That, alas, is where the analogy breaks down.
I'm very interested in your analysis of why capitalist systems must
break down. Your explanation about what to do instead looks so far
entirely like wishful thinking.
Well, no, working class mobilization in a revolutionary direction
happened over and over again in the 20th century, and there's a lot of
this sort of thing starting to go on right now in various places.
General strikes in places like Bangla Desh or various African
countries rarely even make the papers, they're just too frequent.
Trouble is lately that the collapse of the Soviet Union means most
people assume that socialism doesn't work. Something that takes time
to get over.
Post by Jonah ThomasPost by John HolmesPost by Jonah ThomasPost by John Holmes...
The key is nuclear weapons of course. The USA will rule the world
as> long as it still has an effective nuclear monopoly, which is why
there> is so much concern about Iran, North Korea, etc.
I dunno. Once the USA actually uses another nuke things will change
drasticly. I don't know how they'll change, nobody does. It would be
a giant step into the unknown.
Already did. Hiroshima.
The first time nobody understood it. Now we've had a lifetime -- 63
years -- to figure it out. The next time the USA uses a nuke and admits
it, we change drasticly. We get a big antinuclear movement. We suppress
it. We can no longer pretend we're the USA people have been loyal to,
the USA that does the right thing. We become a nation that must
desperately protect itself from the world including from a large
minority of its own citizens. Concentration camps are not impossible.
Nuking some of our own cities can't be ruled out. Unless the antinuclear
movement somehow wins, and that's a different set of giant changes.
This would be true if the USA was the only nuclear power. Fortunately,
it is not. Since other people have nukes, the USA does not want to
create the precedent and will only use them in extreme situations, or
if there is solid backing from the rest of the world.
Nuclear weapons internally is very difficult, the people with the
actual fingers on the buttons are too likely to have relatives in the
blast zone. Military discipline is not as tight as people think it is,
as a lot of officers found out during Vietnam the hard way. Remember
the verb "to frag"?
They already have concentration camps for "illegal aliens." Setting
'em up for American citizens is politically difficult. Actually they
have them legally on the books, McCarran/Walter Act, but they've never
dared to actually start putting people in them. If they do, there will
be much resistance. Bush already has gotten himself very unpopular for
this sort of thing.
Post by Jonah ThomasOr maybe it would be some other giant changes, I can't predict very
well. But we couldn't go on like before.
Post by John HolmesPost by Jonah ThomasPost by John Holmes...
Because US elections are controlled by money. To the point that on
CNN etc., the favorite topic of election experts is which candidate
has the most money.
That's a good point. But you expect lots of people to try to
understand very complex topics. And the complexity makes it hard to
plan in the first place, and even hard to evaluate the results.
True. Whoever said this was supposed to be easy?
A capitalist could use that argument, except they claim it will all work
out for the best without anybody having to think about it. But they
*could* go that route. "The current difficulties come because of the
giant changes we must make quickly. Sure there will be local hardships
but there's no better way than to let the free market do its job." And
then you complain about americans starving and such and they say "Nobody
said it was supposed to be easy.".
This is not a responsive answer.
If in fact it does work out for the best in the long run, then the
argument works for them. That was true under the Marshall Plan in
Europe, which immediately created much suffering and popularized the
communists. Over the long run it worked out, due to unusual
WWII-related circumstances.
If Marx is correct, then in general with occasional exceptions the
argument *won't* work for the capitalists, but can work for the
socialist.
Post by Jonah ThomasPost by John HolmesPost by Jonah ThomasAh! A caucus system.
Post by John HolmesRegular
meetings at all levels, right down to the local factory or village
council, as frequently as weekly if needed. At all levels recall is
instantaneous whenever anybody wants it.
That looks potentially workable. It could get tried out in pilot
systems. If socialists run a newspaper or something, they could
organise themselves that way and see if there's any fine-tuning
needed.
Well, the pilot system was the actual Soviet system in its first few
years. It degenerated quickly, but *how* and *why* it degenerated is
very worth study.
Yes. Can you build such a thing anywhere on a small scale? Like, we have
a few companies that are run by the employees, no other stockholders.
ACIPCO is one.
http://www.achievemax.com/blog/2007/07/16/acipco/
Er, I am repeating myself, but no.
Post by Jonah ThomasWould one of them follow your caucus plan? How about starting your own?
A socialist newspaper, maybe, run by socialists with socialist methods?
The perfect example of why that is a bad idea. Newspapers are old
tech, losing money. A socialist newspaper would lose money faster.
Socialist websites? They would have been murdered in the dot.com
collapse.
There are plenty of socialist newspapers, they all lose money and *are
supposed* to lose money, as their purpose is not to make money but to
spread the word.
Post by Jonah ThomasIf you can build an organization that can survive in a capitalist world,
and its interior communications are better, it may build an ecological
niche. And spread out of that niche into others. You wouldn't have to
start with a revolution and then do your trial and error with the whole
world at stake. Get something that can grow and encroach and by the time
you take over the whole world you at least have something that works on
a smaller scale.
I am repeating myself here for the third time I think, but it's been
tried, cooperatives, doesn't work. The hippies were very into food
coops and whatnot during the '60s, few were even aware that they were
reinventing the wheel for the 27th time. They failed in all the
classic fashions.
Post by Jonah ThomasPost by John HolmesPost by Jonah ThomasPost by John Holmes...
How do you make them stay small? Simpler would be socialism.
One starting approach is to limit the number of employees. If
everything is done by contract then units that you depend on might
get hired out from under you whenever the contract expires. Or if
they go bad you can replace them easily.
That is, as I pointed out, the system for the clothing industry,
notorious as the worst industry in America, and the world too.
One bad example does not make a counterexample. But it is a bad example.
I wouldn't want it to work out like the clothing industry any more than
you'd want it to work out like the USSR.
Post by John HolmesIt is only practical with tiny production units producing tiny
commodities like blouses and tee-shirts.
Not so. Start with a company with 80 employees. 20 or so of them are
doing the bookkeeping. They can be another company that contracts out
its services. 15 of them do sales. Ditto, a sales company. Etc. Not so
hard.
A company with 400 employees can be split into 5 or so with around 80
employees. They can each be split again.
What's needed is a very clear understanding about what each small unit
receives, and what it produces. That in theory should be necessary
anyway, right?
The ultimate problem is of course, what about economies of scale? If
you introduce this system in one country, the countries that don't
follow it will take advantage of those economies of scale to
outproduce you, so unless you have tariff barriers, they will compete
you into the ground quickly. If you do, then slowly.
Same problem as the Soviet Union, actually.
Post by Jonah ThomasPost by John HolmesReducing companies to a max of 20 employees is a minimal change? I
don't think so! From the standpoint of the big companies who own the
government that is supposed to enforce this, it is just as bad as
socialism. So the resistance would be just as much.
That's true. But if we started by making it a maximum of 1 million
employees we might get a whole lot of smaller companies supporting us
against the biggest ones. Walmart has 2.1 million, how many corporations
would like to hurt them?
Then we could reduce it more in steps.
Post by John HolmesYou couldn't
obtain it peaceably through the ballot box any more than you could get
socialism that way.
Not this year. Give it 50 years for the idea to percolate through the
public mind and maybe then. Of course we probably don't have 50 years.
This has been a very interesting exchange, and I am a fast typist. But
I think I have to end it now, as it is sucking up more and more time,
and even I can't crank out posts like this at infinite speed.
Shall we agree to disagree, and maybe take this argument up again in a
month or two after you've studied Marx? I would definitely be
interested in your critique of Das Kapital.
-jh-