Had a question about the relation of invested capital and wages earlier (thanks for the answers, Stranger), and really brought into focus a vague theory I’ve had kicking around for a while.
In the modern world, the boundries of nations are withering away, leading to an increasingly continuous “global” economy, with capital moving around the world in search of the cheapest labor.
If it were truly lassiez-faire, and assuming labour had mobility equitable to capital (mass migrations, open borders), would labor chase capital, raising wages and decreasing capital, until the two were in almost complete equilibrium, except for the temporary (especially without the artificial protections of IP, patents, trademarks, and copyrights) boost to capital provided by invention/innovation, and the slight profit margin required to keep people interested in taking risk.
This sounds a lot like Marx’s socialist/communist epoch, except since his economic ideas were so off the mark, he messed up all the details (violent revolution of the proletariat, central planning of resource distribution, labor theory of value, no property, etc.).
Right, otherwise it would cease to function, but would it eventually (assuming we don’t start colonizing other planets by then) get so close, that it for all practical purposes labor and capital could be considered equal?
I don’t. I just mentioned it because I thought it would be necessary for it to follow capital, causing capital to move once the cost of labor became too high in that region.
My thoughts run thusly: The fluctuations in price level arise from changes in the conditions of production and demand. It’s not so much that the flux in prices causes the changes in valuation, it’s the changes that cause the fluctuations. And it’s because these valuations are constantly changing that the “wave-like motion” of the economy will float around some average but never settle on one point.
I’m not quite sure what you mean by capital and labour being considered equal. Do you mean that an entrepreneur would be indifferent as to whether he could apply capital v. labour to production? I’m not sure this is possible even with free flows of capital, labour and goods given that labour and capital are qualitatively different. Furthermore, even in terms of the ratio of supply/demand I don’t think it’s possible as, in market economies, capital production exceeds it’s consumption thus creating “wealth”. The creation of wealth necessarily requires that the rate of capital accumulation exceed the rate of population growth and thus growth of the workforce.