16
Jun
2014
Potpourri
==> My latest Mises CA blog post goes back to the issue of “productivity” versus labor compensation.
==> Cory Massimino also opposes the shooting of cops in pizza places.
==> Rognlie has the longest “Note” you’ve ever seen, dissecting Piketty’s argument in terms of estimates of elasticity from the literature.
==> This Noah Smith post on macroeconomics is refreshingly honest. Yeah yeah yeah, many of you aren’t going to like Noah’s methodological position, but the point is, he’s showing that “cutting edge” macro is not very sharp.
Cory’s post is revealing in the sense that, while he makes the obligatory “cops are people too” argument…even after characterizing them as terrorists, he revealingly outlines his main rationale behind his opposition to cop killing. The fact that it will empower the state even more!
So your movement characterizes police as agents of a terrorist state, takes a relatively weak stand on the issue of using violence against them (e.g. ,”I wouldn’t EVEN harm them”), and acts surprised when a couple of loons go off the reservation with their AK’s.
I often wonder how mind twisting it is for you all that it was the state who peacefully backed down during the Bundy standoff, while a couple of his supporters were the ones that ended up going on a violent rampage.
“I often wonder how mind twisting it is for you all that it was the state who peacefully backed down during the Bundy standoff, while a couple of his supporters were the ones that ended up going on a violent rampage.”
Not mind twisting at all. It’s kind of like when a liberal supporter goes on a killing rampage. I just think, “wow, there are some crazy people in this world”, and then I move on with my life. Why, do you blame the liberal ideology for liberal mass killers?
Truly, I can’t recall a recent crime spree in the name of increased stimulus spending and increased environmental regulation…care to clue me in?
“when a liberal supporter goes on a killing rampage”
such as?
Chris Dorner, for one, is a liberal who went on a killing spree. Killed some cops just like those other nuts. Now, I’m sure that conservatives jumped on that fact to paint his liberalism as a contributing factor, but I’m not some idiotic buffoon that isn’t able to understand that crazy people do crazy stuff, and I don’t blame political philosophies for mass murderers. I blame mass murderers for mass murders. I’m weird like that.
“I don’t blame political philosophies for mass murderers”
It’s possible for a political philosophy to provide a rationale for murder in the mind of the murderer, though.
“In the mind of the murder” heck, couldn’t just about anything possibly provide that once inside the mind?
lots of things could, potentially, but not ‘anything’. Political ideologies can be particularly powerful in that regard however.
“lots of things could, potentially, but not ‘anything’”.
So “just about anything”
I’m sorry, is your point that a political philosophy can not provide a rationale for murder?
No, no. My point was merely that your initial expression was too vague to mean much of anything.
To which you agreed, then kind of clarified.
Thanks.
To murder, you have to have zero respect for private property.
or you just have to have zero (or little) respect for the life of the person you murder.
If you go the Libertarian/Rothbardian Self-Ownership route then it’s the functionally the same thing. The murderer has invaded his property in his (the victim’s) person.
Their life is their own private property, unless you happen to think the State has a legitimate claim over people’s lives… but you surely don’t believe that.
You said yourself no such claim has ever existed.
ok.
What of the recent uptick in “eco-sabotage” of genetically modified crops? (which could be viewed as a part of the very, very long history of environmental arson)
“In a competitive market economy, there is a tendency for workers, landowners, and the owners of capital goods to be paid in accordance with the marginal product of their inputs.”
Ah, yes, that “competitive market economy” that only exists as a fantasy in people’s minds.
Meanwhile, in real world industries or businesses, the evidence that prices are magically equated towards marginal cost, or that wages are equated towards marginal product of labour is either non-existent or utterly insignificant.
Most prices are not based on marginal cost, nor do they tend towards marginal cost: they are set on the basis of total unit costs plus profit mark-up Wages are mainly determined by social, institutional and legal factors.
Even most business people have no great interest in paying people wages equated to marginal product of labour:
“Most internal pay systems emphasised the importance of equity and fairness. Managers often imposed bureaucratic pay structures in order to avoid favouritism or overpayment and to provide clarity about how much everyone was earning. Contrary to economic theory, it was seen as harmful to pay workers their marginal productivity because this was a) unobservable and b) harmful to morale as people were suspicious of each other and why some were earning more than others. It was seen as more convenient to pay workers doing similar jobs the same wage to avoid some feeling underpaid.”
http://robertnielsen21.wordpress.com/2013/12/23/why-wages-dont-fall-during-a-recession/
Ah yes, that fantasy world without murder or rape. According to LK illogic, we cannot reason that absence of murder and rape would make people’s lives better off, because “the real world” has seen rape and murder take place. A murder and rape free world does not exist. It is only in our imaginations. You anti-rape and anti-murder ideologues! You’re not being empirical!
Oh woops, I am naively assuming LK would be consistent in this regard in which case he would conclude that maybe rape and murder contribute in some way to material well-being as well. That would be the empirically sound conclusion to make. I mean, LK illogic suggests that if rape and murder were really bad as anarcho-capitalists are saying, then why does every “modern economy” have rape and murder? Clearly rape and murder are “associated with” modern, healthy, growing economies.
So to be LK “logical”, we will say that while we can say that our imaginary rape and murder free world would be an improvement, we can’t claim our imaginary world of absence of states would make people’s lifes materially better off. Because the goal of LK logic is nothing but a desperate, logically flawed attempt, to advance the state. Period.
“that fantasy world without murder or rape”
The “competitive market economy” is not a world “without murder or rape”.
When Bob says that “In a competitive market economy, there is a tendency for workers, landowners, and the owners of capital goods to be paid in accordance with the marginal product of their inputs”, he is referring to a specific economic model, which is based on often unrealistic assumptions.
Your irrelevant rant about about murder and rape suggests that you have little familiarity with such economic concepts.
Philippe:
As expected, the argument about LK’ fallacious logic, flew right over your head.
I am not claiming that an anarcho-capitalist world as you understand the term will have zero rapes or murders.
I am saying that LK’s illogical premises lead to absurd conclusions like we can’t argue that a murder and rape free world would make people better off as we have never observed a rape and murder free world.
Your statements about what Bob said refer to arguments I did not intend to address in my reponse to LK. It is ridiculous to assert that my intended argument about LK’s fallacious logic “suggests” I am unaware of a particular economics model.
Nah, M_F your incoherent rant stems from your inability to refute what I said: Most prices are not based on marginal cost, nor do they tend towards marginal cost: they are set on the basis of total unit costs plus profit mark-up Wages are mainly determined by social, institutional and legal factors.
No doubt these simple facts cause you to go berserk.
“Wages are mainly determined by social, institutional and legal factors.”
Incredible that anyone commenting in an economics blog could deny that wages are determined mainly by economic factors:
http://www.economicsonline.co.uk/Competitive_markets/The_labour_market.html
As usual, LK sets up a straw man, and ignores and evades the response I gave to his illogical claims about knowledge. He does not want to think to the logical conclusions because his intention is not to think logically to arrive at sound conclusions, but rather to push his ideology of statism.
I did not, nor do I intend, to argue that prices are set in accordance with marginal cost, rather than full cost.
I already refuted LK’s fallacious prattling about markup prices, numerous times.
LK, if you keep dodging the arguments, you will only continue to publicize your flawed thinking.
LK says “Ah, yes, that “competitive market economy” that only exists as a fantasy in people’s minds.”
LK does not believe we have a perfect market economy. Neither does MF. The difference I think is whether the model is achievable.
Neither also believes that we have a world without rapes and murders.
We can claim that a world where everyone loved and respected everyone else we would have no rapes or murders.
We can claim that in a competitive market economy there is a tendency for workers to be paid according to their marginal product.
I think both are true.
The former is not much use because we do not know of a way to get there.
When some people talk about competitive economies, I believe that they often think they have a way to get there. Perhaps by the Govt. not existing any more, or at least scaling down.
Others think that even without Govt interference there would not be perfect market economy. Possibly LK believes that speculating about a world where there is a perfect market economy is no more use that speculating about a world where everything is peace and love. We are entitled to do so, but it is not much use.
People make exchanges based upon their subjective values. In business, people need to make exchanges based upon making a profit or they will soon go out of business.
In a competitive market economy, there is a TENDENCY for workers, landowners, and the owners of capital goods to be paid in accordance with the marginal product of their inputs.
Business people who tend to not do that go out of business.
There is not even a tendency for this to happen in most markets.
Yes, there is.
That is: “a TENDENCY for workers, landowners, and the owners of capital goods to be paid in accordance with the marginal product of their inputs.”
LK:
“Meanwhile, in real world industries or businesses, the evidence that prices are magically equated towards marginal cost, or that wages are equated towards marginal product of labour is either non-existent or utterly insignificant.”
Who is claiming prices “magically adjust”? Oh that’s right, nobody.
” Most prices are not based on marginal cost, nor do they tend towards marginal cost: they are set on the basis of total unit costs plus profit mark-up
“Wages are mainly determined by social, institutional and legal factors.”
No, wages are mainly determined by supply and demand, and by mainly determined, I mean exclusively determines.
Anything that affects wage rates, must affect either supply, or demand, or both.
In a free market, wage rates will tend to adjust towards clearing, given a supply and nominal demand. Keynesians know this, which is why they advocate for the state to use coercion and inflate and/or increase nominal demand in order to prevent “deflationary death spirals” that would otherwise occur, meaning what would otherwise occur in the absence of statism, meaning what would happen in a free market.
Markup prices adjust towards clearing by way of factor prices tending towards clearing. A rise in nominal demand would, in a free market, tend to make factor prices and hence markup rise towards clearing. A fall in nominal demand would, in a free market, tend to make factor prices and hence markup prices fall towards clearing.
All of economic history is 100% consistent with the above theory. The theory does not assert that prices have to rise or fall over time, as compared to their past values. It instead states that prices will be higher or lower than they otherwise would have been in the absence of the change in nominal demands. This means that nominal demand increases that are accompanied by falling prices does not imply that demand increases tends not to raise prices after all, and it means that nominal demand decreases that are accompanied by rising prices does not imply that demand decreases tends not to lower prices after all.
Regarding business behavior that includes equity as factor in establishing bid prices for labor, does not disprove the marginal product theory, for the marginal product theory does not assert that everywhere and always are wage earners are paid their marginal product without deviation. Again, it is a tendency. If the psychology of workers and employers at the time regards equal wages for unequal work as optimal, then the tendency of wages to be their marginal product still exists. It exists empirically in the form of different wage rates for different marginal product job types, rather than different wage rates for different individuals within a particular job type.
“the tendency of wages to be their marginal product still exists. It exists empirically in the form of different wage rates for different marginal product job types”
Circular. You are saying that wages are determined by marginal productivity because jobs with different marginal productivities are paid different wages.
Not circular.
No, I am not saying that workers of different industries are paid their marginal product as caused by or because they are paid differently.
I am saying that the tendency exists, and you can just see it as different wage rates for workers of different industries.
“Markup prices adjust towards clearing by way of factor prices tending towards clearing. A rise in nominal demand would, in a free market, tend to make factor prices and hence markup rise towards clearing.”
Ah, yes: the “free market economy” that only exists as a fantasy in your mind?
Thanks for confirming everything Is said!
Ah yes, the imaginary world with less or no rape and murder than what currently exists that grounds your belief that changing the real world into your imaginary one will make the world better.
Oh my gosh! LK doesn’t even understand himself as an actor that purposefully acts to change his environment to better suit his interests. According to LK, even thinking of ways to change and improve the world from what it currently looks like, is a sin.
But only if your imagination is anarcho-capitalism.
If your imagination is Keynesian-Statist, then it is OK to imagine a different world than what exists.
LK, you continually make yourself appear woefully dull.
How dare me, incorporating my imagination of a world with less rape and murder into arguments that such a world would be better for me.
If only I just did what LK claims I should do, and…never think of ways to change and improve the world to better suit my well being because that would be evil imagination at work. Maybe I really should just leave the responsibility of changing the world for the better to the state like LK. Then I don’t have to think anymore either. I could also just look up historical events and claim my theory is correct.
LOL
lk wrote”Most prices are not based on marginal cost, nor do they tend towards marginal cost: they are set on the basis of total unit costs plus profit mark-up Wages are mainly determined by social, institutional and legal factors.”
Okay then explain why some profit mark up is 1% and others mark up- 35%?
Even most business people have no great interest in paying people wages equated to marginal product of labour:
The marginal product is what the businessman gets in return for employing capital and labor.
Since the goal is profit, he will only pay to labor that which he thinks allows him to profit.
His wage offer to the laborer, therefore, *is* the laborer’s value *to the employer*. And absent a competing employer, that wage *is* what that laborer is worth.
To say it another way, absent a competing employer, if an employer is only willing to offer a low wage, what that means is that the marginal value of the laborer is low.
you clearly have no understanding of the economic concept known as marginal product. Your argument is purely circular, as always.
Exploitation is impossible according to you because workers are always paid what they are worth by definition. You define exploitation out of existence by just asserting that it can’t exist.
Person A owns some stuff.
Person B owns himself, and he can labor.
Neither person is entitled to what the other has.
Therefore, when they voluntariily agree to a trade, the compensation received (by both parties) *is* the marginal value of what they gave up.
Besides, the laborer typically has an easier time trading for a low wage than he does gathering resources and constructing what he wants with his own bare hands.
The laborer is better off with the trade, because it lowers the costs of acquiring wealth.
Philippe:
You assert exploitation exists in free trade by definition.
Fairness in economic freedom is impossible to you, because you have defined economic freedom to be unfair.
I believe exploitation is possible even in a voluntary exchange. It requires some other involuntary action or lack of information elsewhere.
Take the employer who pays a worker in “magic beans”, where the worker believes in the magic but the employer knows they are just beans. The employer is exploiting the worker even though the exchange is apparently voluntary.
To demonstrate that there can be no exploitation in a voluntary exchange you must show that there could not be such an occurrence.
You could argue that such an exchange is not voluntary, but you are then left with the problem of showing that any exchange between worker A and employer B is voluntary.
Harold, if the argument is that mere information asymmetry is sufficient to make exchanges exploitative, then again, you too are saying that all trade is exploitative *by definition*, since everyone has different mental states all the time, and thus information asymmetry is present all the time, however minor or remote it is.
A computer producer and seller for example would be an inherent exploiter because they know more about that computer than the buyers, as the buyers aren’t the producers and don’t have as much information about the entire production process which would affect the computer’s quality.
Suppose the following example. Suppose you continue to buy regular, normal 18 inch pepperoni pizzas from me for $1000 a piece, because you believe they will make you invincible. Given that information, am I exploiting you?
Suppose you say yes, I would be exploiting you. Why would I be? Is it because I know better?
What if I too believe those pizzas will make people invincible? Are you saying that only if I am deluded, will I cease being unethical?
In other words, exploitation in your framework would be greater, the smarter and more intelligent people become. The more intelligent they are, the more they exploit because they know more than the buyer.
But what if not everyone can be equally intelligent by nature?
If you dig really deep into your beliefs, you will find that your idea of exploitation springs forth from diversity, differences, that is, individuality.
You sure?
LK you are incredible. The quote you supply obviously contradicts itself.
“it was seen as harmful to pay workers their marginal productivity because this was a) unobservable”
How in the world can you pay workers according to their marginal product when it is unobservable? Obviously, if this was true, it would render this impossible.
Also, you are in the vast minority if you reject price theory on the basis of irrelevant surveys.
Question: When demand increases what do you do?
Answer: Increase overtime workers.
How do they know if they have the resources to increase overtime workers, if the survey does not make this specification? Of course, they have no idea. They are just answering in generalities which don’t apply to concrete events happening in the real world.
Since you have failed to statistically verify any statements you have made, under your own criteria, what you are doing cannot be classified as science. I guess we that leaves us with pseudo-science.
That is an insult to pseudo scientists.
Haha I’d say.
In addition, we have yet to empirically validate the use of surveys.
Often when people take a survey they are asked if they would support some public work for increased taxes. A lot of the time, this is supported according to the surveys.
However, once this policy is put in place, it becomes enormously unpopular, despite the previous endorsement. How is this explained?
Do they come to the conclusion that surveys are unreliable? Of course not!
“A lot of the time, this is supported according to the surveys.
However, once this policy is put in place, it becomes enormously unpopular, despite the previous endorsement. How is this explained? “
All that would prove is that people’s opinions can and do change,
However, in the case of price surveys, we are not asking about mere opinions: but about what concrete actions are regularly taken to set prices. The fact that over 21 surveys in over 21 different nations over many years show very similar results demonstrates we are dealing with a real business behavior here.
First of all, are you aware that no one is denying that its impossible for a business to offer a mark up price?
Please refer me to an Austrian who says that.
LK,
There is a reason Walmart doesn’t charge a million dollars for a can of coke.
When Austrians say there are “forces” against Walmart doing this, they don’t mean actual forces like compulsion. It is an analogous term.
It means Walmart is highly influenced to not do this. Obviously I could just go somewhere to buy another can of Coke.
Therefore, in most if not all instances, you must admit there is some kind of competitive force. Even if you just admit it is miniscule, this is at least one force preventing Walmart from charging a million dollars for a can of Coke.
Austrians argue this is a necessary property of exchange and value. This ‘competitive force’ always exists if exchanging exists. Its undeniable as long as you attribute the action of exchanging to human beings.
“They are just answering in generalities which don’t apply to concrete events happening in the real world. “
lol.. So nothing they say ever happens in the real world? So you think no survey ever reports what happens in the real world?
Thanks for showing us the depths of your irrationality.
This is what is happens in the real world: wages respond market forces. Read about it here:
http://online.wsj.com/news/articles/SB10001424052702303287804579447623214129940
So notice how we are both guilty of not assigning any quantity to our statements as a poor debate tactic.
To specify, my statement should read, “generalities which don’t apply to SOME concrete events.”
However, this still gives no useful information.
Obviously, its possible to just offer a mark up price.
However, the survey does not specify under WHICH concrete event this occurs. Therefore, the only answer offered is just a generality not referring to any specific actual event, nor any specific possible hypothetical event.
For example, when the economy is in depression or recession, or under another 100 specified conditions, their answer may change.
Furthermore, even if you did specify many conditions, it probably be impossible to specify EVERY SINGLE FACTOR involved.
Furthermore, you are only asking about a specific INSTANCE IN TIME. The price could have been established in the past by competitive forces, but under relatively recent conditions, they just stuck with their established prices.
Furthermore, the survey only includes business’s CURRENTLY STILL IN BUSINESS. In order to characterize a historical event, for example, you must randomly select a sample out of all the existing business’s currently in existence at the time. However, since 90% of businesses file for bankruptcy in America, this would be next to impossible.
Good luck fulfilling all of these shortcomings in your methodology. Let me know when you publish something fulfilling this criteria.
When the survey asks: “When the demand increases…”
The demand never JUST increases. The answers received just depend on however the person chose to interpret the question. I am sure some of them just assumed ideal conditions. I am sure other assumed other conditions. Who knows?
Bob,
on the one hand you argue that workers receive the full value of their product, and on the other you imply that the divergence between productivity and wages is due to financiers robbing workers through the monetary system somehow. These seem to be contradictory positions, so which one do you actually support?
“Another quick point is that the above chart dovetails nicely with David Howden’s thoughts about “income inequality,” the (allegedly) scary stats for which often start in the early 1970s. There was indeed a major change in the U.S. financial system in the early 1970s, but it’s not the route progressives want to take when complaining about the deteriorating position of the middle class.”
Tend to recieve.
In a competitive market.
“Tend to recieve. In a competitive market.”
In that article, Bob is not arguing that workers receive or tend to receive the full value of their product in an imaginary world that doesn’t exist.
He’s not arguing that in the real world workers don’t actually receive or tend to receive the full value of their product.
He is arguing that in the real world, workers receive or tend to receive the full value of their product.
But in the same article he implies that the divergence between productivity and wages is due to financiers robbing workers through the monetary system somehow.
So there is a contradiction there.
“is due to financiers robbing workers through the monetary system somehow. ”
and taxes. and excessive regulation. and pointless licensing. and other needless middlemen.
No, Bob is saying in a free market workers tend to earn their marginal product.
He isn’t saying that workers earn their marginal product in all concievable ethical systems.
No contradiction.
on the one hand you argue that workers receive the full value of their product …
It helps if we clarify that the “full value” will be different from employer to employer; And also that “full value” is attained when the two parties agree to the terms of employment.
One’s “full value” isn’t based on output such that X amount of output “ought” to equal a set amount of pay, but rather on subjective valuations of what the other person is offering in trade.
stop pretending that you have any idea of what you are talking about.
Not an argument.
Some people might respond, “Good! Why should ‘unearned’ income go to these fat cat exploiters? Only the workers truly contribute!” Yet this statement is simply incorrect, from an engineering perspective. The workers by themselves are actually quite unproductive;
LOL. That was awesome.
Bob,
I just read your article on Bohm-Bawerk’s critique of the exploitation theory of interest. Basically you just ignore the elephant in the room. You assume that the distribution of the ownership of capital is perfectly fair and just, that the remuneration received by the owners of capital is perfectly fair and just, and so there is no exploitation. In other words your argument is that there is no exploitation because exploitation doesn’t exist.
If no one is entitled to anyone’s wealth, no agreed upon wage can possibly be exploitative.
Oh no Philippe, Bob is not assuming capital is owned fairly and justly.
He fully accepts that your preferred ethics are being practised to some positive degree in the real world.
“You assume that the distribution of the ownership of capital is perfectly fair and just”
This is injecting a moral criteria into economics. If economics is a science, then it should be value-free. Your concepts of “fair” and “just” make no difference to the debate. Since Murphy is an economist, the question of fair and just are irrelevant.
“Your concepts of “fair” and “just” make no difference to the debate. Since Murphy is an economist, the question of fair and just are irrelevant.”
“The worker will get justice if he gets all that he has labored to produce up to this point. If … he has up to this time produced a pile of unfinished ore … then he will be justly treated if he receives … the full exchange value which this pile of material has, and of course has now”
“If there is any doubt that the worker above is being treated fairly by being paid only the discounted value of his marginal product (i.e. $1,000) rather than the eventual present value of his marginal product, Böhm-Bawerk points out that the worker is certainly free to lend his wages out at the prevailing rate of interest of 5 percent per year.”
I guess you’re wrong, Hank.
http://mises.org/daily/1680
If administered prices are such a problem and are so natural and prevalent, why do business people constantly seek government help to stifle competition? Why does everyone shop at big box stores for cheap prices? These are actually rhetorical questions. We’ve been over this before. And I’ve cited Butler Shaffer’s book before.
http://consultingbyrpm.com/blog/2013/10/outrage-over-outrage-over-government-shutdown-im-starting-with-the-man-in-the-mirror.html#comment-75073
Bob R.,
Those are excellent passages. I guess the NRA was abandoned because it wasn’t really needed afterall (maybe Roosevelt & Co. were initially bamboozled by the reigning laissez-faire ideology of the day into thinking the price system was relatively free). And those pesky Schecter Bros. and others couldn’t possibly have undermined an NRA that wasn’t even needed.
Marginal product.
I wondered what the Y axis of the graphs was – it is natural log of indexes, so we are defining productivity and wages the same in 1947.
If I have your interpretation right, it means that the workers are contributing a lower percentage of the value of stuff. They are still getting paid what they add, it is just that are adding less of the total than they did in 1947. The rest of the value is added by capital rather than labor inputs. This might be expected if machines are getting better at operating without people.
Whilst this might not say anything about marginal product, does this suggest that inequality is likely to increase if this trend increases? This may not be a problem, but is that the conclusion? Or will capital ownership spread, so individuals income will come more from capital than labor? Or have I got it totally wrong?