Is North Korea an example of socialism?

You guys are stuck in this world where you think we are making a judgement as to which path is better.

As I have repeatedly said we are not passing judgement. We are just using economics to describe human behavior. We are not saying which way one person should or should not go. We are not saying which way will be more or less risky. We are simply explaining

I really don’t care how much intellectual jargon you put around (say the same thing in fancier words, that will make it right), you are misusing the terms “risk” and “preference.”

In normal conversation if I say I prefer something, that has no bearing on whether I will engage in the action or not; I prefer Lamborghinis, but can’t afford them, or I prefer apples to oranges, but we have neither.

In normal conversation when we say risk we mean "with the possiblilty of danger; loss of life/limb/finances.

Do you have a million dollars in capital to gamble? All of these things are factors in where you place your time preference. Obviously a wealthier man will behave with a lower time prefernce as he can afford to wait. But thats irrelevant.

We thank you for coming around to our position. Obviously that is true, because whether you prefer goods now to goods later is nowhere near as irrelevant as to whether you can actually purchase goods now (consumption) or later (savings). Why do you think I have the sig I have?

The risks involved being a coal minor is not relevant as we are discussing finances. Thats a strawman. (If I understand your argument correctly)

My point was that the claim that workers are more risk adverse than capitalists is incorrect. This is because there are many other risks besides monetary risk.

You guys are stuck in this world where you think we are making a judgement as to which path is better.

I don’t know where you got that impression.

100% completely irrelevent. You guys are off in lala land. I don’t even know what you two are stuck on.

I don’t understand. How is this irrelevent? Are you referring soley to financial risk when you say workers are more risk adverse?

My point was that the claim that workers are more risk adverse than capitalists is incorrect. This is because there are many other risks besides >>monetary risk.

High Time preference correlates with the opposite of risk aversion,… yes, ‘a worker’ with a higher time preference than another worker (or a capitalist) is to that extent more likely to take the riskier job, to get the pay check etc…

Workers are not more ‘risk averse’ than capitalist, they are less patient…

If we want to bring appetite for risk into it, the most I think we can say is that capitalists who are taking the longer view, are accepting risks over longer timeframes, whereas the workers who decide to dive for pearls, dig for coal, be guinea pigs in medical experiment accept risks over shorter time scales.

@Laotzu del Zinn

Lets say a man purchases an apple as opposed to an orange. Is it fallacious of me to concede that at that point in time he did in fact prefer the apple over the orange.

What type of physical risks the laborer is exposed to has absolutely nothing to do with the financial differences between incomes of capitalists and incomes of laborers.

If we want to keep this discussing logically correct we have to hold ceteris paribus. Lets assume the capitalist and laborer perform the exact same labor. The differences between the two involve the methods by whcih they receive their incomes.

You and that lao guy talking about coal miners having a higher risk has nothing to do with the financial differences between the two and has absolutely nothing to do with time Preference theory as far as financial payments are concerned.

The fact that you think it’s related is a telling tale. And as for Laotzu’s last statement. I don’t know if he’s trying to dispute the exploitation theory(origins of Interest) or if he’s about to go on a rant on how it’s unfair that not everyone has a million dollars to invest(Rant on scarcity)

My point was that the claim that workers are more risk adverse than capitalists is incorrect. This is because there are many other risks besides monetary risk.

And my point was to explain you the case in which an individual has got relatively lower time preference and still does not engage in capital investment because of his relatively also lower risk tolerance.

An individual who accepts a relatively riskier job is nothing more than an example of one who values the marginal utility of the enjoyed labour wage he receives at the riskier job more than the labour wage he could have received if he occupied relatively less risky job. The increased marginal utility from the higher wage rate derived from the riskier job subjectively compensates him for the disutility of the increased possibility something to harm his health or life. He exchanges the additional wage for the loss of marginal level of safety. And this is WHOLLY BESIDE the point of the discussion. What I was discussing was not what the preference of an individual to accept more or less risky job reveals, but what does his preference to be employed (without considering the relative level of danger the working conditions present to his health or life) or be self-employed reveal.

This quote appears superfluous to you only because you don’t understand Marx. You see Marx, in this passage, is setting up his critique of capitalism, while simultaneously incorporating his theory of history into his economic framework. Marx, unlike the ignorant garden-variety anti-capitalist (you), was actually well-read in economic theory. He studied the works of Smith, Ricardo and Mill extensively. This is why he would never deny, for example, that the consumer is free to express his preferences in the market place through voluntary exchange, and that his ability to consume is solely restricted by his ability to produce (which you deny).

Marx’s critique of capitalism is much more fundamental. He attacks the so-called “logic of the capitalist mode of production,” which exists “outside the limits of the market or the sphere of circulation.” The latter (the market place) is, according to Marx, “the very Eden of the innate rights of man,” while the former (the capitalist mode of production) is, again according to Marx, inherently exploitative and fundamentally flawed. Simply put, the exploitation that characterizes capitalism cannot be found within the market place but rather exists within the factory setting, during the process of production (Marx separates production and distribution from the exchanges that occur in the market place; they are, in his eyes, two entirely separate spheres).

So essentially the argument that you’re (implicitly) making is the exact argument that Marx tried to ignore, precisely because it is so obviously absurd.

Here is the entire passage (just for additional context):

his quote appears superfluous to you only because you don’t understand Marx. You see Marx, in this passage, is setting up his critique of capitalism…

Obviously you didn’t read anything I posted.

Obviously he read something you posted.

Obviously, and this is no hyperbole, he read “superflous” and nothing else. I say this is obvious because I already posted the paragraph before his quotation, to which he reposted it. I alredy pointed out, to him, wherein his error lies. You can check for yourself, I understand what Marx said just fine.

It’s ok, the format messed up in me mid quote and it gets quite confusing. I can post it again, in a better format if you would like.

Obviously Zinn does not know what he is arguing. Firstly, Esuric tried to explain to you that in the unhampered market place an individual can act upon his preference through his purchasing power. He may use it all or a part of it to buy a good (depends on the marginal utility). And he compared that case to a democracy where an individual himself represents only one vote by the restraint of which he can not choose to express his preference in a bigger degree than the other participants of the democratic decision-making process. Other than this (and as a result of what has been just said), in a democracy framework 51% of the votes decide what to be done, so if you happen to be in the 49%, no matter what your purchasing power is, your preference is neglected. This does not happen in the market economy, where everyone is free to express his preference through the use of what he is willing to exchange. What is else, no exchange is zero-sum. Read Rothbard. You also mentioned that sometimes it is not 51% but rather 30%, well it is 51%. It does not matter whether the majority supports actively and passively. Read Hoppe. And passive action is still action. Read Mises.

Then he mentioned, that labourers tend to be relatively more risk-averse than capitalists. To which you responded that there are some labourers who fight dragons (something like that), ergo, they love risk and what Esuric proposes is not correct.

But you guys! Zinn is TRYING to tell us that people simply cannot in all situations act apon their preferences because mana does not fall from the sky and capitalism keeps us from superabundance!

My only goal with my last response was to elucidate Marx’s position. Do you understand that, at least according to Marx, the market place is in fact “the very Eden of the innate rights of man,” and that the exploitation that Marx associates with capitalism is found within the sphere of production and not exchange? A yes or no response would suffice.

Next, as far as my appeal to authority is concerned, I don’t feel the need to prove that individuals are free to express their subjective valuations in the market place. This is tautological and undeniably true. Additionally, it is true that I cannot see into the future, but basic familiarity with economic theory (a science) can allow you to make certain predictions. For example, general price inflation will undoubtedly occur if the FED expands the supply of money beyond the demand for money (all other things equal). This is what science allows us to do, namely make predictions.

Why don’t we try to have a reasonable discussion rather than simply dismissing arguments as fallacies right off the bat.

I mean, I could do the same thing. For example, I could simply dismiss this statement:

as an appeal to emotion. Instead, it’s more productive to point out that this is unessential to my argument. Laborers, again, earn fixed and periodic payments as long as they’re employed; the same is not true for entrepreneurs. The entrepreneurial function consists of attempting to forecast future changes in tastes, preferences, technical methods of production, and act accordingly. Often entrepreneurs will fail in this endeavor, in which case they lose more than just their source of income.

The fact that a laborer willingly chooses to sell his labor-power on the market, rather than borrowing capital and become an entrepreneur (or what you would call an “overlord”), suggests that there’s some sort of aversion to risk. If you can explain this phenomenon without referring to risk or time preference then please do so.

[EDIT:]

Yes I reposted it because I don’t think you understand it.

My only goal with my last response was to elucidate Marx’s position. Do you understand that, at least according to Marx, the market place is in fact “the very Eden of the innate rights of man,” and that the exploitation that Marx associates with capitalism is found within the sphere of production and not exchange? A yes or no response would suffice.

I am telling you to read the next paragraph (and many of the preceeding paragraphs) where Marx is seeming to say the view of the market as free is fine in a theoretical concept, but that it cannot be free within a capitalist framework “where only one side comes to the table expecting a hiding.” The “free market vulgaris” loves to opine on the insubstantial rhetoric of market activity and deny the underlying issues of private property.

Next, as far as my appeal to authority is concerned, I don’t feel the need to prove that individuals are free to express their subjective valuations in the market place. This is tautological and undeniably true. Additionally, it is true that I cannot see into the future, but basic familiarity with economic theory (a science) can allow you to make certain predictions. For example, general price inflation will undoubtedly occur if the FED expands the supply of money beyond the demand for money (all other things equal). This is what science allows us to do, namely make predictions

  1. Whehter they “are free” to so is not up for debate. Whether they “actually do so” is.

  2. I deny the latter above.

  3. You saying it true doesn’t make it true.

  4. A third appeal to authority (“a science”) doesn’t make it true.

  5. That is a completely different prediction. And additionally the statement “workers are not capitalists because they prefer goods now to later” is a political statement, not a prediciton. It is, on top of that, a collectivist statement that does not take a group for the individual motives that make it up.

as an appeal to emotion. Instead, it’s more productive to point out that this is unessential to my argumen

It would be an appeal to emotion if I said “this stirs your emotions and that makes me correct.” I did not do that. I listed some risks. You recognize them as risks, so it stirs emotions. But the stirring of your emotions are irrelevant to my argument. Workers are not risk averse, per se.

Laborers, again, earn fixed and periodic payments as long as they’re employed; the same is not true for entrepreneurs. The entrepreneurial function consists of attempting to forecast future changes in tastes, preferences, technical methods of production, and act accordingly. Often entrepreneurs will fail in this endeavor, in which case they lose more than just their source of income.

Yes, but laborers have already made their sale, on their labor as a commodity. The sold the promise of future work for fixed payments once work is recieved, and they are nearly as, if not just as, at risk if the entrepreneur fails as the entrepreneur. So not only do laborers take physical risks, they take a financial risk selling their labor to a capitalist.

As a rhetorical aside; would you rather work in a coal mine, for a coal miner’s wage, or be an entrepreneur? How many people do you think would say they prefer the former? All rhetorical, you don’t have to answer, and it doesn’t prove anything. Just think about it.

The fact that a laborer willingly chooses to sell his labor-power on the market, rather than borrowing capital and become an entrepreneur (or what you would call an “overlord”), suggests that there’s some sort of aversion to risk. If you can explain this phenomenon without referring to risk or time preference then please do so.

I would say “the reasons many workers choose not to become entrepreneurs themselves are diverse. Ranging from ignorance/lack of education, to family history, to personal preference, to community standards, it is clear that the last thing we should do is throw billions of people into one giant clump and dismiss them as if we are telepathic.” Workers are not risk averse, per se, tho some may be. They do not have a low time preference, at least as far as any common definition of preference would say, per se, tho some may. What workers are is a diverse array of individuals with a diverse array of motives.

I don’t need to reread anything. It’s there in plain English and Marx isn’t being sarcastic. He makes his position explicit.

Don’t get confused by Marx’s rhetoric, and the passages that you highlight don’t contradict anything that I’ve said. I really don’t want to spend any more time on this issue because I don’t feel like writing a treatise on Marxian political economy, not only because it would require a lot of time, but also because you’re just going to ignore it. I would ask you to do some research or contact actual Marxians, but I don’t want to be accused of “appealing to authority” once again.

I don’t know what you’re talking about.

Do you deny that science allows you to make predictions or do you deny that inflation is caused by an expansion in the supply of money beyond the demand for money?

Maybe there’s a semantic issue here. When I say that individuals are free to express their subjective valuations on the market through voluntary exchange, I’m not saying that an individual has the right to go into a supermarket and take whatever he wishes. This would constitute theft (isn’t voluntary exchange by definition), and ignores scarcity.

All I’m saying is that if I prefer commodity “a” to commodity “b” (all other things equal), then I’m free to purchase commodity “a” without asking the majority for permission to do so. The fact that I bought commodity “a” means that, at least ex ante, I necessarily preferred it to commodity “b”. Again, this is all tautological.

  1. Science allows you to make predictions
  2. Economics is a science
  3. Economics allows you to make predictions

Where’s the appeal to authority?

It is a categorical law of human action. Laws are, by definition, invariable.

Again, the difference is that laborers earn fixed and periodic payments as long as they’re employed. An entrepreneur’s income, on the other hand, is variable. He has good weeks and bad weeks, good years and bad years, etc. In fact, there may be weeks, months, or whatever where he stays in business and doesn’t earn an income at all (he may pay for expenses out of his own pocket).

Next, the laborer only loses his source of income when he’s fired and/or when the business fails. The entrepreneur loses more than his potential source of income when he fails. The vast majority of entrepreneurs do not own their own capital; they borrow financial capital and invest. This means that entrepreneurial failure frequently means debt, which has to be paid off.

Risk-aversion is not a sign of weakness. I’m not passing judgment on laborers. In fact, I’m quite risk averse myself. I refuse to work on commission, for example.

I would rather own a coal mining business than work in a coal mine, all other things equal. Similarly, I would rather own my own hedge fund than work for one (again, all other things equal). The question is why don’t I open my own hedge fund, or coal mine, etc? Clearly all things aren’t equal.

Let’s deal with these individually:

  1. Family History: I don’t see what family history has to do with entrepreneurship. Are you saying that entrepreneurship is somehow passed down from generation to generation? You would need to provide some empirical evidence, and I can cite a torrential amount of anecdotal evidence suggesting otherwise.
  2. Community Standards: I don’t know what you mean by “community standards.” Can you give me an example?
  3. Ignorance: This is an important element. It’s not wise to open a restaurant if you know nothing about the restaurant industry, and yet many restaurants are owned by entrepreneurs that either know nothing about the industry, or knew nothing about the industry when they started (this is quite common, in fact). The question is why do individuals, with no experience in their prospective industry, borrow capital and start their own businesses in that industry? Why do individuals with no experience in the restaurant industry readily accept jobs as waiters, cooks, or whatever, rather than starting their own restaurant? Why do individuals with a lot of experience in their industry never open up their own business? But I agree that the higher the degree of ignorance/lack of experience, the greater is the risk associated with starting your own business (entrepreneurship).
  4. Personal Preference: Well of course. Some people prefer zero risk to some risk (some risk to a lot of risk), others don’t mind risk, and some even prefer risk (risk-lovers).

I don’t need to reread anything. It’s there in plain English and Marx isn’t being sarcastic. He makes his position explicit.

He’s not being sarcastic, and that’s not what I said. I don’t want to just dismiss this as a straw man, but… He is saying that “freedom” of the market is superficial when we delve deeper into private property, and in the next chapter, the extraction of surplus value. But you’re right, there’s no need to discuss Marx if we don’t need to. But if you can prove something without saying “it’s true because Marx said so” I will not “simply dismiss it.” Tho I am happy to dismiss it if you that is all the proof you can provide.

Do you deny that science allows you to make predictions or do you deny that inflation is caused by an expansion in the supply of money beyond the demand for money?

I deny that “it’s true because I say it’s science” is a valid proof.

  1. cience allows you to make predictions
  2. Economics is a science
  3. Economics allows you to make predictions

Where’s the appeal to authority?

You: The market is the pinnacle of freedom

Me: that’s rhetoric

You: No, that’s economics

Me: and that’s an appeal to authority

You: No, it’s science. Economics can predict inflation by the FED’s actions

Me: that’s another appeal to authority

You: What appeal to authority?

Do you see it now?

Again, the difference is that laborers earn fixed and periodic payments as long as they’re employed. An entrepreneur’s income, on the other hand, is variable. He has good weeks and bad weeks, good years and bad years, etc. In fact, there may be weeks, months, or whatever where he stays in business and doesn’t earn an income at all (he may pay for expenses out of his own pocket).

All of this is fine. But laborers take risks, arguably more than capitalists. Plain and simply, saying they are “risk averse” as a justification for why some laborers are not capitalists is wrong; it is a perversion of the word risk. That is no law. Some laborers are not capitalists because they don’t have the ability to own capital; and there are a variety of reasons why that is so, including an aversion to financial risk by some.

It doesn’t matter if you’re passing judgement on them, it’s still wrong. I could say “human feces is always purple.” I’m not passing judgement on humans… but I’m still mistaken.

I would rather own a coal mining business than work in a coal mine, all other things equal. Similarly, I would rather own my own hedge fund than work for one (again, all other things equal). The question is why don’t I open my own hedge fund, or coal mine, etc? Clearly all things aren’t equal

Yes, clearly you are not risk averse. You would take the financial risk over the physical risk, if you could. But you can’t afford it. You’re risk handicapped, at best. But, clearly, effective economic demand requires more than just need.

Family History: I don’t see what family history has to do with entrepreneurship. Are you saying that entrepreneurship is somehow passed down from generation to generation? You would need to provide some empirical evidence, and I can cite a torrential amount of anecdotal evidence suggesting otherwise

I think people are a product of nature, nurture, and personal will. If your family has a history of poor, uneducated laborers, you will have more of a chance of repeating suit. This is partially genetics (kinda), but a lot of it is culture and social capital (connections/networking). This works in vice versa too.

http://www.economicmobility.org/assets/pdfs/EMP%20American%20Dream%20Report.pdf

What’s also interesting to note is that many of the “self made” wealthy, were entreprenurs. But very few came from below upper middle class backgrounds. Family doesn’t insure nor prohibit wealth. But it indicates wealth rather strongly.

Community Standards: I don’t know what you mean by “community standards.” Can you give me an example?

Does one interact with PHD’s, people with the ability to hire, places with a lot of credit, or have general interaction with many positive role models?

Personal Preference: Well of course. Some people prefer zero risk to some risk (some risk to a lot of risk), others don’t mind risk, and some even prefer risk (risk-lovers).

That’s the point. And I would stake my savings that says there are just as many per capita amongst the wealthy/capitalists as the laborer in all categories. Hence why it is very misleading to say workers are “risk averse.”

Ignorance

Some people don’t even take it to the step of getting the starting capital to begin an entrepreneurship because of ignorance. They don’t know they can, or how. (Or their parents opened bills in their name, never paid them, and now their credit is wrecked lol. This is really quite common.)

So beyond the implied physical/economic limitations of scarcity. What exactly about the market prevents you from acting apon your preferences?

What exactly is preventing me from purchasing milk tomorrow should I so choose to do so?

Indeed, and that’s exactly my point. Marx’s argument is that the capitalistic economic system, at its surface (referring to the market, i.e., the “noisy sphere of circulation”) appears to be a paragon of freedom (innate rights of man), but only superficially so. In order to understand the true exploitative nature of the “capitalist mode of production,” one must go deeper, into the factory setting (“hidden abode of production”). Surplus value is earned through the process of production (M-C-M’), and not through exchange (Production and exchange constitute two different sphere for Marx). So again, Marx doesn’t take issue with exchange (enter long Marx quote), as you do; his critique of capitalism is much deeper, more fundamental. I’m glad that you finally understand.

Yeah some people cannot borrow financial capital because they have bad credit scores, and/or people don’t want to finance their bad ideas. This is called efficiency. If you have a good idea, i.e., if you’re willing to provide a service that is demanded by society, you will almost always find financing, because those “greedy capitalists” are always trying to make money. You see?

I mean, you say that my argument is “fine,” but then you just simply dismiss it. At the same time, you didn’t even bother to answer my questions from the previous post.

I don’t start a hedge fund or a coal mine because I’m afraid of going broke and don’t want to fall into heavy debt at 24. I’m definitely risk averse because if given the choice between 30$ for sure, or a coin flip where heads gives me 0$ and tails gives me 100$, I would choose the former.

This is pure nonsense, and that study you cite is the typical garbage you find in most introductory sociology textbooks. Larry White deals with the “death of income mobility in the U.S” myth here:

Some stats:

  1. Between 1977-1988 86% of the poor were no longer poor
  2. Between 1975-1991 95% of the poor were no longer poor
  3. Between 1975-1991 the top 20% increased their average real income by about 4,000$, while the bottom 20% increased their average real income by about 28,000$.

Larry White also demonstrates that America is arbitrarily penalized by clumsy indices which attempt to measure income mobility precisely because the U.S., relatively speaking, has the highest degree of opportunity.

PHD’s are probably least likely to be entrepreneurs. Most of them work in academia and/or the public sector.

Yes, it’s hard to start a business when you don’t have access to financial capital, but the access to financial capital is most limited precisely in those nations that are not capitalistic/suppress markets.

Okay, I concede this point. Economics cannot deal with those who don’t know that they can start their own businesses.

[EDIT:]

I never made this argument. You claimed that I cannot see into the future, which is true, but science allows us to make predictions and economics is a science. But now we’re just quibbling. Let’s get back to what we were initially discussing. Do you still deny that democracy is rule of the majority, and do you still believe that individuals are not free to express their subjective valuations via voluntary exchange (now that I’ve provided clarification)?

Do you still deny that democracy is rule of the majority, and do you still believe that individuals are not free to express their subjective valuations via voluntary exchange (now that I’ve provided clarification)?

I maintain my intital charge that both of those statements are pure, insubstantiale rhetoric. Democracy is a slippery enough term, and in my view you have severely misrepresented it. But things like “free” “value” “voluntary exchange” I have found not to stand on solid footing upon further inspection. They rely on other faulty uses of words like “risk averse” and at the margins."

I don’t like when people tell whole academic disciplines they are wrong, and I would never claim economic expertise. But I can say I take much of it with a grain of salt. What is not a valid way to engage a discussion is to say “I am claiming to be doing this science, this is something completely unrelated this science can do, therefore this science I am claiming to be doing is right in this instance as well.”

Indeed, and that’s exactly my point. Marx’s argument is that the capitalistic economic system, at its surface (referring to the market, i.e., the “noisy sphere of circulation”) appears to be a paragon of freedom (innate rights of man), but only superficially so. In order to understand the true exploitative nature of the “capitalist mode of production,” one must go deeper, into the factory setting (“hidden abode of production”). Surplus value is earned through the process of production (M-C-M’), and not through exchange (Production and exchange constitute two different sphere for Marx). So again, Marx doesn’t take issue with exchange (enter long Marx quote), as you do; his critique of capitalism is much deeper, more fundamental. I’m glad that you finally understand

Then it appears we’ve been in agreement the whole time. The freedom of the market is pure rhetoric that does not, nor cannot in a capitalist system, express itself in any such way.

  1. etween 1977-1988 86% of the poor were no longer poor
  2. Between 1975-1991 95% of the poor were no longer poor
  3. Between 1975-1991 the top 20% increased their average real income by about 4,000$, while the bottom 20%
  4. increased their average real income by about 28,000$.

Like I said, I take both of these studies with a grain of salt. But here’s the rub… if you can show anywhere I said family determines future wealth, I’ll buy you an ice cream. In fact, I expressly noted it does not. But it influences many people, ask any son that took over his father’s business, or went into the same work as his father (or the same for females). Some people are influenced by their family.

My point with giving those many different things that cause people to be who they are was to point out they are individuals with diverse and individual motives, and saying “all poor people do this, or all rich people do that” is fallacious from the start.

Uh huh. All those things have very concrete meanings.

Way to shift goal posts. As if my argument was that Marx supported capitalism.

I was responding to that study you linked.

I never claimed that all laborers are risk-averse, and no economist would say this. What I said was this: laborers tend to be, as a rule, risk-averse, and they demonstrate this by their actions (the fact that many of them don’t open up businesses even though there’s greater income potential, and the fact that many of them prefer their fixed and periodic payments over commission, i.e., variable compensation based on performance). Additionally, entrepreneurship is inherently risky; it is this factor that basically defines it.

Similarly, economists would say that labor tends to yield disutility (a labor-leisure trade-off). Does this mean that every laborer hates his job? No, of course not, but understanding this insight, analyzing this variable and holding the ceteris paribus condition, allows us to understand and better elucidate social phenomena. For example, it is this insight, namely that labor tends to yield disutility that allowed many economists to deduce that communism would be relatively inefficient because it fails to provide an adequate incentive structure for production. From this many economists actually predicted the mass genocides and concentration camps that are now associated with communism.