Unemployment

[Gustaf]

Of course in a rational society when millions are out of work, while other millions suffer from burnout, backache or sleep-shortage due to overlong working time, we would redistribute work in a way that allows us to produce the same amount of goods and services with a 20hour-week for everyone.

But since the capitalist economy's goal is not the satisfaction of needs, but the production of abstract wealth, this is impossible.

I'm afraid that's just laughably wrong. You can't redistribute work like that.

Also, talking about the capitalist economy's goal makes no sense. What happens in a free market is the result of agents in that market trying to satisfy their preferences. Apparently, peoples' preferences seem to be for a 40-hour work week, given the various constraints that exist.

The capitalist economy that you so despise has led to people being more satisfied now than they have ever been anywhere in human history.

PS: I'd also like to note for the record that I think Opebo overdid it this time. No one can be so stupid as to believe what he posted...

[Gustaf]

I'm afraid that's just laughably wrong. You can't redistribute work like that.

If it is technically possible is arguably.
But you will agree with me that the way work is distributed today is anything but rational, and that, if possible, we should organize it in another way. Not?

Also, talking about the capitalist economy's goal makes no sense. What happens in a free market is the result of agents in that market trying to satisfy their preferences.

The fact that we produce for a market is just the substantiation of what I said: A player in a market economy doesn't think "What / How much do people need?" but "What / How much can I sell?"

The bum down the street is the living example.
While it is absolutely no problem to produce enough food for all of us (in fact, we produce a lot more than we need, and through away tons and tons of it), he is hungry.
Because he can't pay. So his needs are not satisfied. He is economically nonexistent.

Commodification is the only thing that matters, and not satisfaction of needs, and that's my point.

Apparently, peoples' preferences seem to be for a 40-hour work week, given the various constraints that exist.

Sure. Everyone is a player in the game.
You won't here stupid moralist stuff like "Uh, the bad capitalists force people to do xyz..." from me.

The capitalist economy that you so despise has led to people being more satisfied now than they have ever been anywhere in human history.

Capitalism has indeed produced more wealth and a higher standard of living than every pre-capitalist economy. Only a fool would deny that (some self declared "socialists" actually do...).

But that doesn't change the fact that the satisfaction of needs is in no way the goal of capitalism, but a fall-out in it's process of productivity increase.

First off, people who are unemployed can't easily replace the people who work. The 35-year old high school dropout with an alcohol problem can't just jump in and share the workload of the investment banker working 80 hours per week. In the West many of the people who are unemployed are so because they lack skills demanded in the market.

Secondly, even to the extent that people do have the right skills work isn't an infinitely divisible mass. If I invest 20 hours in reading up on the election of 1976 I'll be the only one able to invest another 20 hours in writing a summary of it. I can't share that job with someone else. Nor could I easily have shared the reading. A lot of jobs in the modern economy has these properties.

Thirdly, there are many fixed costs involved in an employee, such as commuter time, having an office, etc. These costs make it inefficient to share jobs between a lot of people.

Now, I'm not so arrogant as to think that everyone else in the world has failed at rationally organizing work whereas I alone have found the golden path to paradise. If it actually were more efficient to divide work between more people I suspect some of the many companies struggling to get ahead in the market would be doing it.

As regards how a market works, you seem to be mixing up different things. An agent in the market doesn't think "how much can I sell." He or she thinks "how can I best satisfy my preferences" Most people have preferences such as having a house or food and to obtain that they must have money. To have money they must work (thus, sell their labour services). Thus, they work. They don't sell as much as possible, because most people also value leisure time.

It is true of course that the agents typically don't consider how to satisfy the needs of everyone else. They might not aim to satisfy the preferences of the bum on the street. That might be a moral failure of human beings, but it's hardly the system failing to satisfy preferences.

The capitalist system does not really have a goal. People have goals and these goals tend to involve satisfying their preferences by selling something in the market. If people preferred not doing that there is nothing inherent in capitalism forcing it upon them.

Of course, not everyone gets everything they want. Then again, I think more people are getting what they want to a larger extent now than ever before. And in my book, that is a good thing.

[Gustaf]

The capitalist economy that you so despise has led to people being more satisfied now than they have ever been anywhere in human history.

That's a tad reductionist for you, no? Of course at that reductionist level, even Marx himself would not have disagreed.

I'm conservative and a bit of an empiricist - I like democracy and capitalism because they have a very strong track record of delivering good things in society.

I always disliked the attitude of people who enjoy the vast freedoms and benefits that our societies today deliver but claim that others are better off being poor and oppressed. It's a bit of a silly point to tell someone they should go try North Korea and see how they like it, but then again it's even sillier to suggest that things like freedom and food on the table are useless or overrated.

[Gustaf]

Also, talking about the capitalist economy's goal makes no sense. What happens in a free market is the result of agents in that market trying to satisfy their preferences. Apparently, peoples' preferences seem to be for a 40-hour work week, given the various constraints that exist.

What utter nonsense.  The goal of the capitalist economic or 'free market' is to serve a small upper class which has power (that power is expressed as capital).

The preferences of people who do not have capital are completely irrelevant in a capitalist society, Gustaf.  You might as well talk about the preferences of the pigs and cattle being slaughtered.

The capitalist economy that you so despise has led to people being more satisfied now than they have ever been anywhere in human history.

Talk about a baseless unproven assertion!  Gustaf, surely you realize that 'satisfaction' is not only subjective, but in point of fact not even knowable by the 'individual himself.  The system brainwashes the slave into accepting his role (or his evolved social instinct makes him adapt in order to survive, it comes to the same thing).

PS: I'd also like to note for the record that I think Opebo overdid it this time. No one can be so stupid as to believe what he posted...

Yes, yes, I find you to be an idiot, you find me to be 'stupid'.. where does that get us, Gustaf?  Your posting is pathetically lazy nowadays.  You might as well not bother.  Instead perhaps you could post something of interest - such as policy recommendations of your own.

I didn't really bother to read this, but I assume it's your usual tirades. I'm afraid I don't find them sufficiently interesting to mock at the moment, so there is little point in directing them at me.

[Gustaf]

I always disliked the attitude of people who enjoy the vast freedoms and benefits that our societies today deliver but claim that others are better off being poor and oppressed. It's a bit of a silly point to tell someone they should go try North Korea and see how they like it, but then again it's even sillier to suggest that things like freedom and food on the table are useless or overrated.

Oh, sure. But Republicanism certainly did not argue in that general direction (unless you're now arguing that to critique Westerndemocapitsocietywhateversky is automatically to love Stalin or something; which would be out of character), even if at least two other people in this thread... sigh.

No, he wasn't going that far, so that last post wasn't really directed at him.

Of course, one is free to critique "Westerndemocapitsocietywhateversky" - that's one of the good things about it. I'm just very skeptical of what is going to come in its place. And if one argues that it is bad because people aren't getting what they want or because there are poor street bums, I honestly think that's so naive as to border on being stupid. Precisely because, as I said in my reply, the system being attacked has dealt more efficiently with precisely those things than anything before it. Therefore I suspect one is focusing on the wrong thing if one thinks we could eradicate poverty or bring about happiness if we only got rid of capitalism.

I should note that capitalism here obviously does not necessarily mean unconstrained capitalism. There's plenty of scope for social democracy within the kind of society that I'm talking about.

[Gustaf]

First off, people who are unemployed can't easily replace the people who work. The 35-year old high school dropout with an alcohol problem can't just jump in and share the workload of the investment banker working 80 hours per week. In the West many of the people who are unemployed are so because they lack skills demanded in the market.

Secondly, even to the extent that people do have the right skills work isn't an infinitely divisible mass. If I invest 20 hours in reading up on the election of 1976 I'll be the only one able to invest another 20 hours in writing a summary of it. I can't share that job with someone else. Nor could I easily have shared the reading. A lot of jobs in the modern economy has these properties.

Thirdly, there are many fixed costs involved in an employee, such as commuter time, having an office, etc. These costs make it inefficient to share jobs between a lot of people.

These are good points. Of course I thought about that myself. I have some ideas on it, but I can't put that in words now. Not in English, and not this morning. But you will get an answer on this part, I promise

Now, I'm not so arrogant as to think that everyone else in the world has failed at rationally organizing work whereas I alone have found the golden path to paradise. If it actually were more efficient to divide work between more people I suspect some of the many companies struggling to get ahead in the market would be doing it.

It is not that this ideas are mine (they are about 150 years old), nor did I claim to have found the golden path.

And your second sentence is just wrong: What is efficient for a company has not to be efficient for society as a whole. Producing handguns or crystal meth is an extremely inefficient thing for society, but it is nice cash for the market player who produces it.
So, if market players don't do certain things does not mean that those things wouldn't be great from a society perspective.
This is a common mistake of market liberals / libertarians.

As regards how a market works, you seem to be mixing up different things. An agent in the market doesn't think "how much can I sell." He or she thinks "how can I best satisfy my preferences" Most people have preferences such as having a house or food and to obtain that they must have money. To have money they must work (thus, sell their labour services). Thus, they work. They don't sell as much as possible, because most people also value leisure time.

Sure. But they have to take part in the system to satisfy their preferences, and the system functions under certain rules.

For example, of course you do not work 40h a day to satisfy your preferences in a concrete sense. The value of your work is much higher than that. But you don't get all the value of your work paid, the employer keeps some of it.

This very fact makes pretty clear that capitalism is not just a simple interchange of preferences, but that other dynamics are involved.

It is true of course that the agents typically don't consider how to satisfy the needs of everyone else. They might not aim to satisfy the preferences of the bum on the street. That might be a moral failure of human beings, but it's hardly the system failing to satisfy preferences.

 

No! It is not a moral failure of humans, it is the system. Even if it breaks the bakers' heart every single morning to see the bum hungry on the street in front of his bakery, he can't give away his goods to him for free (he could do it once or twice, but not on a regular basis) because that would hurt his market position. And that is the cruelty of the system.

The capitalist system does not really have a goal. People have goals and these goals tend to involve satisfying their preferences by selling something in the market. If people preferred not doing that there is nothing inherent in capitalism forcing it upon them.

 

The goal is to produce (abstract) wealth by any means. Doesn't matter if you produce hand grenades or baby toys, porn movies or cancer pills. It has to grow.
Example: If a societies' abstract wealth does not grow anymore, it is called "crisis".
This is not a crisis in producing goods and services, like a bad harvest in earlier times. There are the same machines, the same skilled workers, the same natural ressources, the same infrastructure to produce everything people need as they were before the crisis.
It is just a crisis in making money of the goods and services produced. Sales crisis, overproduction crisis are a joke in its self, if you come to think of it.

Of course, not everyone gets everything they want. Then again, I think more people are getting what they want to a larger extent now than ever before. And in my book, that is a good thing.

Oh, no disagreement here. The capitalist society is a great improvement compared with any pre-capitalist society, as I already mentioned I think. But that does not mean that the evolution of human societies should end here.

It's true that what is efficient for a company need not be efficient for the economy as a whole. There are plenty of externalities. But if it was more efficient to organize work differently the company would make money out of it, wouldn't it? You have to prove that there is a social gain that the market actor cannot capture in order for that point to apply to this case.

And I'd like to see proof that employees don't receive the full value of their work. See, the work isn't the only thing giving value. The capital employed in production also adds to the value, which is why capital providers (stock holders) receive part of the value in the form of profits. It's a common mistake by socialists to think that profits is stealing from the workers. If the worker is operating a machine the person who paid for the machine has a reasonable claim to part of the proceeds.

Now, your claim of the market position getting hurt isn't entirely true either. It's true that if the baker gave away bread to everyone who said they couldn't pay he would go bankrupt. But it's also true that he could easily take the day's profit, buy a bread at any bakery, including his own, and give that bread to the bum. This wouldn't hurt his market position at all. It would, of course, hurt himself - he could have eaten that bread. And if his preferences are such that he cares more for himself than for the bum he won't do it.

If you want to be a bit less libertarian you could also say that there is nothing stopping the baker from voting to elect a government that promises to take care of the bum by taxing all the bakers equally. That, again, would not hurt his position.

Your last point I don't follow entirely. There is nothing inherent telling people to amass wealth. It's just what a lot of people do. Some people give away a lot to philanthropy. Some people do decades of volunteer work.

And I'm not sure what this abstract wealth is. If there is no capital to borrow to fund new investments the economy comes to a halt. And if people are worried about the future they consume less, which also means the economy doing worse. I guess one can consider capital markets abstract but there is nothing unreal or magical about them.

Now, I get the point that we might not be done - I don't think so either. But I think progress is about building on what we have, rather than abolishing it.

[Gustaf]

One of the golden rules of economics: We cannot legislate away the laws of supply and demand.

Of course we can.
And we do in several areas of society. For example, firehouses and schools are not built and kept on the base of supply and demand.
And although you Americans seem to be afraid of that idea, in many countries the same is true for railway lines and hospitals.

It is just a political decision. The market is man-made, it is not a supernatural power.

That is not really relevant to the issue here. It is not as if we have done away with supply and demand merely because we have some public financing of certain services.

[Gustaf]

One of the golden rules of economics: We cannot legislate away the laws of supply and demand.

Of course we can.
And we do in several areas of society. For example, firehouses and schools are not built and kept on the base of supply and demand.
And although you Americans seem to be afraid of that idea, in many countries the same is true for railway lines and hospitals.

It is just a political decision. The market is man-made, it is not a supernatural power.

That is not really relevant to the issue here. It is not as if we have done away with supply and demand merely because we have some public financing of certain services.

I was just arguing against the idea that supply and demand are some kinds of law of nature.

Well...it depends on how you define law of nature. It is true that if you, for example, lower prices artificially there will be over-demand/under-supply.

For instance, Stockholm has rent-regulation on apartments. Hence, the waiting lines to get an apartment are at something like 10 or 20 years. As a consequence, people make money on the black market renting out illegally, thus getting the price to where supply and demand actually meet. And of course, well-connected politicians and the like will be able to get cheap apartments in great locations, effectively being subsidized by the less well-connected people living outside of the city (such as immigrants).

In that sense, supply and demand are hard to get around. Of course, in some cases where we have nothing even approaching a free market it is rather different. For example, demand for schools is a non-issue at least in Sweden, since elementary schooling is mandatory. However, now that we have voucher schools one does see schools popping up where people want to go. And a public high school that a friend of mine went to was actually placed in Stockholm, even though the kids attending lived in a municipality well outside the city limits. Presumably because there was a demand for hanging in the city.

And things like fire-fighting and police services are, I think, also prohibited for private actors to engage in. So there is no supply in the typical sense. 

[Gustaf]

Well...it depends on how you define law of nature.

Not really. I think it's fairly obvious that the distribution of different species of squirrel in North Wales is not determined by market forces.

Well, I would argue that something does not have to determine the distribution of different species of squirrel in North Wales in order to be a law of nature.

Market forces obviously only apply to human beings, but then again, so does a lot of things, do they not?

[Gustaf]

Well...it depends on how you define law of nature. It is true that if you, for example, lower prices artificially there will be over-demand/under-supply.

But you don't have to organize eeverything based on prices. Schools, Police, etc. are not organized that way.

And to your example with the Stockholm rents: I'm not arguing that without supply-and-demand in action, everything would be fine. But there is no superior force that implements "the law", that men have to follow. The market is man-made.

You don't have to. But you are likely to create efficiencies. See, the idea of economics is fundamentally to describe human behaviour. Thus, the point is not to say that people should behave in accordance with supply and demand but rather that they tend to do. If you prohibit people from doing something they want they will try and circumvent it. That might still be worth it in some cases but one should always be aware of that cost.

Also, schools and police still depend on market forces in a lot of ways. For example, there is a discussion going on now in Sweden on whether we should raise wages for teachers. The supply of teachers will be higher if the price (wage) of teachers increases. Currently, there is a problem with too few people (especially those with any knowledge) becoming teachers. In a free market the demand for good teachers would likely push up wages quite substantially. Of course, some consumers would then likely be priced out, which we don't want. What happens instead is that the rich pay for private teachers for their kids (I've been one myself).

Thus, the idea that we can ignore demand for education and equalize everyone's education by having a state monopoly on it didn't really work out. The demand from high-income parents for good teaching found a supply somewhere else instead.

Of course, if one goes to political economy one would probably assume that this setup makes high-income parents less willing to pay higher taxes to improve public education since they can solve their problem on the side. So there is a lot you can discuss back and forth.

I think the general lesson economists would point out is that if we want to achieve a certain goal that cannot be solved by the market (say, equal opportunity through making education available to everyone) you want to do it in a way that interferes with the market as little as possible.

[Gustaf]

Well, I would argue that something does not have to determine the distribution of different species of squirrel in North Wales in order to be a law of nature.

Market forces obviously only apply to human beings, but then again, so does a lot of things, do they not?

Yes, but then I tend to find attempts to find 'laws' in most aspects of human behavior to be so much laughable pseudo-positivist reductionist bullsh!t. Which is the point of the (admittedly rather silly) example. Which is quite different from saying that markets do not exist and can be freely ignored in all circumstances; that's obviously untrue as well.

There is certainly a discussion going on within economics right now looking at experimental data from behavioural economics that challenges a lot of the traditional findings. Those on the other side would typically argue that their theories do not claim to predict individual behaviour, but aggregate behaviour. Thus, while we may not know that every person will act a certain way in a given situation we may still see an aggregate outcome and base policy on that. Such as saying that raising the price of a good will on average lead to less consumption of that good, even if not every single individual will buy less of it. And so on.

[Gustaf]

Well...it depends on how you define law of nature. It is true that if you, for example, lower prices artificially there will be over-demand/under-supply.

But you don't have to organize eeverything based on prices. Schools, Police, etc. are not organized that way.

And to your example with the Stockholm rents: I'm not arguing that without supply-and-demand in action, everything would be fine. But there is no superior force that implements "the law", that men have to follow. The market is man-made.

You don't have to. But you are likely to create efficiencies. See, the idea of economics is fundamentally to describe human behaviour. Thus, the point is not to say that people should behave in accordance with supply and demand but rather that they tend to do. If you prohibit people from doing something they want they will try and circumvent it. That might still be worth it in some cases but one should always be aware of that cost.

Also, schools and police still depend on market forces in a lot of ways. For example, there is a discussion going on now in Sweden on whether we should raise wages for teachers. The supply of teachers will be higher if the price (wage) of teachers increases. Currently, there is a problem with too few people (especially those with any knowledge) becoming teachers. In a free market the demand for good teachers would likely push up wages quite substantially. Of course, some consumers would then likely be priced out, which we don't want. What happens instead is that the rich pay for private teachers for their kids (I've been one myself).

Thus, the idea that we can ignore demand for education and equalize everyone's education by having a state monopoly on it didn't really work out. The demand from high-income parents for good teaching found a supply somewhere else instead.

Of course, if one goes to political economy one would probably assume that this setup makes high-income parents less willing to pay higher taxes to improve public education since they can solve their problem on the side. So there is a lot you can discuss back and forth.

I think the general lesson economists would point out is that if we want to achieve a certain goal that cannot be solved by the market (say, equal opportunity through making education available to everyone) you want to do it in a way that interferes with the market as little as possible.

Human behavior changes all the time. Economics in the modern era is focused on explaining the hows, but not the whys-why people act the way they do.

The economic system is not a reflection of human behavior.  Human behavior is a reflection of the economic system.

Your first sentence has some truth to it, but the rest are unsubstantiated falsehoods, I'm afraid. Feel free to try and back them up though.

[Gustaf]

Well...it depends on how you define law of nature. It is true that if you, for example, lower prices artificially there will be over-demand/under-supply.

But you don't have to organize eeverything based on prices. Schools, Police, etc. are not organized that way.

And to your example with the Stockholm rents: I'm not arguing that without supply-and-demand in action, everything would be fine. But there is no superior force that implements "the law", that men have to follow. The market is man-made.

You don't have to. But you are likely to create efficiencies. See, the idea of economics is fundamentally to describe human behaviour. Thus, the point is not to say that people should behave in accordance with supply and demand but rather that they tend to do. If you prohibit people from doing something they want they will try and circumvent it. That might still be worth it in some cases but one should always be aware of that cost.

Also, schools and police still depend on market forces in a lot of ways. For example, there is a discussion going on now in Sweden on whether we should raise wages for teachers. The supply of teachers will be higher if the price (wage) of teachers increases. Currently, there is a problem with too few people (especially those with any knowledge) becoming teachers. In a free market the demand for good teachers would likely push up wages quite substantially. Of course, some consumers would then likely be priced out, which we don't want. What happens instead is that the rich pay for private teachers for their kids (I've been one myself).

Thus, the idea that we can ignore demand for education and equalize everyone's education by having a state monopoly on it didn't really work out. The demand from high-income parents for good teaching found a supply somewhere else instead.

Of course, if one goes to political economy one would probably assume that this setup makes high-income parents less willing to pay higher taxes to improve public education since they can solve their problem on the side. So there is a lot you can discuss back and forth.

I think the general lesson economists would point out is that if we want to achieve a certain goal that cannot be solved by the market (say, equal opportunity through making education available to everyone) you want to do it in a way that interferes with the market as little as possible.

Human behavior changes all the time. Economics in the modern era is focused on explaining the hows, but not the whys-why people act the way they do.

The economic system is not a reflection of human behavior.  Human behavior is a reflection of the economic system.

Your first sentence has some truth to it, but the rest are unsubstantiated falsehoods, I'm afraid. Feel free to try and back them up though.

How is that? What, do you suppose hunter-gatherer societies were capitalist?

Not in the sense I would use capitalist, but then again, that does not seem very relevant to anything either of us said so I'm not sure why you mention it?

The behaviour ascribed to agents in economic models is not dependent on the capitalist system, so if you are assuming that it might help explain where you go wrong here.

[Gustaf]

Market forces are forces of nature (human nature, if you want to be exact), and you ignore them at your own peril.

The laws of supply and demand cannot be legislated away. In order for the government to give anything to anybody, it must first take something from at least somebody, or many people, or everybody. These are observations, not opinions. I did not make this world; nobody did. This is just the way things are.

It may be the "way things are", but it's not how they always been, so it's a safe bet that it's not going to always be that way.

There are basically three ways to organize an economy: traditionalism (i.e., everybody does what their father did and everybody is permanently stuck "in their place" while the "lords," the owners of the land, run the show; this sort of thing has not really been seen since the Medieval ages), command and control (i.e., through a monarchy, dictator, communist apparatus, etc.), or free enterprise. The historical record shows which is most successful at raising standards of living for everybody. If you have any doubts about the miracle of free enterprise, do a comparison of South Korea/North Korea and West Germany/East Germany: Same history, same culture, and dramatically different results. Hell, just compare China before it adopted elements of free enterprise with its current status.

Interesting.  So you don't think West Germany is in any way socialist?  Again I'm going to do another shot in the dark here.  I am going to assume you are another Atlas Forum poster without a passport.

What is with all these right wingers and their false choices?  You do realize all governments exist on a continum.  It's not an either or situation.  Do you consider China communist or capitalist?  Who's economy has been doing better for the past decade the US or China?  Which country has more central planning and no idiotic Tea Party to get in the way?

There really needs to be some more stringent age, education, travel and life experience requirements for posting on this forum.  All these nonsensical debating fallicies are polluting the forum.

I will take a shot in the dark and assume that you are unaware of the convergence hypothesis. 

[Gustaf]

I'll take that as a yes then. I must say that for someone who is completely ignorant about the basic science of the topic, you are oddly condescending.