#tbt Robert Hale 1923 Coercion and Distribution in a Supposedly Non-Coercive State

Okay, so admittedly this sort of strays from the realm of "economics" proper, but I think economists would do well to read it. In 1923, lawyer and economist (it was once possible to be both) Robert Hale argued that, despite platitudes to the contrary, the institution of property ownership itself is a coercive system.

Hale argues that the institution of private property is not so much about one's freedom to use particular objects, but rather one's ability to exclude their use by others with the backing of the violence of the state. Throughout the paper, Hale goes through several different iterations of potential conflicts of ownership and use to demonstrate precisely how coercive the supposedly non-coercive institution of capitalism is.

Download the paper here

BRAAAAAAAAINS!!!!

After weeks of googling myself, I am pleased to announce that my working paper on human capital augmented production functions is finally live on RePEc. You can view it here. You might recognize the theoretical proof from a previous post I wrote on here a few months ago while the paper was still in development.

What is in the paper that was not in the blog post are as follows:

1. A reasonable review of the literature
2. A simulation to drive the point home
3. Zombie puns

Enjoy, and leave comments below. Or cite me in a rejoinder - that would be cool too!

UPDATE: In the interest of transparency and what I meant to do but just forgot (thanks to Robert Vienneau for reminding me), here are my R scripts. I apologize in advance about the run time of the second one:

Humbug Simulation
Success Simulation

If you have any trouble with the scripts, make sure you clear your R environment from one before running the other.

Interview on Unemployment with Orchestrated Pulse

Yesterday, I sat down for an interview with Robert Stephens II of Orchestrated Pulse for an interview on how unemployment fits into the capitalist system. We talked about what unemployment is, and why the unemployed are necessary for the power of the boss over workers. Needless to say, I threw some Kalecki into the mix and somehow managed to work in a shout-out to Ed Baptist's new book.

R: What is unemployment?

Mike: Everyone, workers and business owners, needs employment, but for different reasons. The workers need consistent employment so that they can buy the things they need to survive. Business owners need employment because it is ultimately human effort that creates the things that they sell for a profit.

Thus, we can take two perspectives on employment. First, it can be for the purpose of determining how much work is needed for bosses to maximize their output. Second, it can be for the purpose of determining how much work is needed for workers to maintain a given standard of living. Whichever version we choose, unemployment becomes the amount of labor that we believe society isn’t producing.

To speak of unemployment, we need a very specific type of economic system. It has only been within the last 400-600 years that “employment” has become a necessity as an end in itself.

Check out the interview on Orchestrated Pulse

There Is No Law; There Is Only Enforcement

This past weekend, Rand Paul led a filibuster on the Senate floor to delay certain provisions of the Patriot Act. As of noon at night on Monday, the NSA "couldn't" collect massive amounts of domestic phone call metadata in three month intervals. Technically, they "couldn't" do that about a month before, but appeals courts?

¯\_(ツ)_/¯

#tbt Michał Kalecki 1943 Political Aspects of Full Employment

In the 72 years since its publication, Michał Kalecki's Political Aspects of Full Employment has received little in the way of faithful formalization. The currency it has found has been mostly in grave departures from its premises and conclusions. For the most part, the paper has been treated as if it were a theory of the business cycle. Perhaps the most notable of these endeavors was William Nordhaus' 1975 paper, although a nod to this direction was recognized by Joan Robinson in her 1972 speech at Cambridge. This view generally sees Kalecki's theory as saying that political power determines macroeconomic outcomes.

To be sure, the theory does derive from the realization of a consequence of part of what may be considered the business cycle – widespread unemployment. However, the meat of Kalecki's argument is not (necessarily) about what causes economic downturns per se so much as the curious way in which large business interests react to them.

In my reading, the curiosity motivating Kalecki is not one of what causes widespread unemployment, but rather why businesses would have an interest in seeing it persist. In this model, Kalecki takes rampant unemployment as a prior condition to his model, and is interested in why business interests would oppose a full employment program even when such a program is to their own benefit.

What Kalecki argues instead is that the very fact of full employment itself gives workers the leverage to bargain for higher wages. For Kalecki, lack of job security acts as a discipline device. With a larger pool of unemployed, workers are easily replaced, and they know it. Thus, any attempt to bargain for higher wages, better working conditions, etc. can be easily remedied by businesses with the sack. Thus, any attempt to take this discipline tool from the capitalist class is viciously opposed in spite of the fact that they stand to make higher profits.

Download the Article Here

March Against Monsanto

So it appears I'm going to be leading a teach-in with Alexandria Eisenbarth after the March Against Monsanto on Saturday the 23rd. It's gonna be at C-Squat downtown. Never been there before, so I'm kind of excited.

It's kind of a weird topic for me to be talking about since I don't do environmental economics. It's not that I don't care about the environment, nor is it that I think that the environment is somehow separate from the economy. I'm just kind of bored by economic models of the environment. To be honest, I don't really think that "economic" considerations should take all that much precedence over environmental issues.

Instead, I'm going to be talking about how ownership structures in capitalism necessarily lead to the exploitation, impoverishment, and disenfranchisement of the majority of the world. I plan to touch on how and why this inequality tends to manifest along identitarian and geographic lines. Then I'm going to explain how this tendency for exploitation to intensify makes the capitalist system fundamentally unstable.

The Problem with Human Capital as a Factor of Production

Shaikh's "Humbug" paper should have sounded the death knell for the Cobb-Douglas "production" function. Instead of accepting that the Solow residual (A in the equation below) was identically equal to the share-weighted geometric mean of the factor prices, New Classical economists have turned inward.

$$Y = AK^{\alpha}L^{1 - \alpha}$$

Now, the mainstream theory of growth is in constant search to "endogenize" the Solow residual. Thus, the hunt has been on for additional factors to "explain" the Solow residual as "accumulated" factor productivity.

If you take as given the Shaikhian formulation, then it becomes obvious why "total factor productivity" increases over time. Since average wages have generally been increasing over time while the average rate of profit is roughly constant (per the last two Kaldor facts), the Solow residual will necessarily be increasing over time. Thus anything roughly correlated with the average wage rate should allow for the ad-hoc creation of a "factors only" production function.

Minimum Wage Reader

CEPR - Why Does the Minimum Wage Have No Discernible Effect on Employment?

Richard Eskow - Real Faces of the Minimum Wage

Claire Goldstene - Republican Nostalgia for the Gilded Age

David Howell, et al. - Low Pay, Employment and Labor Market Regulation: A Lesson from France?

Robert Reich - The 'Paid-What-You're-Worth' Myth

Setting the Record Straight

I didn't watch the Bruce Jenner interview. After the backlash from the horrendous questions they asked Janet Mock and Laverne Cox, mainstream media can probably handle a coming-out story.

But they can also stir one up.

#tbt Herbert Simon 1951 A Formal Theory of the Employment Relationship

Today, I'm thinking about Herbert Simon on labor. In Simon's view, an important and often overlooked characteristic of the employment relationship is the degree of authority granted the employer over the behavior of the employee. In the extreme, a sales contract - the standard economic approach - would have employers paying merely for the product of labor. However, in practice, the employment relationship is one in which employees would likely prefer to do less work while employers would prefer they do more.

Simon used game theoretic notions of bounded rationality to explain the various situations in the labor market that would result in either sale contracts or employment contracts would arise. According to Simon's model, employment contracts will be preferred to wage contracts as information asymmetry about effort expenditure increases and as labor disutility decreases.

I find his approach interesting, mostly for its relative abandonment of supply and demand curve in favor of satisfaction functions. Rather than simply proving the existing of a point of intersection, Simon proposes that a bounded set of wage-behavior pairs could exist that would be acceptable to both the worker and the employer.

Simon proposes an extension to explain the existence and persistence of unions as well. Unlike mainstream economic models, it does not rely on supply and demand, and hence on so-called "market imperfections." Rather, Simon shows that union administration functions as a shift in authority, reducing uncertainty for all parties involved. I wonder what extensions can be made for public assistance or a reserve army.

Download the article here

Sol Invictus

Looks like LK of SD21C has come up with a sun theory of value based on an admittedly amusing caricature of the labor theory of value. While this theory might provide insight into how a solar deity might account for the exploitation of his energy release, it doesn't seem all that useful for understanding capitalism as an actually existing social system:

The source of most energy that reaches the earth is clearly the sun. Without the sun and the energy it provides, there wouldn’t be any production of any kind.

Energy can be embodied in raw materials and we can measure human work as energy expended and machine work in terms of energy expended too. So therefore all commodities must have a “physically-necessary sun energy” value. All commodities are just embodiments of the “physically-necessary sun energy” required to produce them. We can even – unlike the hopeless Marxists – use a real homogenous unit to calculate energy straight from the natural sciences: the joule.

Certainly, the mythologizing "ruthlessly exploiting the poor, oppressed and innocent sun" might make one admire the odd coincidences required for life on earth. What the labor theory of value is intended to address was the social relations required to explain capitalism. What the labor theory of value states, very simply, is that all value is brought into production through human labor, and that all labor can be measured (and therefore, compensated for) in units of time.