Economics Discussion Thread

[Constantinopolis]

It's funny how, despite their historic victory and taking over practically the entire world, the capitalists deny the fact that they've won because they don't want to be held responsible for what happens in the world that they rule.

we'll happily take responsibilty for the effects of capitalism in the real world, just dont dump failure of government or the flaws in the general human condition at capitalisms door

The ruling class (in this case the bourgeoisie) is responsible for the entire system that they rule through, not just the good parts of it.

There's no such thing as an "agrarian mode of production". There is a feudal mode of production, which was still quite widespread in many parts of the world during Marx's lifetime, but is almost entirely extinct today.

Capitalism isn't responsible for what was happening in Africa in the mid-1800s, because Africa was not yet capitalist at that point. But today? Almost the entire world, except for a few holdouts, is capitalist. This is the golden age of capitalism. Today. We're living in it now. There never was - and likely there never will be - a historical period when the world is more capitalist than in the early 21st century.

This world, the world we're living in now? It's your world. It was made in your image. You rule it. You own it.

Alright in that case I get to """"own"""" the historic reductions in poverty that happened recently

Sure thing. With a note that those reductions in poverty were caused by simple industrialization and could have been accomplished just as easily by any economic system that can provide industrialization.

[Taihei Tengoku]

It sure wasn't Mao Zedong Thought or the License Raj...

[Barbarossistan]

we'll happily take responsibilty for the effects of capitalism in the real world, just dont dump failure of government or the flaws in the general human condition at capitalisms door

The ruling class (in this case the bourgeoisie) is responsible for the entire system that they rule through, not just the good parts of it.

So now capitalism is somehow responsible for the failures of systems that are not part of it, especially failures it is not even allowed to correct? And it is responsible for the fact that humans are very flawed and this will show in any system? Righ, its clear you're giving capitalism a fair shake here.

Alright in that case I get to """"own"""" the historic reductions in poverty that happened recently

Sure thing. With a note that those reductions in poverty were caused by simple industrialization and could have been accomplished just as easily by any economic system that can provide industrialization.

"Caused by simple industrialization" , simple, sure, so simple that many countries fail at it, socialism did it poorly if at all and capitalism has been very good at it -precisely- because of how it works.

And Africa, where capitalism plays a limited role next to a large state sector and primitive subsistence agriculture, reflects the flaws of the human condition, no economic system can succeed well when everyone from top to bottom prefers the quick grab over longterm investment.

I'll note that the most capitalist bits of African economies function reasonably well compared to the rest.

[Hakons]

we'll happily take responsibilty for the effects of capitalism in the real world, just dont dump failure of government or the flaws in the general human condition at capitalisms door

The ruling class (in this case the bourgeoisie) is responsible for the entire system that they rule through, not just the good parts of it.

Alright in that case I get to """"own"""" the historic reductions in poverty that happened recently

Sure thing. With a note that those reductions in poverty were caused by simple industrialization and could have been accomplished just as easily by any economic system that can provide industrialization.

In our modern times, who is the bergoisie? We've moved passed the world of markets and production of Marx. We have different economics than the mid 1800s.

[Constantinopolis]

The ruling class (in this case the bourgeoisie) is responsible for the entire system that they rule through, not just the good parts of it.

So now capitalism is somehow responsible for the failures of systems that are not part of it, especially failures it is not even allowed to correct? And it is responsible for the fact that humans are very flawed and this will show in any system? Righ, its clear you're giving capitalism a fair shake here.


Sure thing. With a note that those reductions in poverty were caused by simple industrialization and could have been accomplished just as easily by any economic system that can provide industrialization.

"Caused by simple industrialization" , simple, sure, so simple that many countries fail at it,

Which countries are those? Every country in the world is vastly more industrialized, and has vastly higher standards of living, than 100 or 200 years ago. The share of people working in agriculture has been dropping globally for the past two centuries, and has also been consistently dropping in almost every individual country for the past century.

Everyone is industrializing, and everyone is richer than they used to be 100 years ago. They just started at different times and are going at different speeds, but everyone is moving in the same direction.

socialism did it poorly if at all and capitalism has been very good at it -precisely- because of how it works.

ROFLMAO. Socialism... bad at industrialization? Really? Of all the things to accuse socialism of, you picked this one? When socialism is known historically for its excessive emphasis on rapid industrialization at the expense of other concerns?

If there's one thing socialism is especially good at, it's industrialization.

And Africa, where capitalism plays a limited role next to a large state sector and primitive subsistence agriculture, reflects the flaws of the human condition, no economic system can succeed well when everyone from top to bottom prefers the quick grab over longterm investment.

Every border in Africa was literally drawn by capitalist colonial powers, every country in Africa (well, except for two) has inherited the institutions left behind by capitalist colonial powers, African natural resources play a vital role in the global capitalist economy - including the rare earth metals used to build the electronic device that you're probably reading this on - but yet somehow, you don't think Africa is capitalist?

Stop living in the distant past, African economies aren't based on subsistence agriculture any more. They haven't been for some time.

Agriculture accounts for 17% of the combined economy of the African continent. This is, of course, much higher than in the developed world, but the point is that the days when African economies were dominated by agriculture are long gone.

The dominant sector, like everywhere else in the world, is the service sector. And most of those services are provided by... you guessed it, private companies that employ wage labour.

Also, Africa is rapidly urbanizing. 36% of Africans lived in urban areas in 2010, and this share is projected to grow to 50% by 2030. Africa actually has the most rapid urbanization rate in the world right now.

So, again: The image of Africa as being poor due to being stuck in some sort of agricultural past is for the most part obsolete. African poverty is, increasingly, urban poverty.

[Constantinopolis]

Note: You can believe that property income is immoral and should be abolished (or, I suppose, redistributed) without necessarily endorsing the LTV. This was the approach of the "Analytical Marxist" school, for example. They accepted standard neoclassical economics, but combined it with the normative belief that capitalism is morally wrong. Roemer even came up with an interesting re-definition of capitalist exploitation that uses only mainstream economic concepts but leads to the same normative conclusion as Marxism.

I don't agree with them, I'm just pointing out that it can be done. The claim "capitalism exploits workers and this is morally evil" does not have to be based on the claim "the LTV is correct".

Surplus value cannot exist without labor theory. If you accept neoclassical economics you accept marginalism, which makes mincemeat of "surplus value." If there is no surplus value there is nothing to steal--I've explained a dozen times on several threads marginal compensation tracks marginal productivity.

And that is why, if you'll read carefully, you'll notice that I did not use the words "surplus value" in the post you quoted. I said "property income." I like to be precise in my wording, you see, and it is true that surplus value cannot exist without the LTV.

But property income exists. Profit exists. Interest exists. Rent exists. So it is possible to take the normative stance that these forms of income are illegitimate, immoral, equivalent to theft. That is what I pointed out. You don't need the LTV to be able to say "I believe that, morally speaking, all income derived from non-labour factors of production rightfully belongs to society as a whole."

Do you understand? Separately from the LTV, we also believe that capitalism is inherently immoral. Consider, as an example, an economic system that you also regard as immoral: slavery. Would you be persuaded that slavery is justified if I could show you that the marginal compensation of the slave owners tracks the marginal productivity of their slaves? No. And why not? Because you would say that the compensation for that productivity rightfully belongs to the slaves, not to the owners.

Socialism without the LTV can be summarized as follows:

1. The marginal compensation for the marginal productivity of labour rightfully belongs to the individuals doing that labour.
2. The marginal compensation for the marginal productivity of capital rightfully belongs to society as a whole.
3. Private property over capital and land is illegitimate.

Now, of course, I actually support the LTV myself, so I am mainly just explaining the above for the sake of the argument.

Explain why you don't like the LTV again?

It's incorrect. How would you feel if you went on an Astronomy Discussion Thread filled with geocentrists and flat-earthers?

Oh that's cute. The arrogant little neoliberal economist thinks he's doing Real Science™.

The academic discipline of Economics is nothing but Mathematical Ideology. You start with some non-falsifiable, ideological assumptions, run them through a complex mathematical model, and hopefully get some result at the end that looks vaguely like a phenomenon in the real world. Alternatively, you go down the econometrics route, which is basically just statistics, but often pretends to find universal truths in limited data sets drawn from a particular place or time.

I'm not speaking from the outside. I have a degree in economics, and that is precisely where my disdain for your pretensions comes from. I, too, thought I was going to learn Real Science went I went into it. But the more I learned, the more I realized your emperor has no clothes. It's just a bunch of really intelligent people doing a very advanced form of propaganda for the status quo (or, less often, some alternative system that they prefer).

And there's nothing wrong with doing advanced propaganda, as such. It is real work, and the arguments you guys come up with are serious ones, worthy of study and reflection and an equally-advanced response. I only have disdain for those of you who try to couch your work in the bullshit claim that you are doing impartial, non-ideological Real Science™. Those are liars. And I respect honest ideological opponents, but I do not respect liars.

It is never actually possible to study human society in an impartial way. Every study of human society is founded explicitly or implicitly on a certain set of ideological values.

Neither marginalism nor the LTV can be "proven" true or false. Both are perfectly capable of being used to explain common economic phenomena, and both are fundamentally non-falsifiable, because they rely on concepts which cannot be observed empirically (marginal utility for one, socially-necessary labour time for the other). Any error that seems to result from either theory can be wiped away by adjusting your assumptions about marginal utility or about socially-necessary labour time so as to lead you to the desired result.

This is why economics - neither yours nor mine - can ever be Real Science™.

[Taihei Tengoku]

"non-falsifiable assumptions" lmao

Of course someone who is consistently wrong would just say it's all bullshit anyways, much like a Flat Earther would disdain astronomers. Sorry, observation and empiricism doesn't favor a disc world nor does it favor any of your pet Marxist theories.

[Orostan]

What's the point then? Marginalism also takes into account the marginal costs of production in the supply curve. A computer in 1985 had very high marginal costs--but it also had marginal benefits greater than the cost, which is why people bought them.

It had high costs because it took more labor to create it. Making computers and the components that go into them was more labor intensive. Now there are mass production techniques to make computers fast and in great numbers. The amount of labor exerted per computer has decreased.

"non-falsifiable assumptions" lmao

Of course someone who is consistently wrong would just say it's all bullshit anyways, much like a Flat Earther would disdain astronomers. Sorry, observation and empiricism doesn't favor a disc world nor does it favor any of your pet Marxist theories.

Prove it, and stop being a smartass.

[Orostan]

Marginal Utility is bullsh*t, and I'll explain why. So, as I understand it it goes something like this. The value of a good is based on it's "marginal utility" to a market which depends on supply and demand. This ignores what the actual utility of the product is, and that a microwave produced during a period of low supply and high demand and an identical microwave produced during a period of high supply and low demand have different prices but have the same use value. I can microwave a burrito with the first microwave as well as I can microwave a burrito with the second microwave. Their prices are the only thing that is different.

You're overthinking it - the *value* of any good is subjective and not some scientific function of labour hours.

So then why does mechanization lower the cost of something? Why does a phone cost less than a car, even when most people need a phone but not a car?

[Hydesland]

You're overthinking it - the *value* of any good is subjective and not some scientific function of labour hours.

So then why does mechanization lower the cost of something? Why does a phone cost less than a car, even when most people need a phone but not a car?

Nobody denies labour is an extremely important factor of cost. Cost is not value, something's value (to consumers) can be more or less than its cost.

[Hydesland]

1. The marginal compensation for the marginal productivity of labour rightfully belongs to the individuals doing that labour.
2. The marginal compensation for the marginal productivity of capital rightfully belongs to society as a whole.
3. Private property over capital and land is illegitimate.

But these are just deontological normative assertions that can't be debated - why expect anyone to be convinced? This is basically religion.

[Herzegovenia]

Marxian socialist here, obviously. I strongly advocate a socialist planned economy, with state ownership of all the means of production, labour vouchers instead of closed-circuit money, and heavy use of computer networks in planning.

What a perfect description.

[Hydesland]

This world, the world we're living in now? It's your world. It was made in your image. You rule it. You own it.

The difference is most people in the mainstream don't claim that capitalism alone is sufficient to relieve all poverty and build utopia. Most don't claim capitalism will solve drought, war or corruption alone. Furthermore, I'd wager almost all famines under capitalism are of these secular kinds, not endogenous man made famines like you might get from a total failure of economic planning - the price mechanism doesn't have these huge bottlenecks.

[Taihei Tengoku]

I've "proved" it a dozen times already. If you insist on being wrong there is little I can do to change your mind no matter how much I type at you.

What's the point then? Marginalism also takes into account the marginal costs of production in the supply curve. A computer in 1985 had very high marginal costs--but it also had marginal benefits greater than the cost, which is why people bought them.

It had high costs because it took more labor to create it. Making computers and the components that go into them was more labor intensive. Now there are mass production techniques to make computers fast and in great numbers. The amount of labor exerted per computer has decreased.

Macintosh IIIs weren't artisanally crafted.

[Orostan]

I've "proved" it a dozen times already. If you insist on being wrong there is little I can do to change your mind no matter how much I type at you.

>you're wrong because you're wrong

"prove" it again

Macintosh IIIs weren't artisanally crafted.

No sh*t, but they still needed more labor than the average computer today.

[Taihei Tengoku]

Are the cost decreases proportional to man-hours?

[Chestaan]

And what about the millions that die of hunger each year?

They are in the Third World, not known for its laissez-faire economic policies and bourgeois liberalism

Oh we can use that can we? In that case none of those cases you mentioned were REAL socialism/communism.

I suppose the British Empire, where the Industrial Revolution began isn't capitalist enough either?

In any case, even """"""real"""""" capitalist societies such as the US are hugely inefficient in the amount of wastage they generate. One third of the food produced in the world each year is wasted. http://www.fao.org/save-food/resources/keyfindings/en/

This is all while other people starve to death or remain hungry. How can a system both generate too much food and simultaneously have people remain hungry?! It's absurdly inefficient. Same thing happened in Ireland, most notably, and several other countries throughout the world which experienced a housing crisis. During the recession, there was the twin problems of empty ghost estates and soaring homelessness.

[Chestaan]

This world, the world we're living in now? It's your world. It was made in your image. You rule it. You own it.

The difference is most people in the mainstream don't claim that capitalism alone is sufficient to relieve all poverty and build utopia. Most don't claim capitalism will solve drought, war or corruption alone. Furthermore, I'd wager almost all famines under capitalism are of these secular kinds, not endogenous man made famines like you might get from a total failure of economic planning - the price mechanism doesn't have these huge bottlenecks.

The mode of distribution in capitalism means that it is profitable to produce excess food and waste it, in order to pick out the best, most aesthetically pleasing food from the bunch to sell while leaving others who don't have the income to pay starving.

Obviously the best possible system would distribute resources to those who need or gain from them most, but to be able to do this, as I'm sure you know, we would need to have access to each individuals utility function. Seeing as this is not possible, capitalism's solution is to proxy for utility with willingness to pay, which is a relatively poor proxy due to the fact that it ignores the effect income has on WTP.

Capitalism is the method of distribution through the vast vast majority of the world. If there are any distributional issues, that is due to a failure of capitalism.
I'm not even saying economic planning is better or even on par with the pricing mechanism, but that doesn't mean that the capitalist pricing mechanism of allocating resources isn't absurdly inefficient also. Even if it is the best we currently have, it still needs to be improved upon.

[Taihei Tengoku]

The British Empire in 1850 had a per capita income of ~$2,000. Would a country with the living standards of Uganda or South Sudan experience famines time to time? Even so, a command economy would not stop spoilage--all examples point to worse food waste and worse diets under it.

Given that I know exactly how you'd "improve" upon a system I can say with confidence it wouldn't get better at all.

[Chestaan]

The British Empire in 1850 had a per capita income of ~$2,000. Would a country with the living standards of Uganda or South Sudan experience famines time to time? Even so, a command economy would not stop spoilage--all examples point to worse food waste and worse diets under it.

Given that I know exactly how you'd "improve" upon a system I can say with confidence it wouldn't get better at all.

I'm going to need to see a source on those numbers to see if they are real or nominal. Secondly, I'm not saying a command economy would help, I'm saying capitalism is inefficient, just like a command economy and also experiences massive shortages of essential goods. And thirdly, the important point is that there was plentiful supplies of food in Ireland at the time to alleviate the starvation, but it was more important for the capitalists to make a profit by exporting these goods. The profit motive was what caused this famine.

And lets not act as if the fact that countries such as Uganda and South Sudan have such low GDP per capita is unrelated to capitalism, because it is because of this system that such inequality exists.

[Hydesland]

The mode of distribution in capitalism means that it is profitable to produce excess food and waste it, in order to pick out the best, most aesthetically pleasing food from the bunch to sell while leaving others who don't have the income to pay starving.

That's a huge assumption, the reality is that much excess food is packaged and sold as cheaper products, or sometimes sold as fertilizer or for energy. Much food waste is from households throwing out excess food, not from producers. I rarely hear of butchers or bakers throwing out perfectly good food because it's not "aesthetically pleasing" enough, they may reduce the price on non prime goods (and often give it away practically free at the end of the night, where it WILL have to be thrown out otherwise).

Seeing as this is not possible, capitalism's solution is to proxy for utility with willingness to pay, which is a relatively poor proxy due to the fact that it ignores the effect income has on WTP.

It's more complex than this, because incomes are not exogenous in this system.

Capitalism is the method of distribution through the vast vast majority of the world. If there are any distributional issues, that is due to a failure of capitalism.

Again, the reality is that the method of distribution is thousands of different mixed market configurations with thousands of different results, there is no one single nebulous distribution mechanism.

[Taihei Tengoku]

The British Empire in 1850 had a per capita income of ~$2,000. Would a country with the living standards of Uganda or South Sudan experience famines time to time? Even so, a command economy would not stop spoilage--all examples point to worse food waste and worse diets under it.

Given that I know exactly how you'd "improve" upon a system I can say with confidence it wouldn't get better at all.

I'm going to need to see a source on those numbers to see if they are real or nominal. Secondly, I'm not saying a command economy would help, I'm saying capitalism is inefficient, just like a command economy and also experiences massive shortages of essential goods. And thirdly, the important point is that there was plentiful supplies of food in Ireland at the time to alleviate the starvation, but it was more important for the capitalists to make a profit by exporting these goods. The profit motive was what caused this famine.

And lets not act as if the fact that countries such as Uganda and South Sudan have such low GDP per capita is unrelated to capitalism, because it is because of this system that such inequality exists.

Its PPP on constant 1990 dollars. Secondly, you are saying a command economy would help because that is the only alternative. Either emergent systems move resources or you take active control. Given that you are a "council communist" (whatever the hell that is) I know what your decision heuristics are.

Uganda and South Sudan had low GDP per capita forever--that's the state of nature regardless of the system. They don't sacrifice part of their GDPPC to redistribute to Europe, it's just that there really is that little economic activity there.

[Chestaan]

The mode of distribution in capitalism means that it is profitable to produce excess food and waste it, in order to pick out the best, most aesthetically pleasing food from the bunch to sell while leaving others who don't have the income to pay starving.

1.That's a huge assumption, the reality is that much excess food is packaged and sold as cheaper products, or sometimes sold as fertilizer or for energy. Much food waste is from households throwing out excess food, not from producers. I rarely hear of butchers or bakers throwing out perfectly good food because it's not "aesthetically pleasing" enough, they may reduce the price on non prime goods (and often give it away practically free at the end of the night, where it WILL have to be thrown out otherwise).

Seeing as this is not possible, capitalism's solution is to proxy for utility with willingness to pay, which is a relatively poor proxy due to the fact that it ignores the effect income has on WTP.

2.It's more complex than this, because incomes are not exogenous in this system.

Capitalism is the method of distribution through the vast vast majority of the world. If there are any distributional issues, that is due to a failure of capitalism.

Again, the reality is that the method of distribution is thousands of different mixed market configurations with thousands of different results, there is no one single nebulous distribution mechanism.

1. https://www.theguardian.com/environment ... food-waste
http://www.independent.co.uk/news/uk/ho ... 09601.html
While consumer also waste food, which isn't exactly unconnected with the economic system, some food never even reaches the shelves, because it doesn't meet high enough aesthetic standards. Retailers don't throw this food out, because it never even reaches them. As a separate case of wastage, look at housing. Houses were overproduced in many nations, the one I am most familiar with is Ireland, which were then left empty when the bottom fell out of the market. Meanwhile homelessness skyrocketed.

2. Incomes are endogenous, true, but it would be a massive stretch to claim that incomes are solely or mostly determined by how much a consumer wants a good. Its not the case necessarily that rich people want goods more, and that poor people want them less.

3. I'm sure the bureaucrats that ran the Soviet Union had a different system to the bureaucrats than ran the PRC, but that doesn't mean we shouldn't critique command economies. I suppose a good question would be to ask is any of the many different systems that utilise a price mechanism better than all the others?

I look forward to your reply, but I may not be able to reply for a few hours!

[Hydesland]

1. https://www.theguardian.com/environment ... food-waste
http://www.independent.co.uk/news/uk/ho ... 09601.html

Don't have time to fully digest these right now, but I'd need hard data on: to what extent are these niche/luxury foods or essential staples that working class would rely on? To what extent is this actually impacting food prices in affected areas in any way, are there food shortage problems there (my guess: no)?

Houses were overproduced in many nations, the one I am most familiar with is Ireland, which were then left empty when the bottom fell out of the market. Meanwhile homelessness skyrocketed.

Sure, bubbles can occur.

2. Incomes are endogenous, true, but it would be a massive stretch to claim that incomes are solely or mostly determined by how much a consumer wants a good. Its not the case necessarily that rich people want goods more, and that poor people want them less.

My point is that you can't isolate a partial part of the system, the market can determine output, prices and incomes - it's not just about distributing a preset numb of goods to a preset collection of people according to their WTP. You need to look at the big picture - and to save you the time, mathematically under ideal assumptions, a free market really is the most optimal/welfare maximising system of distribution, as long as the government can do lump sum transfers. Now obviously, it's rare these ideal assumptions all hold, so economics is about looking at these violations (e.g. asymmetric info, irrationality, natural monopolies, free riding etc...) and seeing what policies can fix them. This is a fair approach imo - rather than trying to abolish everything and plan an entire economy instead.

I suppose a good question would be to ask is any of the many different systems that utilise a price mechanism better than all the others?

And I'd say the best approach is to just look at the most successful countries and see how they do it.

[Constantinopolis]

And I'd say the best approach is to just look at the most successful countries and see how they do it.

I've never understood this line of argument - the claim that being "successful" means you have the best economic system and others should emulate it.

I mean, if you had tried to apply that logic in literally any other historical period except for today or the recent past, it would have led you to conclude that you should support colonial empires, or slavery, or various other such practices that were done by "the most successful countries" between 1500 and the early 1900s.

What is so magical about the present historical period that makes this line of thinking valid today, when it would have obviously led to reprehensible conclusions at any other point in history?

We all recognize the fact that, for virtually all of human history, the most successful countries got their success in part by horribly mistreating other people. We recognize the fact that, for virtually all of human history, "success" was built on the bones of the oppressed.

Why should we buy the claim that, somehow, today it's totally different?

Especially given the fact that the advocates of the status quo have always claimed that "today it's totally different"?