Response to Epicurus ibn Kalhoun

Economics Economics Questions
1

Moved this response here because we were derailing the other thread. This is my third response to his assertion that, “Ownership is always trying to disendfranchise workers (so it can satisfy consumers better) with lower wages and harsher working and living conditions.” In order to substantiate this assertion he brought up the fact that businesses tend to oppose labor unions.

My argument is that opposing labor unions =/= opposing labor in general (supporting capital accumulation = supporting labor), and that both economic theory and empirical evidence don’t support his assertion (they entirely refute it, in fact).

If wages were determined by bargaining power then unions could potentially elevate wages. Let me repeat my self: if there was a total fixed amount of “surplus,” which had to be distributed amongst varying classes (typically land, labor and capital), and the remuneration to each class was determined by bargaining power, then unions would be capable of increasing the remuneration to labor. But this theory of wages, namely the “wage-fund theory of wages” has been entirely refuted. Wages are determined solely by the marginal product of labor which is a function of capital per worker and the sophistication of capital.

This means that the only ways to elevate wages, in the aggregate, is to:

  1. Increase the total stock of capital
  2. Increase the technological sophistication of capital
  3. Organize your capital in increasingly efficient combinations.

This means that, by definition, the only way that union workers can increase their remuneration is if they do so at the expense of someone else. And this is why unions are partially exclusive (sometimes extremely exclusive in the case of guilds).

Prices are not determined by decree. The entrepreneur, at least in the long run, does not get to choose how much he will sell his products for. For example, the market clearing price of commodity “y” is “p.” The entrepreneur may decide to increase his revenues by selling commodity “y” for “4p.” But this entrepreneur is mistaken, because this will not increase his revenues at all; in fact, it may very well cause his revenue to collapse entirely (consumers prefer lower prices, all other things equal). The entrepreneur now has a choice: (a) he can continue to charge “4p” for his product (4x higher than his competitors and the market clearing position) and go out of business, or (b) he can lower his price and make a profit.

The same is true for wages. For example: I just graduated college, and if a potential employer, during a job interview, offers me $200 a year as a salary, I will turn him down and look for employment elsewhere. Here’s a more concrete economic explanation:

Assume that the equilibrium wage rate (when it’s equal to the marginal product of labor) is “x,” and that all entrepreneurs collude and decide to pay their workers “x/4” in order to increase their profit margins. Now the first thing that’s going to happen is that workers that value their leisure above this arbitrarily suppressed wage rate simply won’t work. They will leech off others or demand welfare.

The next effect, and this is the important one, is that higher profit margins will lead to additional capital accumulation (investment). But the newly introduced capital, on its own, is entirely barren; capital cannot produce without the aid of labor. In other words, the profit margin for these new entrepreneurs is zero, because production, for them, is also zero. The only way that they can engage in production is if they bid away workers from other firms by offering higher wages, say “x/2.” Now, their profit margins will not be as high as the other firms (that are paying x/4), but (a) they now have access to labor and can engage in production (some profit is better than no profit), and they get to choose which workers they wish to employ (the most productive workers), and will gain a competitive advantage. This is known as chiseling, and it’s why all cartels eventually collapse, which is why unions would never exist, for any extended period of time, in a free market (requires the aid of government).

And finally, this process will continue until wages are bid up to the equilibrium level “x.” Wages cannot rise above “x,” assuming no wage rigidity (either endogenous or exogenous), because this will turn labor into a liability (the cost of labor will exceed its product). Some businesses, though, know that offering a wage above the equilibrium level (efficiency wages) elevates morale and, in turn, will increase productivity and profitability (alleviates agency problems). But this also causes macroeconomic problems in labor market.

Nope. A single murder does not prove that society is characterized solely by conflict and aggression. Again, for every one horrific example you can regurgitate, I can respond with 1000 examples that prove otherwise.

No one says that free markets will eliminate stupidity. Idiots will exist, and they will go out of business, assuming that there is no government to bail them out.

2

If wages were determined by bargaining power then unions could potentially elevate wages. Let me repeat my self: if there was a total fixed amount of “surplus,” which had to be distributed amongst varying classes (typically land, labor and capital), and the remuneration to each class was determined by bargaining power, then unions would be capable of increasing the remuneration to labor. But this theory of wages, namely the “wage-fund theory of wages” has been entirely refuted. Wages are determined solely by the marginal product of labor which is a function of capital per worker and the sophistication of capital.

Unions do elevate wages, for thier members. There is also a case for their strengthening worker demands for wages across the board. Standard of living is a relative thing.

These terms like “function of capital per worker” have real meanings in people’s lives. They determine how much productivity will be potentially gained by the introduction of more labor, and how it effects costs/gains.

Organize your capital in increasingly efficient combinations.

I feel like that could include stock options, and/or lower wages for management. There may not be some fixed “surplus” that determines wages. But there are real profits, and their is real compeition between various parts of the company over those profits as compensation (it happens evertime someone asks their boss for a raise or promotion). Ownership has the highest bargaining power, and recieves by far the largest dividends.

Prices are not determined by decree. The entrepreneur, at least in the long run, does not get to choose how much he will sell his products for. For example, the market clearing price of commodity “y” is “p.” The entrepreneur may decide to increase his revenues by selling commodity “y” for “4p.” But this entrepreneur is mistaken, because this will not increase his revenues at all; in fact, it may very well cause his revenue to collapse entirely (consumers prefer lower prices, all other things equal). The entrepreneur now has a choice: (a) he can continue to charge “4p” for his product (4x higher than his competitors and the market clearing position) and go out of business, or (b) he can lower his price and make a profit.

How does this translate to busineses wanting to pay the least amount of wages possible to their workers, while still mainting efficiency?

The same is true for wages. For example: I just graduated college, and if a potential employer, during a job interview, offers me $200 a year as a salary, I will turn him down and look for employment elsewhere.

Let’s assume $200 is an appropriate wage for a second. So now he offers you 200, you say 250. He really values your potential, he wants you at the job, but he needs to profit. So he offers you 235. His intent is always going to be to pay the best workers he can find the least amount possible, it’s called maximizing profits.

Assume that the equilibrium wage rate (when it’s equal to the marginal product of labor) is “x,” and that all entrepreneurs collude and decide to pay their workers “x/4” in order to increase their profit margins. Now the first thing that’s going to happen is that workers that value their leisure above this arbitrarily suppressed wage rate simply won’t work. They will leech off others or demand welfare.

That’s a pretty broad jump. Why won’t they start their own businesses, or go on strike? Why won’t they just go home and grow their own crops and live “off the grid?” This is the conservative culture I’m talking about; the natural assumption that everyone is just trying to leech off the capitalist class. It’s like the marxist view of capitalists trying to leech off the productive class. It’s simply a biased definition of human nature that tries to say noone actually wants to be productive, they just have to.

*which is why unions would never exist, for any extended period of time*

Nobody said they had to. I have repeatedly said I don’t accept any plutocracy deciding people’s lives for them as beneficial.

Some businesses, though, know that offering a wage above the equilibrium level (efficiency wages) elevates morale and, in turn, will increase productivity and profitability (elevates agency problems). But this also causes macroeconomic problems in labor market.

Or you could streamline management, and use the extra proceeds to go to worker stock-options, or pension plans, or something. But alas, any extra proceeds go to ownership first, maybe labor after depending on market conditions.

Nope. A single murder does not prove that society is characterized solely by conflict and aggression. Again, for every one horrific example you can regurgitate, I can respond with 1000 examples that prove otherwise.

Hey guys, we shouldn’t worry about the holocaust because for every Jew that was killed, there were 50 people born. We actually came out ahead if you think about it… /sardonism

Good things happening do not mean the bad things are ok.

No one says that free markets will eliminate stupidity.

I’ll agree with you there

3

Yes, but only for their members, at the expense of outsiders. Do you now realize this?

I don’t know what this means. Please elaborate. I’ve already demonstrated the only ways to elevate wages across the board, which I assume you accept because you haven’t attempted to refute it.

I see what’s going on here. You don’t know what capital is in economics. Capital, in economics, is merely the produced means of production, i.e., tools and machinery. Capital increases the productivity of labor: for example, trying to chop down a tree with your bare hands will take x units of time, but chopping it down with an axe (a capital good) will take x/100 units of time, and cutting it down with a Chainsaw will take x/1000000 units of time (numbers are made up, of course). The introduction of capital, and more sophisticated capital, increases the productivity of the individual trying to chop down a tree.

Profit/interest goes to the owners of capital, usually in the form of dividends. Wages are paid to labor, and management is part of labor (again, determined by the marginal productivity of labor). Any profit above the normalized rate of profit is known as “entrepreneurial profit” or “supernormal profit.” It belongs to the entrepreneur and this can be distributed to whomever (towards additional investment, to stock owners, workers, etc). So again, each individual is paid according to real economic factors, entirely independent of bargaining power.

Please respond to my comments in their entirety. I gave you a very lengthy response for a reason, namely so that you wont get confused. But the point that I was making, which I believe that I have completely substantiated, is that the remuneration to the factors of production, including wages, is determined by real economic factors. In other words, the businessmen cannot pay their workers less than their marginal product in the long-run, even if they wanted to.

Again, as I’ve demonstrated, the “least amount possible” equals “the highest amount possible.” Wages, in equilibrium, will equal only one rate, namely the marginal productivity of labor (i’m repeating this because it’s absolutely essential). I must also remind you that profits are not the result of exploitation, that is, they are determined by the marginal productivity of capital (according to the mainstream neoclassical school) or time preference (according to the Austrian school), and not by screwing over workers.

  1. They may go on strike, but it wont do them any good since the entire economy is completely cartelized. But, as I’ve demonstrated, wage rates cannot remain below the marginal productivity of labor, and cartels must necessarily collapse (because of chiseling).
  2. They may start their own business if they aren’t risk averse (best option; it will elevate wages back towards the equilibrium rate).
  3. The vast majority will not resort to subsistence farming because the remuneration for such endeavors is lower than even the artificially reduced wage rates (x/4), due to a lack of capital, and because the costs are higher than the alternatives (working for the firm at the arbitrarily reduced wage rate). Now, some people may get so mad that they may in fact turn to subsistence farming, but this won’t last and it will be a very small minority.
  4. And they may, as I’ve mentioned, leech off others and/or demand welfare.

I’m not a conservative; I voted for Obama. The difference between me now and me three years ago is that I’m now somewhat familiar with economic theory. Also, there is no “capitalist class.” Something like 50% of Americans own titles to capital.

Non sequitur. My point was that your one horrific example does not invalidate the fact that high worker morale is profitable, and that most businesses (especially successful ones) try to make their workers happy. The same way that one horrible murder does not prove that society is solely characterized by violence and aggression.

Leftists are quick to point out that businessmen “only care about profits,” and they may admit that high worker morale is profitable, as you have, but then the logical conclusion is that “businessmen care about elevating the morale of their workers.”

4

Yes, but only for their members, at the expense of outsiders. Do you now realize this?

If that’s true, and I have my doubts, it is only indirectly. It sounds to me like you’re saying if wages on the bottom rise above equilibrium level (entirely subjective of course), there will be unemployment, or some other adverse phenomenon. This only validates when I said "some economists claim raising wages is bad for the economy/business. My problem with the theory, even if it’s true, is that it is usually only used against raising low level labor’s wage. It’s rare that someone claims the reimbursement from stock for the owners has an equilibrium level that can aversely effect the economy.

Why?

I don’t know what this means. Please elaborate. I’ve already demonstrated the only ways to elevate wages across the board, which I assume you accept because you haven’t attempted to refute it.

I think what you are describing is wages over the long-term. And that is great for taking a timeline view of history. But in real time people want more, and will demand for it if need be. Many times they have won. Expansion of and sophistication of capital may be how wages across the board are raised, but in a snapshot there are strikers and boycotters who have raised their own wages.

Why can management’s/ownerships compensation go up and up as the company expands, but labor has to fight for it’s share?

I see what’s going on here. You don’t know what capital is in economics. Capital, in economics, is merely the produced means of production, i.e., tools and machinery

It seems, out of further research, that what you say is mostly true here. It makes me wonder why I’m paying “capital gains” tax tho, and why my stocks are called “capital assets.” Confusing economists hijacking and changing words for their own uses… since when is capital not just onwership in the means of production?

Profit/interest goes to the owners of capital, usually in the form of dividends. Wages are paid to labor, and management is part of labor (again, determined by the marginal productivity of labor). Any profit above the normalized rate of profit is known as “entrepreneurial profit” or “supernormal profit.” It belongs to the entrepreneur and this can be distributed to whomever (towards additional investment, to stock owners, workers, etc). So again, each individual is paid according to real economic factors, entirely independent of bargaining power

Well, that’s wrong. It’s not entirely independant at all. The bargaining power is found in the bolded part. If the entrepreneur’s workers go on strike, and the state doesn’t step in and shut it down, it’s likely he’s going to have to give some of that profit to the people who did all the work.

In other words, the businessmen cannot pay their workers less than their marginal product in the long-run, even if they wanted to.

Yes, but in the short-run, real people have real wages that are insufficient to a decent standard of living. There’s a reason people wanted a min wage implemented, it’s because we don’t want to have to force people to work 18hrs a day to get ahead.

But that was not my point. My point was that even with this wage floor, the owner wants to pay his workers that and nothing more.

Again, as I’ve demonstrated, the “least amount possible” equals “the highest amount possible.” Wages, in equilibrium, will equal only one rate, namely the marginal productivity of labor (i’m repeating this because it’s absolutely essential).
Again, that’s simply not true. Their supposed “equillibrium level” may equal one rate. But in reality strikes raise wages in real time, granted for only specific sectors of the economy.

I must also remind you that profits are not the result of exploitation, that is, they are determined by the marginal productivity of capital (according to the mainstream neoclassical school) or time preference (according to the Austrian school), and not by screwing over workers.

This whole thread is about how workers are screwed, they should just take what they get, yet ownership gets as large a cut of that as they want. It sounds to me like “marginal productivity of labor” and “time preference” is really screwing over labor.

Henry Ford practiced high wages and good working standards, and it made his company the most powerful auto company in the world at the time. I have no problem with unions focusing on expansion and sophistication of capital as well. Many unions may be crap, but most unionists simply want a better living standard for labor… all labor. They may just happen to be skilled labor, or not.

They may go on strike, but it wont do them any good since the entire economy is completely cartelized. But, as I’ve demonstrated, wage rates cannot remain below the marginal productivity of labor, and cartels must necessarily collapse (because of chiseling).

It has done them well. Strikes have worked many times. And only a very select few times has it lead to a companies collapse. In fact, over the three years leading up to the recent crash, the UAW at the local plant here (Cobalt/Cruise) took wage and benefit cuts, and still GM had to ask for a bailout.

  1. And they may, as I’ve mentioned, leech off others and/or demand welfare.

I just want to know why this was the first thing you jumped to. The assumption that it’s leech first, work later if you have to, is a popular sentiment is, in my view, incorrect. Most people like to be productive.

I’m not a conservative; I voted for Obama. The difference between me now and me three years ago is that I’m now somewhat familiar with economic theory.

Whether or not you call yourself a conservative. Saying that the first thing people will do if wages get too (subjectively) low is leech and/or demand welfare, is most certainly a conservative statement.

My point was that your one horrific example does not invalidate the fact that high worker morale is profitable, and that most businesses (especially successful ones) try to make their workers happy. The same way that one horrible murder does not prove that society is solely characterized by violence and aggression

High worker morale is profitable, but we both know most businesses don’t practice that. In fact, most businesses fight labor’s demands every step of the way. Just go to any Wal-Mart or McDonalds, or even an office in your area and ask the rank and file if they’re happy with their job.

Leftists are quick to point out that businessmen “only care about profits,” and they may admit that high worker morale is profitable, as you have, but then the logical conclusion is that “businessmen care about elevating the morale of their workers.”

What leftist would not say worker morale is profitable? My point is that he may care about more than profit, but at the end of the day that’s what business is about; profits. If it doesn’t make them, it goes under. For the owner it’s all about how much bigger his bank account gets. Many businesses only raise worker morale when it is demanded, the Henry Fords that do it willingly are rare.

5

So are scarcity, mortality, gravity, and the laws of conservation of mass and energy.

Why would any employer pay any employee more than his marginal productivity? That would be charity.

6

Doing this over the long run would also be bankrupting.

7

So are scarcity, mortality, gravity, and the laws of conservation of mass and energy.

That’s completely different. There are fixed sets to those, they are not changing, and are experienced evenly across the board. The economic models are much more subjective, they fluctuate in their positions based on the whims of the people involved. As you said “that would be charity.” Meaning, he could, if he wanted to, pay his workers better.

You act as if charity is a bad thing, or that there is no way charity can benefit the charitable.

8

I think Joe put it better than I did, that such a policy of giving workers more than they produce cannot be sustained over the long run. The only way that unions are able to increase the pay of their members is by using force to keep the supply of labor in a particular sector artificially scarce relative to capital. This hurts both the prospective workers who are now barred from entering that sector and the consumers of that product since its price increases. Firms must produce a return consistent with the going rate of profit or they will be unable to attract investment capital. So unless you own your own business and do not care about deriving a profit from your asset, you cannot afford to give away money to labor.

9

I think Joe put it better than I did, that such a policy of giving workers more than they produce cannot be sustained over the long run.

I think you’re still putting it wrong becuase it is labor that does all the actual “producing.” Capital accumulation may allow the producing to happen, or expand, but its role in the actual producing is indirect.

The only way that unions are able to increase the pay of their members is by using force to keep the supply of labor in a particular sector artificially scarce relative to capital.

You have a strange definition of force… a boycott is aggression?

This hurts both the prospective workers who are now barred from entering that sector and the consumers of that product since its price increases

The question is why do prices have to increase? A rise in wages by itself doesn’t cut into profits. A rise in wages relative to returns on capital ownership does, or a rise in rank-and-file compensation relative to management compensation.

Streamline management, compensate workers more in capital ownership than worthless paper… does this aversely effect a business’ profitability?

10

If the capital accumulation is not necessary, then why do the employees even need the employer? If they do all the producing, then why don’t they just produce on their own?

As long as scabs crossing a picket line are not physically attacked (this is what I was referring to), I have no problem with unions. However, that seems to be their M.O.

So you’re saying that a company can offset its increased labor costs by cutting management costs. First of all, management is labor. What you are doing is creating a false dichotomy between manual labor and managerial labor. Both earn compensation equal to their marginal productivity. As for compensating workers in capital ownership, no one is prohbiting that from happening now (except arguably the government, which imposes capital gains taxes on capital transactions). Workers have demonstrated that they prefer to be compensated in cash rather than a less-liquid payment-in-kind. Since you seem to be partial to class analysis, think of the worker “class” having higher time-preferences and preferring cash and the consumer goods they can buy with it now over capital stock that will take years to pay back the initial investment. Like I said, if labor really wanted to own capital, companies would be able to attract all the best workers by offering such a compensation package.

11

If the capital accumulation is not necessary, then why do the employees even need the employer? If they do all the producing, then why don’t they just produce on their own?

You have misrepresented what I said. I said labor does the actual producing, capital accumulation provides the materials. A genie could run around dropping factories and machines all over, if noone/nothing does labor in them, they will just sit there producing nil.

As long as scabs crossing a picket line are not physically attacked (this is what I was referring to), I have no problem with unions. However, that seems to be their M.O.

Idk, that seems a red herring to me. Most strikes do not see union members physically attacking scabs. They may demean them, they may refuse to allow them through (which is just a refusal to move), but rarely do they physically attack scabs. More often than not they are peaceful things, until the police get involved.

So you’re saying that a company can offset its increased labor costs by cutting management costs. First of all, management is labor. What you are doing is creating a false dichotomy between manual labor and managerial labor.

There is a dichotomy. But not an absolute one. Did you not see when in I said “rank and file compensation relative to management compensation” or are you deliberately misrepresenting me? Those sentences there clearly show a distinction between ownership and labor on the one hand, and rank-file labor and managerial labor.

As for compensating workers in capital ownership, no one is prohbiting that from happening now (except arguably the government, which imposes capital gains taxes on capital transactions). Workers have demonstrated that they prefer to be compensated in cash rather than a less-liquid payment-in-kind

Why, because that is all they have been offered? I don’t see many workers refusing pension plans, in fact they sue bankrupt companies to get them back. That’s an ignorance/laziness argument you’re making, and I’m going to say it’s more ignorance than laziness.

Since you seem to be partial to class analysis, think of the worker “class” having higher time-preferences and preferring cash and the consumer goods they can buy with it now over capital stock that will take years to pay back the initial investment.

Classes are not homogenous bodies. They are snapshots on groups of individuals with similar stakes and positions in society. Most of the reason the public supposedly prefers money to liquidity is because they can’t maintain a standard of living.

12

A genie could run around dropping laborers all over, if no capital goods are available, the least proficient cannibals would starve.

Threatening force is aggression. Also, if the police allow strikers to block the sidewalks, then the government is aiding the union. If the strikers are standing on company property, and the police are not evicting them (or preventing the owner from evicting them), then the government is aiding the union. The union depends on force and the threat of force to make its strike effective.

If paying rank-and-file labor more and managerial labor less is a successful strategy, then companies that employed it would outcompete those that didn’t. They do not do so because, as has been pointed out numerous times, wages equal marginal productivity. If management is paid more than rank-and-file labor, it is because ownership believes that management is more productive.

Whatever compensation package a company offers its workers, its total net present value cannot exceed the worker’s marginal productivity. If a company could attract more productive workers by offering $50,000/year worth of company stock than $50,000/year in FRNs, it would do so. Most workers choose to receive their pay in cash because it is more readily convertable into the consumer goods they want.

If they value attaining a certain standard of living over sacrificing the present and holding stock, then that demonstrates their subjective choice. All that paying them in company stock would accomplish is to make it more difficult for them to satisfy their demands for present consumption. And cash is just as good for those who do want to invest in capital, since it’s easy for them to use it to buy stock.

If you really believed what you’re saying, you should heavily invest in unionized companies with a low management-to-manual labor pay ratio that offer their workers compensation in stock rather than cash, and then watch your profits roll in as this company crushes its competition with its allegedly superior business model.

13

A genie could run around dropping laborers all over, if no capital goods are available, the least proficient cannibals would starve.

False, since when does hunting require tools, or gathering for that matter?

Threatening force is aggression. Also, if the police allow strikers to block the sidewalks, then the government is aiding the union. If the strikers are standing on company property, and the police are not evicting them (or preventing the owner from evicting them), then the government is aiding the union. The union depends on force and the threat of force to make its strike effective.

Nobody threatened force, they simply refused to move. Police early on were very likely to get involved on the part of the owner/s. It was only after popular demand for worker’s rights became such a force that they started allowing strikes to continue.

Some things happen despite government, not because of it.

If paying rank-and-file labor more and managerial labor less is a successful strategy, then companies that employed it would outcompete those that didn’t. They do not do so because, as has been pointed out numerous times, wages equal marginal productivity.

It’s not about paying management less, how would they attract new managers? It’s about streamlining management, getting rid of the unnecessaries. It’s about worker self-management, there are thousands of companies on the market using it and making profits.

If you really believed what you’re saying, you should heavily invest in unionized companies with a low management-to-manual labor pay ratio that offer their workers compensation in stock rather than cash, and then watch your profits roll in as this company crushes its competition with its allegedly superior business model.

I do invest in union companies. I even, when I needed to buy a new car for my business, bought a Cobalt because I live not 10mins from the factory. I make decent profits off of it.

14

So (I haven’t read the other thread) is the argument that you’re making simply informational, like you think unions have a bad rep and you think that consumers and investors should support unionized companies because they’re more moral than non-union companies?

Or are your arguming that employers should not be able to legally terminate/evict employees at will (if, for example, they chose to unionize)?

15

“Need be”? When exactly does the need for “more” dissipate? And if “people” don’t get what they demand, then what? If I demand (insist!) that you sell me your car for $100 and form a “union” toward that goal – just standing around you, blocking your movement, minding our own business – what would you make of our thusly acquired “bargaining” power?

Z.

16

Let me bring this up:

One kind of labor (non-management/non-owners) does the producing. The other kind of labor (owners, managers) organizes labor and capital to realize more productivity or profit. It’s more or less the 3rd point that I’m driving at. That’s what some of the labor does, even if it doesn’t “produce” directly. They get compensated for managing, which is a kind of labor.

To bring this back to the original point, everyone who works for the company or manages the company adds to the production and the realization of the creation of wealth by the company. Everyone gets compensated for it. The amount each person gets paid for is essentially tied to their marginal productivity.

17

Whether you believe it or not is entirely inconsequential. The theory is logically consistent and has been empirically validated. No society has ever been able to increase wages, in the aggregate, through unions. It’s simply impossible. But don’t say that you take shit on this forum “because you defend the poor.” You take shit on this forum because you’re either ignorant of economic facts, or because you choose to ignore them for whatever reason.

Supernormal returns belong to the entrepreneur because that entrepreneur was able to successfully predict future market conditions and act accordingly. In other words, he/she accepted risk (which is a cost in itself), and satiated the needs of society better than his/her competitors. That surplus, therefore, belongs to him/her. The ability to earn supernormal profits (aka entrepreneurial profits) acts as major incentive for entrepreneurship, technological innovation, and capital accumulation (dynamic efficiency), which, in turn, elevate the marginal product of labor and therefore real wages.

If that entrepreneur decides to use that surplus for additional investment (capital accumulation), then it will elevate real wages; if he decides to increase stockholder dividends, then it will increase real wages (makes the stocks more lucrative which will allow that firm to accumulate funds more easily for capital investment). But that entrepreneur can do whatever he/she wants with that surplus; again, it belongs to him/her. You keep saying that labor “deserves” more than it produces, but you don’t even bother to explain why.

first of all, the only reason why unions even exist is because the state directly supports them. Without state protection, labor unions, like all cartels, would go away. In other words, those laborers that go on strike will get replaced by other laborers. Either way, if this strike actually elevated wages at the expense of the entrepreneur or capital, then it is, by definition, theft. Labor has no rightful claim to entrepreneurial profit or interest, the same way that capital has no rightful claim to a portion of labor’s wages. What’s truly ironic, though, is that since the industrial revolution, wages have grown at exponential rates, while interest and rent have remained fairly stable. In other words, capitalism (capital accumulation) benefits labor the most, which is why so many laborers are now capitalists, and yet anti-capitalists always claim to be “on the side of labor” (which can’t even exist in noncapitalistic systems).

I don’t know what you mean when you say “sufficient standard of living.” Sufficient according to whom? The poorest American’s, thanks to capitalism, have access to goods that people around the world only dream about (TV’s, computers, cars, and even houses in many cases). The poorest American’s are poor because they have to eat fast food three times a day, or shop at discount supermarkets, but the poorest African or Chinese citizens are poor because they have to search for drinkable water every day.

But yes, you’re right. Wages will equal the marginal product of labor only in equilibrium. So there are times when wages fall below the equilibrium level, and there are times when wages exceed the equilibrium level. But you only consider one of these conditions to be “unfair.” Either way, the market is a process.

**

You don’t know what entrepreneurs want; they aren’t a homogenous segment of society. Either way, and as I’ve demonstrated, their intentions/desires are entirely inconsequential. They really have no say in the matter. Capitalism and the profit motive turns scum bags into philanthropists (Rockefeller, Carnegie, etc).

Reality is neither fair nor unfair; it simply is. Reality cannot “screw people over.” The person that claims that gravity is “unfair” because it prevents him from jumping from one building to the next is an idiot. The person who attempts to lobby congress in order to reduce the strength of gravity is an even bigger idiot. Only in the realm economics is such stupidity permitted.

Labor strikes have entirely destroyed the U.S. steel industry (see the “experimental negotiation act of 1973”); in fact, they will destroy any capital-intensive industry with fixed costs. Additionally, unions destroy quality (teacher’s union, for example) and create a major political incentive for inflation (the stagflation crises of the 70s).

It’s not incorrect. Laborers tend to be, as a rule, risk averse, and entrepreneurship is a very risky endeavor. But my example was purely theoretical and was entirely disconnected from reality; the economy can never be entirely cartelized. I incorporated such assumptions only because I wanted to show you that real wages always move towards the equilibrium position, even in the most unbelievable/unrealistic conditions.

And finally, it is true that capital and nature cannot produce without the aid of labor, but it’s also true that labor cannot produce without the aid of capital and nature. You cannot produce anything with only your bare hands. The factors of production are co-dependant.

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Who doesn’t? In any case, worker franchise is a fiction.

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Whether you believe it or not is entirely inconsequential. The theory is logically consistent and has been empirically validated. No society has ever been able to increase wages, in the aggregate, through unions. It’s simply impossible. But don’t say that you take shit on this forum “because you defend the poor.” You take shit on this forum because you’re either ignorant of economic facts, or because you choose to ignore them for whatever reason.

Look… I take sh*t on this forum when people willfully misrepresent me in their responses. I conceded that even were it true that wages were only raised in the aggregate, unions and worker movements have raised wages, for union members, arguably everyone else because of hte passage of the min wage. And I have never “ignored” an economic fact. My most common uttered phrase here is “you have misrepresented me,” and it gets tiring saying it.

If that entrepreneur decides to use that surplus for additional investment (capital accumulation), then it will elevate real wages; if he decides to increase stockholder dividends, then it will increase real wages (makes the stocks more lucrative which will allow that firm to accumulate funds more easily for capital investment). But that entrepreneur can do whatever he/she wants with that surplus; again, it belongs to him/her. You keep saying that labor “deserves” more than it produces, but you don’t even bother to explain why.

I’m sorry, I thought I had said numerous times that they deserve it first because their human and it’s barbaric for people to live in poverty. Second, because they did all the producing. This is why I said I support labor being compensated with more ownership of capital because I think if you produce something you deserve to “accepted risk (which is a cost in itself), and satiate the needs of society better than his/her competitors.”

It’s my own subjective opinion, I admit. But are you against getting the entire populace into the market (specifically the stock market)?

first of all, the only reason why unions even exist is because the state directly supports them. Without state protection, labor unions, like all cartels, would go away

OMG that’s not true. In the early days of unions the state universally supported ownership. Early labor movements were universally opposed by the state. Only when popular demand started to support labor did the state start allowing strikes to continue. Some thngs happen despite govt, not because of it.

Either way, if this strike actually elevated wages at the expense of the entrepreneur or capital, then it is, by definition, theft.

Seriously? That is not exactly the opposite of Marx’s exploitation theory? If labor steals from capital, then capital steal from labor by treating it as a commodity. There may be labor competition across the market, but the workers in that one factory did all the producing. ANd just because some capitalist owns something (which he most likely recieved as an inheritance from a feudal land owner, some decendant of one, or someone who benefited off the forced displacement of native people’s) he gets first right to any profit made. He didn’t actually make anything, but he gets all the money. Or, it’s just market phenomena.

Your approach would be like saying businesses that out compete their competitiors gain profit at other business’ expense (through attracting their consumers away), and is therefore thievery. Or.. everyone who has ever drived on a road, recieved government assistance (maybe for schooling), or owns a business that got subsidized is a theif.

Collective bargaining only exists to protect the interests of the laborer. For exactly the reason that owners can just fire workers. Workers decided to get together and say “if you fire John, you fire all of us. And we will try our damndest to get the community to boycott you as well.”

Labor has no rightful claim to entrepreneurial profit or interest, the same way that capital has no rightful claim to a portion of labor’s wages

MIsleading quotes like you make have me wondering whether I can trust anything you say at all. I differ to your knowledge on economics because I am not as familiar, but I am starting to doubt whether that is beneficial either.

Of course capital has no right to labor’s wages, becuse they decided them (within the confines of aggregate demand [just so i’m not misrepresented again].

All I want to see is labor become it’s own entrepreneur; (unionized) self-employment across the board.

What’s truly ironic, though, is that since the industrial revolution, wages have grown at exponential rates, while interest and rent have remained fairly stable. In other words, capitalism (capital accumulation) benefits labor the most, which is why so many laborers are now capitalists, and yet anti-capitalists always claim to be “on the side of labor” (which can’t even exist in noncapitalistic systems).

When did I ever say I was anti-markets? I simply said I am pro labor. I’m down with the market’s ability to raise wages and the standard of living over time. But in real time, I want to see how we can improve the majority of people’s financial situations. You guys may want to try to pin me down with some evil, tyrannical agenda (and it has been tried, numerous times). But it’s simply not there.

I don’t know what you mean when you say “sufficient standard of living.” Sufficient according to whom? The poorest American’s, thanks to capitalism, have access to goods that people around the world only dream about (TV’s, computers, cars, and even houses in many cases). The poorest American’s are poor because they have to eat fast food three times a day, or shop at discount supermarkets, but the poorest African or Chinese citizens are poor because they have to search for drinkable water every day.

I know, it’s horrible right? When did I say I only support american workers? My arguments may be framed in america because it’s where I live, but I’m for all people, everywhere. Capitalism/industrialism had been around for 200 years prior to the 19th ce, and the standard of living for most laboers (america was a different story, at least in the early colonial days) remained stagnant. As I’ve said, I have my doubts that the speed at which prosperity grew was independant of the labor movement.

Some bum’s grandkid is able to actually live in a house, and it’s ok that the old man had ot be a bum? I don’t accept that.

But yes, you’re right. Wages will equal the marginal product of labor only in equilibrium. So there are times when wages fall below the equilibrium level, and there are times when wages exceed the equilibrium level. But you only consider one of these conditions to be “unfair.” Either way, the market is a process.

Look, I have not explicitly stated it in this way, and that’s my fault. But it’s not “low wages” necessarily that are the problem. It’s not how the owner treats labor necessarily. It’s what happens when labor leaves their work, what do they come home to? Do they come home to mac and cheese for the 20th day in a row and a fight over the electric bill that’s going to get shut off? Or do they come home to catch with their son, and a nice family dinner?

You don’t know what entrepreneurs want; they aren’t a homogenous segment of society. Either way, and as I’ve demonstrated, their intentions/desires are entirely inconsequential. They really have no say in the matter. Capitalism and the profit motive turns scum bags into philanthropists (Rockefeller, Carnegie, etc).

Oh, and that makes it all better?

You are right tho. I have no idea what entrepreneurs want. Henry Ford actually wanted to pay his workers a high wage. What I should have said was that all the profit motive wants is to pay labor the least amount it possibly can within market conditions.

Reality is neither fair nor unfair; it simply is. Reality cannot “screw people over.” The person that claims that gravity is “unfair” because it prevents him from jumping from one building to the next is an idiot. The person who attempts to lobby congress in order to reduce the strength of gravity is an even bigger idiot.

C’mon, you can’t recognize a facetious comment when you see it?

Labor strikes have entirely destroyed the U.S. steel industry (see the “experimental negotiation act of 1973”); in fact, they will destroy any capital-intensive industry with fixed costs. Additionally, unions destroy quality (teacher’s union, for example) and create a major political incentive for inflation (the stagflation crises of the 70s).

Unions played a role in that, but most/all steel strikes had taken place long beforehand. Opening capitalist development to underdeveloped countries (free trade) destroyed american steel industry. That’s terrible for us, especially because I live in Youngstown area, but it’s great for people in China.

And yes, I have my problems with specific unions. I support unionization because it is very responsive in the beginning. But like all oligarchies, it tends to distance itself and try to get one off on its members.

The major steel companies and the United Steelworkers of America
approved an “Experimental Negotiation Agreement” where the union gave up
the right to strike in favor of binding arbitration. The companies
agreed to end stockpiling of products.

Workers made a concession and it destroyed the steel industry? I’m thinking the steel industry was already on its way out, so in desperation the industry negotiated its workers ability to strike away.

I’ll say nothing on the teacher’s union, because they, in fact, are terrible… as well as the rest of the educational system in america. And I went to a poor private school, there no better than the public ones.

And finally, it is true that capital and nature cannot produce without the aid of labor, but it’s also true that labor cannot produce without the aid of capital and nature. You cannot produce anything with only your bare hands. The factors of production are co-dependant.

It seems we are in agreement here.

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One kind of labor (non-management/non-owners) does the producing. The other kind of labor (owners, managers) organizes labor and capital to realize more productivity or profit. It’s more or less the 3rd point that I’m driving at. That’s what some of the labor does, even if it doesn’t “produce” directly. They get compensated for managing, which is a kind of labor.

To bring this back to the original point, everyone who works for the company or manages the company adds to the production and the realization of the creation of wealth by the company. Everyone gets compensated for it. The amount each person gets paid for is essentially tied to their marginal productivity.

There is nothing here I disagree with. My question is, how do we get labor on the upper end of their marginal productivity. The equilibrium level is not a fixed position in terms of dollars.

I think more compensation in ownership is a good way to go.