Marxist and Austrian Class Analysis

re: Marxist and Austrian Class Analysis

Sylvain — Fri, 27 Feb 2009 11:02:54 GMT

>> But what does a capitalist care if he commands animals as opposed to humans?

I don't understand this point. Surely any employer wants his employees to be productive, and the most productive people are the ones that use their capacity to think to their full extent. A rational bright employee is much more productive than an animal. Therefore it is in the rational self interest of the employer to hire the brightest human beings, especially in this day an age where there is barely any job left that a simple monkey could do.

>> An actor would have to be quite irrational not to encourage others to be irrational, not human, wherever such irrationality would be profitable to the first.

This is a very good point. And it is true that there are market activities that benefit from the irrationality of their clients, even though I would not point to advertising as such an example. Advertising is a tool to promote a product, it is not an end product in itself. I would rather point to religion, "mystic" goods, some products of alternative medecine, etc, as products that benefit from the irrationality of the consumers.

But the important question here is: so what? Yes there is a demand for irrational products, and yes there are producers to satisfy this demand, but how is that a bad thing? Are you saying that irrational products should be banned? Are you promoting a Federal Bureau for the Censorship of Irrational Market Activities? Who would command this FBCIM? Based on what rights? These are the important questions to ask yourself any time you attack the free market. Attacking the free market always means promoting a totalitarian approach.

>> Capitalism is then, far from proliferating humanness, disruptive of humanness.

Definitely the market activities that benefit from the irrationality of their clients do not promote human reason. But it is a very different thing to say that ALL market activities (capitalism) benefit from irrationality. You can certainly point to rational choices in your own personal consumption. I highly doubt that 100% of your consumption is based on irrational whims. You do need food to survive, you do want a home to live in, a car to travel with, quality clothes, quality audio equipment or whatever your personal preferences are, I would argue that MOST of your consumption choices are rational, and I don't even know you.

Most of the competition between producers is not based on their capacity to exploit human irrationality, it is based on their ability to satisfy consumer demand: better product, cheaper price. Yes it is also based on less objective factors, such as promoting the coolness of a brand, but that is only a tiny part of market activities.

>> Will the other employers outbid the first? They will if their bounded rationality incites them to ally with the worker. If, as is at least as likely, employers ally with eachother, they can instead split a huge profit that would have been marginal--after the "bidding war"--for the one. If, on the other hand, the employers are more inclined to compete against eachother than the workers, the latter need only wait for natural monopoly to have their wages reduced to subsistence.

In a free market there is no natural monopoly where an entrepreneur makes a ton of profit out of his employees without ever any other entrepreneur stepping in to offer these employees a better wage. This simply does not happen. Profits are a signal to attract competition. Collusion between entrepreneurs to lower wages never lasts long in the free market, as there is always a strong incentive to break the collusion. Say you and I are employers, and you employ someone at $1 an hour while he produces $10 worth of value, there is great incentive for me to offer this guy $2 an hour. Now we can decide to collude, you can ask me not to offer him $2, and maybe I will comply for a while, but that employee still produces $10 of value while being paid only $1, the profit incentive to offer him a better pay is still there and is still strong, so what about maybe a 3rd employer that would like to hire him? And what exactly do you offer me in exchange of me not hiring him? Collusion really is not that easy in a free market. However we currently do not have a free market, so your best bet is the political approach, maybe you can promote a law that would make it impossible for your competitors to hire this employee, maybe what you do could require a costly licence from the state, that would be a good barrier to compete with you, or maybe no other company should be allowed to build a factory near yours (for the sake of sustainable development or whatever), etc, there are plenty of political ways to stop the free market from working.

>> Homesteading is available only in the obsolete world of frontiers. Locke's proviso has been broken. His admirers don't seem to mind.

There are still pleny of government owned areas that could be open for homesteading. Also, private property is not limited to land, what about the sea? What about air waves? What about internet domain names? And there are probably still new areas yet to be discovered.

>> Charity, family...many people have access to neither. Even if these were universally available, why should one have to grovel before any?

This is a simple economic law, without the intiation of violence either you produce more than you consume or you rely on others offering their production to you. Now if you don't want to grovel before charity or family, then you can chose to be a free, independant, self sustained, individual who produces more than he consumes. This is simple economic reality.

re: Marxist and Austrian Class Analysis

Rye — Sat, 13 Dec 2008 03:52:57 GMT

@Tomb:

"each non-owner must come to the onwer (sic) for all manner of sustenance"

You assume that there exist "non-owners", where Austrians assert from the beginning that there are no "non-owners"; every person, in fact, owns themselves. Furthermore, because their persons are a means of production, no conscious person is bankrupt, they have always their own labor to trade.

"Even if these were universally available, why should one have to grovel before any?"

Not that I accept the foundation of your argument at all, but even the conclusion of your argument fails, because the alternative is aggressive force.

re: Marxist and Austrian Class Analysis

Tomb Like Bomb — Thu, 11 Dec 2008 03:40:21 GMT

The implication is that we cannot test capitalism in the world because there is no pure capitalism at present. So let's test capitalism by pure reason. If we assume a Gini coefficient of 1 (the simplest inequality), surely the socio-economic constraints are there: in addition to being a constant trespassor, each non-owner must come to the onwer for all manner of sustenance. Clearly, initial distribution is critical to the true "freedom" of contract. The Austrian is then faced with the obvious question, at what point of initial equality does capitalism open itself up to the promised "optimal distribution"? This is where the Austrian should consider opening his concept of "freedom" to relativity and begin to see it as directly related to equality.

The individually rational human has been disproven empirically. This the Austrians get around by calling one human only to the extent that he is individually rational. But what does a capitalist care if he commands animals as opposed to humans? An actor would have to be quite irrational not to encourage others to be irrational, not human, wherever such irrationality would be profitable to the first (See: the marketing industry). Capitalism is then, far from proliferating humanness, disruptive of humanness.

Will the other employers outbid the first? They will if their bounded rationality incites them to ally with the worker. If, as is at least as likely, employers ally with eachother, they can instead split a huge profit that would have been marginal--after the "bidding war"--for the one. If, on the other hand, the employers are more inclined to compete against eachother than the workers, the latter need only wait for natural monopoly to have their wages reduced to subsistence.

Homesteading is available only in the obsolete world of frontiers. Locke's proviso has been broken. His admirers don't seem to mind.

Charity, family...many people have access to neither. Even if these were universally available, why should one have to grovel before any? The paradise you describe is nothing so happy as what's available currently, and much less than the natural state of free access.

re: Marxist and Austrian Class Analysis

mitcjm — Wed, 30 Jul 2008 14:20:54 GMT

"When, by virtue of hunger and the socio-economic constraints surrounding getting something to eat, it becomes *necessary* to enter into a contract with an employer, who mind you doesn't *necessarily* have to employ *you*, the only freedom we can talk about is the freedom to starve."

An important question you should ask regarding your "starvation or contract" situation is: where do the "socio-economic contraints" (necessary for the existence of such a condition) arise from?

For example, say such conditions exist in Indonesia. Do those conditions exist because of a system of private property? Or do they exist because of a system of crony capitalism / state power conferring benefits on the favoured few?

"If all contracts were voluntary, who would make them except those who expect to get no less than what they give?"

The point is that each party values what the other party offers *more* than they value what they themselves offer. Value is subjective after all. The labourer values money more than he values his time and effort. The employer values the labour more than she values her present funds.

"A contract made under such conditions is anything but voluntary."

Is it *necessary* (and thereby non-voluntary) that the starving man enter into that contract? Not totally. Even in your posited situation (starvation or unfavourable contract)that person would still have other choices. He could have (in a real free market) planned for the future by homesteading some land and planting food, or by joining a cooperative that worked some land. Or he could go to a charity until he find a job that he likes. Or he could ask his family for help until he found favourable employement. You do have the freedom to starve, but you also have just as much freedom to prevent that from occuring.

We should also remember that there are other employers seeking employees too. That means that by only offering subsitence level wages the employer loses out as other employers will outbid her.

re: Marxist and Austrian Class Analysis

Joe — Tue, 29 Jul 2008 23:19:51 GMT

When, by virtue of hunger and the socio-economic constraints surrounding getting something to eat, it becomes *necessary* to enter into a contract with an employer, who mind you doesn't *necessarily* have to employ *you*, the only freedom we can talk about is the freedom to starve. A contract made under such conditions is anything but voluntary. If all contracts were voluntary, who would make them except those who except to get no less than what they give?

re: Marxist and Austrian Class Analysis

mitcjm — Mon, 28 Jul 2008 17:10:40 GMT

The very fact that people have different time preferences and the freedom to contract makes it possible for them to engage in mutaully beneficial agreements. The key is the voluntariness of the contract and not the voluntariness of the particular time preference.

Because a contract is voluntary it means that both parties gain. They each thought that they would benefit by the contract (the starving man gets money, the employer gets labour; the sick man gets care, the doctor gets money).

Will some contracts be unfair in the eyes of some? Probably. But the two parties thought otherwise. Remember, the starving man would always have been free to homestead some unowned land (by himself or with others) and plant or gather some food, he would be free to ask family or charity for help, he would be free to beg.

The fact that time preference is, at a given point in time, composed of some factors beyond the actors' control does not mean that the contract was not undertaken involuntarily, nor does it mean that the actor does not benefit from the contract.

re: Marxist and Austrian Class Analysis

mempko — Sun, 27 Jul 2008 20:44:12 GMT

Ideally, with how you describe capitalism, you would want everyone then to be a capitalist as per individually, workers gain a benefit from waiting to get the full capital of what they produce.

Why is there an immediate time preference vs a time preference to wait?

It would seem to me that having an immediate time preference might not always be a CHOICE. And if it is not a choice, then clearly the capitalist can exploit this by keeping wages low, etc.

However, to have the idealized situation that everyone's time preference is a personal choice, would require equality, harking back to Adam Smith. Where Mr Smith thought that free market capitalism is good ONLY when people achieve equality for their basic needs. IE, a persons immediate needs are met.

It is clear that otherwise, an immediate time preference would not be a CHOICE, but a necessary decision. If a person is starving, it is clear he would be forced to have an immediate time preference.

Or if a person breaks a leg and needs to pay for a doctor, he has an immediate time preference.

How does a pure capitalism where everything is privately owned address the issue of everyone's time preference being a non force personal choice. Otherwise there is clearly exploitation.