Wednesday, October 23, 2013

None of them along the line know what any of it's worth

The greatest hesitation I have about the market economy is the wedge between demand and the willingness to pay that is the ability to pay. This is, after all, why full employment is so important. This is why opportunity and equality are so important. Even if we were to put aside interpersonal utility comparisons, this wedge seems to present insurmountable problems when dealing with any kind of welfare claims about the market economy. At best we can say that given these constraints individuals do their best. We can't say anything about the quality of the system as a whole that isn't contingent on implausible assumption about the quality of the distribution of the ability to pay.

The trouble is the ability to pay is tied up with productivity, and this doesn't seem to be a justifiable basis for distributing well-being. At the same time allocating productivity efficiently is the only chance of getting a surplus in the first place to distribute.

If we have robots, robot socialism is probably an answer. Until then I just don't know. Advocacy of market economies in a lot of ways is fundamentally practical. There's no particular reason to like their results except that their results just seem so good in practice. Since that's largely what we have to go on it's not a trivial point.


  1. It's so unfair that the people who actually make things get them!

    1. I don't know that it's "so unfair". But I do know that marginal revenue products of workers are certainly not evenly or even randomly, and almost certainly not fairly distributed.

    2. Please define "fair" with some objective criteria.

      FYI: Life isn't "fair." Most of us adults realize this by the age of thirteen.

    3. 1. I'm not sure you can define it objectively. But if you think so, then why don't you start?
      2. Agreed. That's the point of the post, no?

    4. Then why are you prattling on about fairness exactly?

    5. You've honestly lost me Tau. By "prattling on" do you just mean "mentioning as something to think about"? Also, are you under the impression we must have objective definitions of things before talking about them (if so, then what's the point of talking about practically anything we value?).

      I really need actual answers to these questions before I can answer you, much less take you seriously.

    6. People aren't paid according to productivity. They're paid the smallest amount they can possibly be paid in order to get their productivity. It's a big difference.

    7. What I need from you is something other than your famous goalpost moving.

    8. When have I moved the goalpost? When have I ever said "there is an objective standard of fairness and this is what I think is important" such that I am moving the goalpost by disputing your point about an objective standard now?

      What you know, deep down, is that you made a dumb assumption about the claim that didn't have anything to do with what I said, and when I didn't take the bait you were left without much of an argument left. Or else you ARE under the impression that there has to be an objective definition of everything - in that case you need to be disabused by the notion.

      Whichever it is there is no sense in which I have moved the goalpost on the question that you raised. None at all. And if there is, quote me and lay it out rather than doing your anonymous sniping. As of now you are dead weight on this thread, Tau. Change that.

    9. This comment has been removed by the author.

    10. mmcirvin, consumers don't offer money for exchange based upon the cost of the good. They offer the smallest amount that can possibly be paid in order to get the good.

      But more than that, one certainly is not forced to take an underpaying job nor are they forced to buy an overpriced good.

    11. re: "But more than that, one certainly is not forced to take an underpaying job nor are they forced to buy an overpriced good."

      Kinda depends on your sense of "forced". Certainly there are very reasonable definitions of "forced" where you are not so forced, I'll agree to that.

      But that strikes me as hiding behind definitions. What about the person that can't find a job he can survive on or who only faces overpriced necessities? Surely the conversation doesn't end when we rule a narrow definition of "forced" inapplicable.

    12. Most Americans are in the top 1% of world incomes. The minimum wage puts one around triple the world median income. I don't think Joseph's definition is narrow for wages.

  2. Gene, when you talk about the people who make things, are you referring to the people who provide the capital to make things or the people who directly make things? Because I know plenty of people who make things for incredibly profitable organizations that can barely make ends meet.

  3. There is a matter of "willingness to work" in the ability to pay. I don't mean that in a derogatory way, either. From what I've seen, the wage gap for laid off workers is often really high. It's a pretty big step to take a 50% pay cut, especially if a lot of it will be lost to taxes, child care, etc. Half of US workers are in the upper 1% of world incomes but many of those are not even near the upper 1% of productivity. Wage levelling is bound to occur

    From what I've seen, admin has been getting hit increasingly hard for decades. Increased demand won't bring those jobs back. Nor will it bring back the IT jobs that are now outsourced to international help desks.

    Companies are downsizing in the midst of increasing revenue. They have to in order to survive in the global marketplace. Plus, they all have their sites on the global market. Either they will be able to create a model that manufactures product for developing countries at a price the market will bear or someone else will and they will bew grossly uncompetitive in any market.

    My low income friends are being killed by housing costs. I think trying to save the market by pushing those up was a very bad idea.

  4. Daniel:

    (a) What is incorrectly allocated in the structure of production that allows people to desire to consume, but have nothing to exchange?
    (b) It is probably true that if we bypassed the financial system, and inflated the currency, by directly, say, crediting people's debit cards - as long as it was done equally, that this would increase activity in the economy by redistributing savings and investment that are not moving, to consumers who desire to spend. We've been talking about this for a couple of decades now.
    (c) But why is there structural misallocation in the first place, and what misallocations are we creating this way?
    --- We are creating poor single parent households. Would this activity increase the rate of creation of single parent households?
    --- We are clearly failing at education of our work force compared to the Germans
    --- We are clearly transforming old age savings into academic institution equity, and long term student debt, without performing any useful education other than sortition.
    --- We are clearly immigrating vast numbers of low wage workers rather than employing our young and old at higher cost, and therefore creating two dependent classes.
    --- We are clearly destroying the system of intergenerational cooperation of savings and borrowing, and the information system that goes with it.
    --- We are clearly depending upon future anticipated growth, based upon a five hundred years of the spread of anglo absolute nuclear families, accounting, law, money and prices around the world by forcible conquest and unforced competition.


    You use the artful word 'wedge' as a means of obfuscation: As OBSCURANT LANGUAGE, in order to OBFUSCATE the underlying CAUSAL RELATIONS. This is what it means to speak as a leftist: using obscurant, and therefore, unscientific language. :) At least the right's religious people speak in analogy not obfuscation. :) The left's religious people simply use obfuscatory language, and artificially select short time horizons so that they can ignore externalities. :)

  5. Unfortunately, there is no evidence that "the ability to pay is tied up with productivity." The productivity of a typical Apple engineer is vastly higher than the productivity of a supermodel, but the supermodel gets enormously more money than the engineer. The productivity of essentially all stock analysts is negative -- studies show irrefutably that the more often people trade stocks, the more money they lose, and by far the best strategy in the stock market is to buy a broad-based portfolio that tracks the market, and hold it as long as possible. Yet stock analysts make vast amounts of money.

    Lastly, the productivity of psychic palm readers or dowsers or psychic surgeons is nonexistent. Yet these charlatans stay in business forever, while businesses that produce real products and fill an actual need -- like, say, the cellphone company Nokia, or the computer company Atari -- collapse and go out of business.

    Making money has nothing to do with productivity. The ability to make money is tied solely and exclusively to the capacity to convince other gullible dupes that you are providing them with something perceived as valuable. But that is not productivity. It's con artistry.

    1. If the supermodel is not bringing productivity of some sort, why are they paying her so well?

  6. This is a really thoughtful post. Thanks for writing it. I had a little bit of trouble following you at a few points (e.g. the referent of "this" in the second para, and the meaning of "allocating productivity"), so, if you're looking for constructive feedback, it would be helpful to me as a reader if you spelled things out a tad more. Or not. It's your blog.


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