On Jun 17, 2013, at 11:26 AM, Julio Huato wrote:
Gene wrote:
A standard phrase of the neo-classicals is this, found in Mankiw
above: "Under a standard set of assumptions, a competitive economy
leads to an efficient allocation of resources."
Once the reader or audience lets that sentence go by unchallenged
it is home free for workers being paid their marginal
contribution. CEOs get what they deserve, and so do the janitors.
What could be more fair?
A founder of that theory, Friedrich von Wieser, declared it "the
economic theory of a communist society." von Wieser would certainly
agree with Karl Marx that the compensation of CEOs and their ilk is
nothing but "a new swindle."
Leaving aside the issue of "efficiency," the just-deserts story is
*not* implied by the theory. This is why we must be careful in
analyzing this garbage. As is, the theory implies *nothing* about
ownership. Instead, ownership is *assumed*. Follow the logic of the
argument.
This is what I recommend my students: Build the story yourself, from
scratch. See which assumptions are required to sustain which
conclusions. If you cannot reproduce the story logically, you do not
understand it.
Of course means of production ("capital goods") are required to
produce other/more goods, but that doesn't mean that the marginal
contribution from the use of those "capital goods" in production (or
its value) should go to a particular group of people. Why? The
private or exclusive appropriation of the social surplus has to be
justified independently, on other grounds. The theory does *not*,
cannot do that.
The normative use of "marginal productivity theory" as a theory of
just deserts is a non sequitur, and we should insist that it is. To
be fair with the economists, the sophisticated among them have turned
their backs on this crap. One can fault them for not being
sufficiently outspoken about their rejection of this garbage, but that
is a separate issue. I object to discarding the baby with the
proverbial dirty water.
Shane Mage
This cosmos did none of gods or men make, but it
always was and is and shall be: an everlasting fire,
kindling in measures and going out in measures.
Herakleitos of Ephesos
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