Many anticapitalists actually do care about the long term. And even those who don’t, don’t realize how short the short term is.
If the rich man had less purchasing power to buy medical services, the poor would not benefit by receiving the rich man’s now diminished share. That share would not come into existence in the first place and there would be that fewer medical services and supplies to go around for everyone.
The additional purchasing power is itself the result of a previous “creation” of net wealth to society. It is the result of a higher state of consumer satisfaction. It does not come at the expense of someone else, but on the contrary, it increases the total “pie” and eventually benefits all. If this additional purchasing power of the more wealthy had never come into existence in the first place, the less wealthy wold be worse off, not better.
This is too generous. You are destroying capital is more like it. You are subsidizing the unproductive at the expense of the productive.
“to the less efficient” sounds like it is not a total loss. As if some “less efficient” people receive the stolen wealth and still produce something. No way! They produce nothing. They only consume!
Consuming does make money for someone tho, who may invest that in productive enterprises. So they are still being productive in some sense.
Your argument would only work if they were throwing their redistributed wealth under their matress.
A producer who benefits from wealth distribution doesn’t suddenly stop being a producer thereby.
This is a fallacy that runs back through Keynes and to Malthus.
The money that goes from the consumer to the vendor gives the latter command over already-produced factors of production, and it is those factors that are productive, not the money. Had the consumer consumed more, there would be less, not more, of those factors, and thus fewer possibilities for future production.
Why is one good, while the other bad? If redistribution is bad, what makes it any different when it’s done voluntarily? It was still redistribution from so-called productive to so-called unproductive.
In the voluntary case, the charity is a type of consumption by part of the benefactor. On the other hand, in the involuntary case, there is no reason to believe that a wealthy man will curtail his consumption. Instead, he is more likely to reduce the amount of capital re-invested into production, in favor of maintaining his standards of living. This is an argument put forth by George Reisman, in Capitalism. The difference comes down to preference and utility. In the voluntary case, there was satisfaction in the charity. This satisfaction doesn’t exist with taxation. Ultimately, the involuntarily redistributed money comes out of capital, not consumption funds.
Then of course there’s the ever popular “the poor are poor because they are lazy.”
I don’t think anybody seriously suggests this is the case. The wealthy are wealthy because they are better able to respond to consumer preference (of course, there are people who inherit wealth, but if they make poor investment decisions they will lose that part of their wealth and it will be ‘naturally’ redistributed to those who are more efficient entrepreneurs).
Lastly, why is upward redistribution good? By this I mean the flow of wealth, which tends to center in fewer and fewer hands through open trade.
I don’t think this is always the case. It certainly has been the case in the past thirty years, largely resulting from the web of welfare legislation in Western countries. Previous to the welfare state, however, there is empirical evidence which suggests that workers’ wages were rising faster than employers’ profits, which goes hand in hand with any theory of competition and full employment. It is natural that workers’ nominal (and real) wages rise as a result of competition for labor. This is clear if you model the relationship in a world with a fixed supply of money in circulation.
However, that some people tend to earn more money than others is a byproduct of natural inequality, and is a good thing. That large amounts of money accumulates in the hands of efficient entrepreneurs means that that money, now capital, is efficiently invested in lines of production which are congruent with consumers’ changing preferences. Like Daniel wrote a few posts ago, it has to be remembered that this accumulation is a byproduct of their efficiency. Efficient entrepreneurs tend to earn more revenue, since they better satisfy consumer desires.
Since when do we [around here] value the concept of production in terms of “real capital” as oppose to the valuations of consumers in an unhampered market? Since when did you start to consider a “producer” as anyone who exerts physical labor?
Is the bomb maker productive? and is the production of paper and ink required for the administration of its making productive?
Since when do we [around here] value the concept of production in terms of “real capital” as oppose to the valuations of consumers in an unhampered market? Since when did you start to consider a “producer” as anyone who exerts physical labor?
I think you missed Daniel’s point. If you redistribute wealth from Bill Gates to a minor entrepreneur who runs a book store, that entrepreneur may still be anticipating consumer preferences. It’s just that ultimately the productive efficiency will be inferior to what it would have been had Gates been able to re-invest those funds. The example is purely theoretical, and assumes that Gates is a better entrepreneur than the bookstore owner, which is why Gates earned that wealth to begin with.
Not all redistributed wealth is consumed. Most of it probably is, but some of it can be invested by private producers. Whether it is or not is an empirical question.
Sieben, you might appreciate the following article:
I didn’t say anything about real capital. What consumers in an unhampered market? I don’t see any unhampered markets. So there are no consumers in an unhampered market whose valuations I could care about.
There is a market for bombs. I may not like it, but it doesn’t change the fact. There are governments and guerillas out there looking to buy them. There are people producing bombs for that market. The noun associated with “producing” is producer.
Now the governments who are buying them are doing so because the people on whose opinion their ideological might rests think bombs are an effective means of achieving their ends. That is not the case. Therefore, the production they are fostering is contrary to purpose. That doesn’t make it not production. Other lines of production would lead to a much higher standard of living. That still doesn’t make it not production.
More accurately, anticipating consumer preferences that would not have occurred absent the confiscation. The net result of the confiscation results in a loss for consumers. Not a gain. We are dealing with negative productivity here. Not less productivity.
The problem is your point of reference for the “measurement” of evaluating the outcome is incorrect. The point of reference you are using is the state before the confiscation. This can lead one to the conclusion that not all may be lost (as in your example). However, this reasoning is flawed. The point of reference you should be using is the hypothetical state absent confiscation, i.e., the unseen state. We can say for sure that such a state [systematically] always leads to a higher output value, and it is this state that matters for assessing the loss for consumers.
Action that leads to “less efficiency” implies a net gain, albeit less gain then action that leads to “more efficiency”. But there is no gain for consumers. There is a loss. It logically follows then that confiscation must result in negative productivity. Not less efficiency.
Now, I have not even taken into consideration the personal loss for the victim, which I should.
This is true, but it is a totally different thing to say that ultimately, the productive efficiency as a whole is inferior (or less efficient) then it would have been, then saying or implying that confiscation need not amount to complete loss but just a less efficient outcome.
I don’t know what kind of argument you are trying to make here. There is no unhampered market so value theory is nonsense?
If this didn’t come from you, I would say this line of argument is nothing but some socialist denial of economics then anything else.
It is production in the Marxian sense. No?, what is its value then?
As far as these lines of production are financed by other productive lines of production, then they are tantamount to capital consumption, purely and simply. Nobody has suggested that these lines of production are not really producing something in the real physical sense. But economically, they are equivalent to non-productive consumers. How can they not be if they are living off loot?
More accurately, anticipating consumer preferences that would not have occurred absent the confiscation. The net result of the confiscation results in a loss for consumers. Not a gain. We are dealing with negative productivity here. Not less productivity.
Right, nobody said otherwise and I actually made this point in my original post. The loss is represented by an opportunity cost; i.e. the consumers lose X1-X2, where X1 is production before redistribution and X2 is production after redistribution. All in all, it represents a loss in efficiency, which is implied in the fact that capital has been redistributed from a more efficient entrepreneur to a less efficient entrepreneur.
The problem is your point of reference for the “measurement” of evaluating the outcome is incorrect. The point of reference you are using is the state before the confiscation. This can lead one to the conclusion that not all may be lost (as in your example). However, this reasoning is flawed. The point of reference you should be using is the hypothetical state absent confiscation, i.e., the unseen state. We can say for sure that such a state [systematically] always leads to a higher output value, and it is this state that matters for assessing the loss for consumers.
You fundamentally misunderstood my post, then, because I always had in mind the potential production of capital in the hands of a more efficient entrepreneur. The parenthetical point in my original post is probably where this is most apparent. I write, “The actual utilitarian argument was provided by Daniel, and that is that you are redistributing capital from the more efficient to the less efficient, ultimately at the expens [sic.] of both (since the less efficient will never enjoy what production was foregone as a result of that wealth redistribution).” Emphasis added.
Action that leads to “less efficiency” implies a net gain, albeit less gain then action that leads to “more efficiency”. But there is no gain for consumers. There is a loss. It logically follows then that confiscation must result in negative productivity. Not less efficiency.
This seems like an exercise is semantics. The loss is represented by opportunity cost, as aforementioned. You, however, originally responded by arguing that by redistributing capital “[y]ou are destroying capital”. The point you make here is not much different from my original point, and is very different from your original argument. Capital was not destroyed. Wealth redistribution does not necessarily lead to capital consumption, unless the new wealth is used in the form of consumption and not investment. There is still production, it’s just less production than otherwise would have been the case. The loss in production represents a loss, but this does not translate into capital consumption.
This is true, but it is a totally different thing to say that ultimately, the productive efficiency as a whole is inferior (or less efficient) then it would have been, then saying or implying that confiscation need not amount to complete loss but just a less efficient outcome.
I don’t see how it is different. Consumer desires are satiated to a lesser degree than they otherwise would have been, but they are still satiated to some degree by the redistributed capital.
Opportunity costs is present everywhere and always. How can this be the key to understanding and persuading why confiscation results in destruction?
And I simply contend that this line of explanation is “too generous” for the benefit of the expropriators. It conceals the destructive element that is always present in every form of systematic theft. The “efficient to less efficient” does not necessarily imply loss if one fails to visualize your opportunity costs, or even reject the concept (Reisman).
What is capital to you? Certainly not the machines and hardware that can be visually observed.
How is an act of violence that lowers output value productivity from A to B not amount to A-B of capital destruction?
Opportunity costs is present everywhere and always. How can this be the key to understanding and persuading why confiscation results in destruction?
I don’t follow your argument here. Does the redistribution of wealth from entrepreneur A to entrepreneur B, where entrepreneur A would have hypothetically produced X and entrepreneur B hypothetically produces X-X2 (with the transferred capital), not represent an opportunity cost in the broadest sense? Production X-(X-X2) was foregone in favor of production X-X2. It’s an issue of foregone production, like I had originally stated.
And I simply contend that this line of explanation is “too generous” for the benefit of the expropriators. It conceals the destructive element that is always present in every form of systematic theft. The “efficient to less efficient” does not necessarily imply loss if one fails to visualize your opportunity costs, or even reject the concept (Reisman).
Then it is semantic, because I thought a loss in efficiency implies a loss.
What is capital to you? Certainly not the machines and hardware that can be visually observed.
How is an act of violence that lowers output value productivity from A to B not amount to A-B of capital destruction?
How is your first question relevant? If we’re talking about capital that is invested (or, more accurately, capital used to purchase capital goods which are then invested), and this investment is not a malinvestment, then it follows that the stock of capital goods will rise. The rise is not as large as it otherwise would have been, but it’s still a rise. There is no ‘destruction of capital’, there is just foregone capital. There is a difference between capital consumption and a loss in the shape of an opportunity cost. They are both losses in the broadest sense of the term, but they are two different types of losses, with two different implications.
I interpreted your use of ‘destruction’ as capital consumption, which is not happening. If you are actually saying that the hypothetical quantity X-(X-X2) has been destroyed (even if it never existed) then you are right, but this is just another semantical argument (and is exactly what I had originally stated).
Jonathan never said that the wealth distribution itself is “efficient” to any degree. He was talking about the recipient-producer himself. The bookstore owner is still a producer, and one can speak of his relative efficiency.
The end state of affairs does have some effiicency, because production is still occurring, but not by virtue of the confiscation having occurred. I don’t know why you’re thinking Jonathan is saying that the confiscation itself is [productive].
I’m saying it makes no sense to determine if something is an act of production or not according to if it would have occurred in some hypothetical unhampered economy. In an unhampered economy, presumably a great number of tax accountants would go out of business. Given the real world we live in as it is now, they provide a real service to their customers. Their customers would consider themselves worse off had they not had their services, because we don’t live in an unhampered economy. They are producers.
Economic categories don’t evaporate just because governments, guerillas, and highwaymen exist. Someone who purchases a gun just to rob someone is still a consumer of the services of that gun. His purchase of the gun has its effect on the structure of production. Those who participated in that structure of production are still producers, and producing for the robber, just as much as for the sportsman and the hobbyist. Whether or not the robber is better off than he otherwise would have been had he not chosen a life of crime is immaterial with regard to the fact that, in purchasing the gun, he is having the catallactic effect of a consumer, however we may judge his ends, or realize that his act is destructive of his rightly understood interests, as well as those of others. In a sense, to a degree, everyone in the vast division of labor that resulted in the production of that gun is “living off loot”, because the structure of production would have been different had the robber not purchased the gun to commit robbery. Maybe even a particular niche industry would go out of business if robbers didn’t exist. That doesn’t make them non-producers. The same basic analysis holds with regard to the structure of production as it is effected by the purchases of governments and guerillas.
EDIT: I had said “occurring” where I meant to say “productive”, which might have been confusing.
Just thought of way of distilling this to use with people who do not have a head for economics.
Human welfare depends on judgment, providence, expertise and industry. This is just as true in the market economy as it would be for Robinson Crusoe.
Insofar as you confiscate profits, you are penalizing judgment.
Insofar as you confiscate interest, you are penalizing providence.
Insofar as you confiscate wages, you are penalizing expertise and industry.
If you penalize that which makes our lives better, you will make our lives worse.