#proletariat science

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I can separate defenses of capitalism into two basic categories.  One of them is that it’s just, it’s about people receiving their just rewards.  The other is that it’s efficient, that’s it’s the optimal method of allocating resources. It’s the deontological vs utilitarian arguments.

The thing about neoliberal policies is that they are often sold on the utilitarian argument.  That makes sense given the global nature of it.  Talking about how people deserve stuff makes sense when you’re talking about removing environmental regulations and lowering taxes, but less sense when you’re privatizing something or doing land reform to make land sellable.  “Just rewards” is harder to apply there.

The point that I’ve found really separates these two points is high top marginal rate taxation, “we should tax the top at 90%“ proposals.  The utilitarian ones can oppose it, but the deonotological ones are absolutely mortified by it.

But the really interesting thing that happens is how shocked some of the deontological types are that many people aren’t offended by that type of taxation.  I see them get genuinely shocked when talking to liberal/center-left people who don’t seem to have a problem with it.  It’s this interesting way of seeing how hegemony can be broken when they don’t even know or can’t even conceive of the fact that their views aren’t universally held.

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Political economy of democratic socialism

So, here are some thoughts I’m going to throw out on democratic socialism as an explainer.  This isn’t something new, the broad strokes of this are something I’ve see a few places. But I’m going to put it together because I think it could be useful, it was related to some stuff I saw.

One of the big parameters that any economy has is that of consumption vs savings.  How much of what people create do they consume, and how much do they not consume.  One view is that this is based on the preferences of individuals who make rational decisions yada yada.  I’m going to say that it’s not, in an advanced economy it’s basically set as a matter of government policy.  The way it’s set is by how much money goes to poor people who consume and how much to rich people who save.  That policy is in turn bracketed by inflation and unemployment which a government will want to avoid.

We don’t really admit that though, not generally. we dress it up in a lot of language about taxes and technocracy and people getting what they earn and incentives to produce.  That’s part of how liberalism works, it’s a handy means of avoiding responsibility, “We’re not deciding the direction of the economy, we’re allowing the market to take it’s course or technocratically setting it to optimize the economy towards an unambigous target.“

Once you’re socialist that doesn’t fly anymore.  That’s one of the whole ideological points of socialism, control of the economy is being directed. But you still gotta make that decision, you still gotta save. That was one of the main points of Critique of the Gotha Program. 

So, you can view a lot of Soviet and Chinese policy as a means of increasing the savings/consumption ratio, which they really wanted to do. They had to take food away from farmers so it could be used to buy machinery.  In a capitalist system, that appropriation is mediated by your landlord or your bank, in their socialist system it was appropriated by the state. And they had to break attempts by the farmers to resist appropriation, ironically one of the points of soviet collectivization was that it was effectively a union-busting operation.  You can view a lot of Soviet and Chinese policy in this frame.

Under democratic socialism, though, this is harder.  The state has to make the savings/investment ratio decision explicitly, and the state has to respond to the people.  Consumption is immediate and certain, savings are nebulous and dubious. And if there’s mass rural poverty then it’s really hard to tell people to tighten their belts.

So that is the dance that democratic socialism must make, and the fact that mass rural poverty doesn’t really exist here is why I believe that it is possible for the US.

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I had a chuckle reading a report in today’s New York Times that describes a pair of papers on the minimum wage presented at the recently-co...

There was lots of back and forth in the article about whether this result would generalize to a minimum wage established over all employers within a region rather than just a few (who could better pick and choose), but for me the irony is that this is exactly what proponents of the minimum wage hope it will achieve.  That is, one of the main purposes of setting a floor under wages is to generate incentives for firms to increase productivity. Note that it is the firm that is expected to do this.  Economists for some reason tend to assume that productivity is essentially a worker attribute, like how tall you are or whether you’re left-handed. No doubt workers differ greatly according to their potential productivity, but most actual, realized productivity is the result of the way the work is set up—whether the output is of lesser or greater value, how much and what kind of equipment the worker has available to work with, what kinds of skills the work develops and makes use of, and how much opportunity the worker herself has to tinker with the job to make it go better.  These are employer choices.  In a world of low wages employers have less incentive to invest in the productivity of work, so they don’t. This argument will hardly come as earth-shattering news to development economists and economic historians.  One of the arguments why the industrial revolution first occurred in Europe rather than China, for instance, is that the possibility of emigration prevented European labor from being as abundant as Chinese, with correspondingly higher wage costs.  A major factor in the explosive rise of the US as an industrial power in the nineteenth century was the availability of cheap land, which put an even higher floor under wage rates.  This is not to say that workers had it easy, of course, just that they were significantly less destitute in some regions than others. If increasing labor productivity is a major social goal—and it should be—then making labor more expensive is a good thing, all else being equal.  The only trick is to see that, in the modern, mechanized interdependent world, it’s the quality of the job that turns the worker’s potential productivity into the real thing.

More minimum-wageposting!

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Veblen in one of his books talked about his theory that certain types of work tended toward socialism, particularly mentioned skilled machinists as those most likely, and theorized that it was due to methods of thought developed when working with machines and processes which were distant from humans.  Machines do not care about natural rights, they do not care about laws, they do not care about contracts.

Been thinking if that’s something that’s became relevant with the computer. A lot of people use computers, and not everyone who posts to facebook has a deep understanding of it, they still can realize that it’s a machine that does not relate to those natural law concepts.  Perhaps the widespread use of computers is having effects on how people think.

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Free trade is one of those subjects that a lot of people in economics agree to, even those that are skeptical of a lot of mainstream economics.  There’s a few possible reasons you could give for this, you could argue that it’s just so well-proven, but a lot of people have commented on the fact that countries that develop often heavily restrict trade and go at least somewhat mercantilist.  There’s this other idea that people are slow to reject it because of a belief in internationalism, it’s basically the idea that if goods don’t cross borders armies will.

Anwar Shaikh tosses a lot of stuff out there, one of the things he tossed out was a rejection of free trade.  What he said was that the ricardian theory of trade that underlies this makes one big error, it assumes the quantity theory of money.  Anwar argued that unless the prices move to counterbalance the import/export balance, his free trade theory doesn’t work.

I’ve been trying to look this up for a while to see if there was a neoclassical counterargument, and what I’ve found is that most people discussing this never get into that.  I can find a million and one articles pointing out the advantages of theoretical trade, but none of them touch on this point of actual trade.

I think that leaves you in this interesting economic place if you believe that.  You can argue that between any set of two countries there will always be a mutually welfare enhancing trade between them.  But that’s not the trade you will actually get.

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Seein Scott’s recent post and going through the replies makes me wonder why nobody’s given the “Naive Keynesian“ answer, which is basically “If we cut government like that we’d plunge into an economic meltdown through aggregate demand shortfall.“  People defending it on the left are pointing to the advantages of the programs, which certainly aren’t nothing, but also aren’t everything.

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At one one point I looked up “The Market for Lemons”  on wikipedia.  What makes that article stand out to me is the criticism section which includes:

the lemon problem creates entrepreneurial opportunities for alternative marketplaces or customers' knowledgeable friends.

And how can you say shit like that with a straight face?

What kills me is that he’s a libertarian economist.  Libertarian economists believe that the labor market clears!  You don’t need to have makework to generate jobs if the labor market clears! (All you need to do is eliminate labor  protections.)

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Just saw this on Branko’s twitter and all I can think of is “What’s the economic growth of a million ‘steam slaves’ with no materials for them to process?“ Does someone need to explain the concept of “Necessary but not sufficient“ here?

Having those machines means you will absolutely need as much raw material as you can get, if that’s the bottleneck, it’s easy to see that more industrial capacity could increase the level of labor exploitation. 

One thing here he reaches right up to but does not realize is that colonies are useful precisely because they are so far away.  You can keep your pampered well-fed skilled artisans in Britain, and so when the labor uprising happens in Africa they’re not at risk or even bothered.  That’s in addition to the fact that having resources be distant makes the whole process very profitable and therefore gives capacity and desire for more intense investment

Also talks about the ”heydays of capitalist growth in the West in the period 1945–1973“ without commenting on the fact that it ended. I can easily argue that wasn’t actually stable and it was a weird period in multiple ways.

I feel I could be convinced that slavery/colonization/whatever wasn’t actually necessary for industrialization but people are so bad at arguing it.