Feel free to erase the following long & theoretical discussion.
Gil writes:>> Having read Jim's article I know what he's getting at
in referring to exploitation as "taxation without representation,"
but this conception does not address the issues I've raised here and
thus doesn't contradict what I've said. Why? Referring to profit as
taxation addresses the question of *how profit is appropriated* (as
indicated by Jim's own summary),<<
Gil, please don't put words into my mouth, especially when they
involve fuzzy thinking! I didn't use the word "appropriated," since
it has more than one meaning. It can mean forcing workers to produce
a surplus-product (what I was talking about) or it can receiving
surplus-value that someone else has induced workers to produce. The
word "appropriate" conflates two issues that need to be separated.
>> but leaves *entirely unanswered* my central question concerning
the economic *function* of profits: as a necessary payment for
productive risk-bearing (or abstinence), or as a rent, a payment in
excess of any such "socially necessary" opportunity costs (if they
exist). As I've already explained, saying that surplus value
corresponds to an economic rent is entirely consistent with the
notion that "[p]rofits result from the force applied by the state to
preserve capitalist property,....", etc. Thus affirm ing Jim's
conception in no way contradicts mine.<<
To talk about "economic function" is either to bring in structural
functionalism (a major step backward in terms of methodology) OR to
talk about the _normative_ dimension, which simply distracts us from
the key issue:
** receiving a rent because one owns a scarce item is NOT the same
thing as having the _power_ to force people to work to produce a
surplus product (the power to "tax").**
As I said in my last missive in the "scarcity, strategy, &
exploitation" thread, I believe the difference between our views is
as follows:
Gil believes that a person owning a scarce item is sufficient to
induce workers to produce surplus-value. (In other words, though
surplus-value _can_ be (and most often is) the result of capitalist
dominance, subsumption, it need not be so.)
I, on the other hand, see this view (whether or not it is indeed
Gil's) as contradicting Marx's accurate view that a surplus-product
CANNOT be produced simply via market relations (buying & selling):
Workers must be dominated ("subsumed") _in production_ and the
passive ownership of a scarce item will not automatically lead to
workers being dominated in this way.
On the normative issue: if all surplus-value is the result,
ultimately and directly, of capitalist domination, then it really
doesn't matter very much whether profit is part of the opportunity
cost of bringing a product to the market ("a necessary payment for
productive risk-bearing (or abstinence)") or an "absolute" scarcity
rent ("a payment in excess of any such 'socially necessary'
opportunity costs").
BTW, under capitalist social relations, the "socially-necessary"
opportunity costs are defined from a _capitalist_ point of view
(just as _all_ opportunity costs are defined from a specific point
of view) and based on the prevailing average profit rate for society
as a whole (i.e., so-called "normal profits"). That is, the
definition of opportunity costs reflects capitalist power, takes it
as a given. (That does not mean that these opportunity costs are
irrelevant or wrong, only that they must be put in perspective.)
As I said before, the role of "relative scarcity" in determining
profit is a _dependent_ variable, dependent on the
macro-structure of power, i.e., the power of the capitalist state,
the power of the reserve army of labor, and the power of capitalist
managers. To forget about this power is to engage in capitalist
ideology.
>The kind of exploitation that Gil is talking about above ("the
essence of Marx's critique of vulgar political economy," profits as
a result of scarcity rents) is that which Henry George applied to
land-owners, Keynes applied to rentiers, and Roemer applied to the
capitalist class as a whole. These theories aren't wrong as much as
_superficial_ compared to Marx's theory (as I understand it); that
is, they are explained by Marx's theory.<
>>No it isn't, since as explained earlier relative scarcity is
essentially dynamic and historically contingent while the basis of,
e.g., land rent is essentially static and ahistorical (though not
independent of particular social conditions).... And since my
conception of relative scarcity accomodates Jim's "taxation" story
as well as Marx's "general law of capital accumulation" it can't be
like these other theories in being "_superficial_ compared to Marx's
theory"; it *embraces* Marx's theory as an important, perhaps the
central, case. <<
Your theory only incorporates or "embraces" the "taxation" theory
(which is simply a restatement of Marx's theory in "modern" terms)
only in the sense that it is exploitation-as-taxation is one kind
("perhaps the central" kind) of capitalist exploitation along with
your theory in which rentiers can induce workers to produce
surplus-value by passively taking advantage of the scarcity of their
resources. However, since the latter doesn't work (given Marx's
principle that surplus-value cannot be created in circulation, only
in production), the passive taking advantage of scarcity ends up
simply being a redistribution of the surplus-value that was already
produced by the application of capitalist power. In sum, "passive
theory" is a superficial aspect of the capitalist power theory.
The theory of relative scarcity (i.e., Marshallian quasi-rents) as
the source of profits is simply the same as that of Keynes (at least
according to Minsky, JOHN MAYNARD KEYNES). I never denied that the
means of production must be (relatively) scarce for capitalists to
receive profits; I instead emphasized that capitalist class _power_
preserves that scarcity over time, so that scarcity should be seen
as dependent on power. But relative scarcity or quasi-rent theory
only gives a small part of the story: it says that individual
capitalists have the ability to claim a part of the societal
surplus-product (surplus-value) but it does NOT tell us how the
surplus-product actually can be produced. If claims exceed the
product, we get inflation.
That is, the average productivity of labor must exceed the real wage
and the mere quasi-scarcity of of MofP CANNOT cause this to occur;
it must be complemented and preserved by institutional factors
(capitalist power). If the power of workers to push up wages and to
restrict the intensity of work is high, there will be NO surplus
product, so that the quasi-scarcity of MofP does the capitalists no
good. BUT the physical coercion of the state, the structural
coercion of the reserve army of involuntarily-unemployed labor, and
the instrumental coercion of managers (threats of firing, etc.)
prevent the workers from having this kind of power. The capitalist
class POWER is the source of their ability to dominate workers, to
induce them to produce a surplus-product, which THEN allows
individual capitalists to claim parts of that product.
>note that Gil's "relative scarcity" corresponds to what Marshall
called "quasi-rents."<
Gil quibbles about terminology: >>It may seem like it corresponds to
"quasi-rent", but it most certainly does not, which is why it is
necessary to invent a new term. Here's the test: for Marshall (as
well as modern mainstream economics) a quasi-rent is a payment that
acts like a rent in the short run (or more precisely, subsequent to
an investment in a non-fungible asset, like a specialized machine),
but acts like a "natural price" in the long run (i.e., *prior to*
any such investment)--that is, as a socially necessary payment for
the opportunity cost of providing some productive service (on this
point see pp 424-426, Marshall's Principles, 8th edition, especially
footnote 1 on p. 424).<<
BTW, all or almost all of the MofP that are relevant to our discussion
are fixed MofP, non-fungible, and specialized. (We're not talking about
a scarcity of paper assets, which is a function of the scarcity of
real assets, except for government bonds which are based on the state's
power to collect taxes.) Also, again: "socially-necessary" here must mean
from the perpective of capitalists.
>>But there is *no* sense or decision horizon [for whom?] in which
economic rent understood as a return to *relative* scarcity as I've
defined it constitutes a payment necessary to call forth a
productive service. Thus my notion of return to relative scarcity
cannot possibly correspond to the Marshallian notion of
quasi-rent.<<
Gil earlier defined "*relative* scarcity ... as aris[ing] if (a) the
long-run supply curve defined for any period of *real* time becomes
vertical at some quantity, but (b) this quantity expands over real
time. The visual representation of this case is as in (2), except
that this representation has an explicitly *dynamic* aspect: the
vertical portion of the supply curve shifts out over time."
The quibbling arises because Gil has discovered a distinction that's
been around for awhile and is usually not made, but in the end is
not very important.
If one wants to think about the phenomenon of capitalists receiving
profits because the MofP are scarce in the short run, I would follow
Paul Davidson's model (see ch. 4 of REAL WORLD MACROECONOMICS), which
shows up with some simplification in Dornbusch and Fischer,
MACROECONOMICS, applied to residential investment.
The key distinction is between the stock-supply (SS) and the
flow-supply (FS) of fixed MofP. At any point in "real" (i.e.,
historical) time, the SS of fixed MofP is vertical or close to it,
above the maintenance cost. The vertical SS curve usually shifts to
the right over time -- because the stock-price or asset-price of
fixed MofP (determined by the intersection of the stock-demand and
the SS curves) is high relative to the supply-price of (i.e., the
marginal opportunity cost of producing) new fixed MofP at a quantity
of zero. The volume of net investment and the actual supply-price of
new MofP are determined by where the asset-price equals the FS curve.
The latter is upward-sloping but relatively flat.
(The asset-price of course equals the present discounted value of
future profits from owning fixed MofP. If the asset-price exceeds
the supply-price, it is profitable to increase the stock of assets.
The ratio between the asset-price and the supply-price is "Tobin's
q.")
One might see the owners of the fixed MofP as receiving a "scarcity
rent" (represented by the area between the asset-price and the
maintenance cost, to the left of the SS curve). If I understand Gil
correctly, this is due to his "relative scarcity." On the other
hand, the capitalists organizing the production of the fixed MofP
get a "scarcity rent" if the FS has an upward slope (the area below
the price and above the FS). This is by-the-book Marshallian
quasi-rent. But though these two kinds of rents are different, they
are highly related and are due to the same problem: they are both
due to the upward slope of the FS curve (see the discussion of the
long run, below). Because they are highly related and due to the
same cause, I don't think much is lost by calling them both
"quasi-rents."
The first kind of scarcity rent (the "stock scarcity rent") is
usually just "on paper"; it can only be _realized_ (i.e., actually
received as income) by an individual if she buys low and sells high.
On the aggregate, this only happens when the SS curve is shifting to
right more slowly than the stock-demand curve. (Otherwise, a seller's
gain is a buyer's loss, cancelling out on the aggregate level.) Even
then, for this profit to correspond to real goods and services,
somewhere in the economy workers have to be induced to produce
surplus-value.
(A neoclassical might object that the owner of a fixed MofP would be
gaining in terms of "opportunity cost," i.e., by the gap between the
cost of running MofP one owns and the cost of leasing that MofP,
just as home-owners often gain relative to renters. But that gain
is not in terms of actual goods and services produced or actual money
changing hands and is thus not surplus-value. Further, that gain
might easily be negative and, in the hypothetical long run, equals
zero unless there is some special tax treatment by the government.)
Similarly, the second kind ("flow scarcity rent"), the profits made
above the "normal" profit, though realized through sale of new MofP,
must correspond to workers being coerced into producing surplus-
value somewhere in the economy.
As noted, the two types of rent are highly related and due to the
same cause. This can be seen if we consider the long run (which
constant shifts of supply and demand and ultimately capitalist
power, i.e., their control over the investment process, never allows
to happen). Here, the FS curve is totally elastic (like flow-supply
curves for most products), abolishing the producers' flow scarcity
rents (Gil's Marshallian quasi-rents), so that they have to rely on
merely "normal" profits (which exist if capitalists have the power
to extort surplus-labor from the direct producers). In the LR, the
asset price of fixed MofP also equals the flow-supply-price of new
means of production, which is independent of the volume of
investment. In long-run equilibrium, this price also equals
the maintenance cost, so that even "paper" scarcity rent doesn't
exist. Pure owners of the fixed MofP receive no stock-scarcity
rents at all, though the capitalists organizing the maintenance
of the equipment can receive "normal" profits.
The question remains: does the non-scarcity of MofP affect the power
of the capitalists, i.e., their ability to extract "normal" profits?
Of course it does, ceteris paribus. But the non-scarcity induces
reactions that imply that all else does not stay equal.
There have been many situations, i.e., "crises," in which
over-accumulation leads to unemployed MofP. In that case, the
capitalists have to compensate for the abundance of their MofP by
raising the reserve army of labor, via speed-up and stretch-out, via
wage cuts, and by arranging intensified state coercion. They
might also arrange for the physical destruction of fixed MofP.
The rise in unemployment happens automatically, due to the
capitalist excercise of their power to control investment, which in
K1, ch. 25 (i.e., at a very high level of abstraction), Marx
represented by the fixed proportionality of accumulation
(saving-and-investment) and surplus-value. (I would add that a
falling rate of profit also reduces the incentive to invest.)
Given the capitalists' control over production, this
rise in U means that speed-up, stretch-out, and wage-cuts can be
imposed (assuming that workers' organizational power doesn't
change). Only in extreme cases, i.e., when these relatively
automatic mechanisms fail, are increased state oppression and
the physical destruction of MofP necessary.
Of course, if workers' organizational power increases due to
the crisis, everything is much more complicated.
in pen-l solidarity,
Jim Devine [EMAIL PROTECTED]
<74267,[EMAIL PROTECTED]>
Econ. Dept., Loyola Marymount Univ.
7900 Loyola Blvd., Los Angeles, CA 90045-8410 USA
310/338-2948 (daytime, during workweek); FAX: 310/338-1950
"It takes a busload of faith to get by." -- Lou Reed.
