Sunday, June 05, 2005

Yglesias-Sinhababu Marx correspondence

So, I got a great email from Matt on my Marx post. It's below, and my reply follows.

Marx is often accused (ever since Bernstein and the revisionist Marxists of early 20th century Germany) of neglecting the fact that a democratic proletariat could simply vote to mitigate their living conditions, but that's not really where he went awry. What he thought was that as productivity increased, an ever-smaller workforce could produce enough stuff to meet aggregate world demand, leading to ever-increasing unemployment, declining consumer power, falling wages, and an inevitable economic collapse.

Then what would happen is that we would realize that we had all these capital goods lying around, all these unemployed people, all these productive workers, and that it would be easy enough to meet all of our needs by just abolishing ownership and letting everyone do their own thing.

And, indeed, despite the claim that "Communism doesn't work" it would actually be very easy for us to guarantee everyone a standard of living that would be quite comfortable by mid-19th century standards on an egalitarian basis.

What he missed was that productivity wouldn't decrease the size of the workforce needed to maintain a mid-19th century living standard, instead it would increase people's expectations of what constituted a viable standard of living. This is the old-time classical economic principle "Say's Law" which holds that supply generates its own demand. The trouble is that Say's Law seems to break down at times (e.g., the Great Depression) leading to the sort of deflationary spiral Marx worried about. This did, in fact, lead to calls for a Marx-style solution (see Upton Sinclair's EPIC plan) where you would solve the problem of unemployed workers and idle factories and farms by . . . giving the idle factories and farms to the unemployed workers. Fortunately, Keynes showed us that you can boost demand by manipulating interest rates and government spending and get out of these sinkholes.

The interesting issue is what sort of a law Say's Law is. It has a great deal of empirical support from history. Usually things do work out like this. But there isn't really a very sound mechanism to explain it. One would need some kind of account of human psychology to know whether or not it's ALWAYS the case that people will want more and more stuff. It seems at least possible that we COULD invent technologies (like Star Trek's replicators, robots to do personal service work, etc.) that adequately meet everyone's demands while only requiring a minimal amount of work gathering some kind of plentiful energy supply. Then what do you do? The Federation appears to operate along socialist lines of some sort where people compete for prestige rather than material rewards. But we never see very much of civilian life. What happens to people who don't happen to want a glamorous career exploring the stars? Are they sitting fat and happy back on earth, or are they horribly oppressed by the space traveling elite?

I respond:

Hey, thanks for all this, Matt!

I don't yet see how the objection about the democratic proletariat voting to improve their living conditions goes away. It's still true that as soon as you get a substantial number of impoverished voters, they'll vote themselves more good stuff, right? As you point out, the non-Say's-law framework implies that you do get lots of unemployment. But now they're unemployed happy people who have stuff, and I don't think people like that would start a revolution. Perhaps there are economic consequences I'm not seeing here. Or maybe if you put big emphasis on the claims about how we realize our species-essence in organized productive activity you can still get a revolution, since the unemployed proletarians will clamor for some way to engage in work. But it seems that they'd be happy to play basketball or D&D all the time instead.

I actually had never heard of Say's Law before, and I too am curious how robust a law it is and where it comes from. Personally, I'm not really a confirming instance of Say's Law -- I haven't cared enough to get electricity started in my apartment since I got back to Texas a month ago, and I hope to someday have so little stuff that I'll be able to keep it all in my office and live there. But I am unusual.


TheJew said...

Say’s law says that prices will adjust so that no value will be left unclaimed (there is no pile of unused oil out there, if there were, it would be put on the market and push down the price of oil). This does not mean that supply creates its own demand (exempli gratia, although it is arguable that this “good” has a negative value and therefore a negative price). The problem with the Great Depression is that the poor had nothing valuable.

Isn’t it accurate to say that Keynes realized that you could fool wealth owners into parting with their wealth by handing them a pile of green slips of paper with pictures of dead presidents rather then outright robbing them in a violent Marx style revolution? This is essentially what Sinclair suggests, however Roosevelt’s genius is in cutting out the middle men and giving cash directly to the people (as opposed to factory owners as Sinclair suggests) to spend as they wish. This eliminates the centralization that was the problem of the CCCP and Sinclair’s plan.

More generally, Marx probably believed that a violent revolution would be necessary because of his characteristically Jewish lack of faith in democracy. He probably believed the masses would be gullible enough to get high on the opiates the capitalists would provide for them, not rising to political activism. The only hope would be to encourage a small group of enlightened devotees to attempt a complete reorganization of society.

Mary said...

"But it seems they'd be happy to play basketball or D & D all the time instead."

I live in a community in which most people work for state government, the state land grant university, or GM. GM has recently closed a factory but we are lucky enough to be in a position, partly because of the work ethic in this community, that GM will soon open another factory in a neighboring township. Some people are working to make that happen, while others are in a Jobs Bank, in which there is much idle time spent, or on layoff collecting 95% of their usual wages.

Many people are indeed enjoying the downtime, but most of them are also looking forward to getting back to work. In fact, someone told me today of situations where people with idle time, waiting for an assignment will gamble, get in fistfights, etc. Idle hands, devil's workshop, etc., etc.

As much as people complain about work, I think people want to feel like they are making a contribution to society. The discussions here are interesting from an intellectual point of view, but as someone who grew up with and lives among the proles, I think it is important for those talking them to actually get out and meet the folks they are discussing. You are kind of discussing my people here, and, Neil, would you rather play basketball and D & D than do your work, make your contribution to society? My God, you're talking about living in your office. I think you feel your work is important, and so do people in other socioeconomic circumstances.

Leave your office, wander off the campus, and talk to people who are not like you. I enjoy reading blogs because I get to see ideas from people who are not like me, whose experiences and backgrounds and ideas are diferent from mine. How funny would you think it was if I read a lot of books and took several courses started having conversations with people about what would both make Harvard grads happy and content and improve the economy? I grant that you certainly have more sophisticated knowledge about economics than I do, but what moves or motivates or makes people happy...really, get to know some of the folks you're discussing. (More than casually; it takes some time.)

Neil Sinhababu said...

Jew! Please no poop links in the future! They are not safe for work or home or anywhere. I don't know enough about Keynes to know if that's what he thought, but I haven't heard that view attributed to him before.

Mary, we're talking about a situation in which everybody's needs are met. Assuming that we generally improve the world until everybody has enough stuff and there are no problems left to fix, I'd be happy to play games all the time. (Or engage in creative pursuits like art, writing, and music -- maybe I should've mentioned those too.) My current ambitions and interests, however, are affected by the fact that there are actually problems in the world that need fixing. Without those problems, I'd do completely different things.

Neil Sinhababu said...

And as for non-me people -- is there any general barrier to people enjoying their retirement? And is there really a limit on fun you can have spending time with your family and friends? Once we get to a situation where there's not much work to be done -- once it settles in that the need for hard work is gone -- will the desire for work remain?

Justin said...

Let me preface this by saying I have almost zero background in economics, and would very much welcome being corrected in order to learn more.

I have been working recently on "special science" laws and, in search of examples, have looked especially at economics. For whatever reason, economists seem far more inclined to call their true generalizations "laws" than, say, cognitive psychologists or geologists are inclined to.

Anyhow, I ended up not using Say's Law as an example because I had some trouble getting clear on its proper interpretation. According to some sources, it *does* say that supply creates demand. So, presumably, if I make a shitload of butterknives, then people will end up wanting way more butterknives than they presently do. Less glibly: there seemed to be an understanding according to which Say's Law makes a claim about how desire responds to the availability of goods.

According to other sources, though, the point seems to be that if I make a shitload of butterknives, I'm going to be stuck with a shitload of butterknives until I dramatically lower my prices, at which point they'll be so cheap that people will buy 'em and figure out ways how to use 'em later. Again less glibly: it seemed to be less a psychological claim and more a claim to the effect that markets work out, so no need to mess with them (if supply creates demand, no need for the government to do anything in response to "excessive" supply.)

I'm sure there are more sutble interpretations too, but these were the ones that I took in upon a fairly superficial look at textbooks/websites/etc.

It's at least not completely obvious to me whether or not Marx got something deeply wrong here.

Mary said...

Neil, if everybody's needs are met without struggle, what is the art, music, and writing going to be about? And aren't all those things work...the way many people make their living?

Maybe I've just been brainwashed into this kind of thinking, but the joy of recreation is that it is not work. The difference is what feels good.

Neil Sinhababu said...

Mary, the broader issue here is about whether the proletarians would be unhappy enough to start a big revolution. Certainly, recreation might feel slightly different and perhaps worse. But I can't see anyone forcibly seizing the factories over that.

Mary said...

OK...sorry for getting off track. There wouldn't necessarily be a revolution, but there would be something, and it would probably be some kind of mischief. Someone manipulative (hopefully for good and not evil) would organize, justify, and put a name on it. People need meaning and purpose. Also, I've been wondering...who decides what everyone's needs are in this scenario?

Justin, I actually bought a shitload of butterknives once (that I didn't need at the time) 'cause they were really, really, cheap. I bought every box on the clearance rack. (Actually, they came with complete flatware sets.) Eventually, I used some, gave some to my son when he went to college, and I used the rest of them for a big Christmas Eve party.

Battlepanda said...

Maybe this desire to feel useful and do work is the drive behind the crafts and DIY boom just as it becomes totally unnecessary from an economic point of view to, say, brew your own beer or knit your own sweater or even (it can be argued) cook your own food. Somehow, there is a satisfaction thus derived that is greater than the value of the completed product in objective terms.

Is craftiness just a proxy for real, value-producing work? Should the world ever come to that stage of improvement when all our material needs are taken care of without labor, would we increasingly need to manufacture the need to manufacture?

Yes, I know this reveals me to be a geek, but I think the Star Trek paradigm is not a bad one for a possible post-economic world. Yes, the story centers around explorers, and surely even in a superadvanced society they can only comprise of a small proportion of the population, but there are hints here and there of people leading rich lives beyond working for economic necessity. For instance, when Picard retires, he tends a vineyard on earth instead of zapping wine out of a replicator. There are also a disproportionate number of scientists. They are often plot devices, it's true. But it's also an acknowledgement that our material needs might be sated, but our thirst for knowledge cannot.


battlepanda said...

As I am reading The Wealth of Nations right now, I cannot resist sneaking in a perceptive observation by Adam Smith making the connection between the kind of long and repetitive labor required by capitalistic societies and the need for dissolute leisure:

"Excessive application during four days of the week, is frequently the real cause of the idleness of the other three, so much and so loudly complained of. Great labour, either of mind or body, continued for several days together, is in most men naturally followed by a great desire of relaxation, which, if not restrained by force or by some strong necessity, is almost irresistable. It is the call of nature, which requires to be relieved by some indulgence, sometimes of ease only, but sometimes too of dissipation and diversion."

You can make a fair case that he is describing the American work and spend economy.

Rousseau said...

Let me just add the economist - utilitarian voice saying "work is bad and if people don't need to do it, yay".

One of the sad things about modern economics is how willingly it has gotten tied up with "fair day's work for fair day's pay" or whatnot, in order to advocate capitalistic policies. Economics is simply mathematical utilitarianism, and anyone who can create ways for labor-supply-costs to go down (ie, more surplus for each hour worked), is hailed as a wonderful wealth-generator.

Now from sociological or philosophical or cultural points of view there may be reasons to favor the work-devoted-life, but from an economic point of view I want people to understand that there is no question that less work is a better world.

Julian Elson said...

Early neoclassical economists like Edgeworth, Jevons, and Marhsall viewed economics and mathematical utilitarianism, but economics today means something rather different by "utility" than what utilitarians mean by "utility." Economists, skittishly afraid of talking about internal psychological states, define preferences as externally revealed behaviors, and define utility as a mathematically convenient way of expressing preferences. That is, if someone spent $7 on a Pad Thai, and did not spend $7 on a Discwold novel, then, by the weak axiom of revealed preference (WARP), the agent prefers Pad Thai to Discworld novels, at least in those circumstances at that time. Therefore, the utility added of Pad Thai is higher than the utility added of a Discworld novel. Nothing at all is said about the consumers psychological state and how it is affected by these purchases, which is what interests true utilitarians, or at least should.

Rousseau said...

Sure, but let's be clear, the WARP would pretty much always say a person would prefer to not have to work.

Julian Elson said...

True. I also believe, on folk-psychological grounds, that usually "if A prefers X to Y, then doing X will make A happier than doing Y." This isn't always the case, but I think it is often enough to be a good approximation. So... economics can be a useful tool FOR utilitarians, but I don't think that it is, itself, utilitarian. Or at least, it's been trying really hard not to be for about ... 100 years? Straight-up utilitarian analysis might be making a comeback, with Kahneman and all, but as an undergrad, I don't know anything about that :^).

Mark H. Foxwell said...

Okay, first of all if one reads Capital thoroughly one knows that Marx knew all about Say's "Law" and explained the manner in which it does not work. He also gave the clearest explanation why it _does_ work as far as it does.

I can't get into the fundamentals of Marxist economics on a comment; let me address the basis of the Marxian theory of world revolution--which is what it was all about to him after all.

Marx fully understood that in the long run, standards of living for the working class would indeed improve under capitalism. There is a striking demonstration by the way in the book that was my first introduction to Marxist economics (Farjoun and Machover's _Laws of Chaos_, published in the mid-1980s--I haven't reread it in a long time and it is hard to get ahold of a copy I am afraid) that in fact the shares of wealth have tended on the whole to be divided almost evenly between working class and capitalists. Capitalist workers tend to realize they need to act collectively, in solidarity, to improve their individual situations, and so whether their organizations are legally recognized or not, they struggle to raise their standard of living to set a floor on how low their bosses can try to cut their wages. My personal theory on why this would result in an even division is, that both sides in the negotiation tend to get more desperate when their share gets smaller. Struggles are not on a global level, setting some abstract division--they are fought on a case by case basis. If you have a bunch of workers who are subsisting on just say 1/10 the surplus left over after the industries that employ them have replaced material losses in production that sustain production at a given level, while their bosses have the other 9/10, then when the bosses propose to cut wages another increment, call it X, then 1/10 minus X represents a severe _relative_ loss to the workers but to the capitalists it is a small gain, so the workers are more motivated. Conversely when they can manage an increment Y to their meagre incomes, they feel it is more worthwhile than the relative loss is to their bosses, so that is more negotiable. If the workers manage to get more than half than the dynamic reverses and the captalists get more desperate and the workers more philosophical. So the balance tends to be in the middle. And so the workers do tend to enjoy a share of their own productivity increases, and the standard of living rises, and workers who are used to that sort of real income get very resistant when circumstances threaten to cut it.

What happens to capitalist society then is not that huge hordes of poor starving sods realize that death would really be no worse and rise up from their rags and tear the throats of their bosses. That is very romantic but not the Marxist revolution. What happens is, the _capitalist class_ gets more and more concentrated. And the working class grows to include just about everyone.

It is the same dynamic that occurs in the game of Monopoly. The richer you are, the more likely any transaction will work out in your favor and the easier it is to choose which interactions you want to be in. Marx writes many chapters on the process of _concentration of wealth_. The capitalist class only gets about half the wealth, and unlike workers they don't get to just consume it. They are responsible for investments and are driven by competition to grasp for as much share of global wealth as they can get. But the process is like musical chairs--greater and greater fortunes are in fewer and fewer hands, and those big capitalists are like gods on the earth.

Erosion destroys the _middle classes_. These are not fundamental to the basic analysis but if you read Marx you can see that what he does is, define a basic model, and then refines it with detail upon detail, fitting everything in carefully with due attention to how it modifies the basic dynamic, until he is finally modeling the real system. The middle classes--who are only _part of_ the bourgeoisie, the ruling capitalists being the minority in numbers but holders of the ruling concentrations of wealth--are important in detailed economic analysis but also _politically_. A healthy capitalist society is ruled by liberal democracy. In theory everyone has a vote. In practice the system depends critically on people accepting that some people "matter more" than others do. In the old days when capitalism was seizing control a member of the "middle classes" would be someone who had enough wealth so that they did not need to work for someone else, but not enough to employ enough other people so as to be able to live off the wealth _they_ create ie--profits.

According to Marx, all wealth is created by human labor. The part that goes into a product that consumes raw materials or machines and tools was previously created by other workers, and since these material items are necessary to creating the product, every competitor must recover their cost in the long run with their prices, or be ruined and removed from the equation. Then there is value added by the worker--the secret of capitalism is, that it is not competitively necessary to pay the workers for all the wealth they create but only enough to maintain the worker at the established standard of living, so they can keep showing up and eventually replace themselves with their childern in the workplace. But people generally can create more than they consume, so there is a share left over. The capitalist claims this and can either consume equivalent wealth from that or invest some of it in expansion.

A capitalist is defined as someone who has enough wealth to live off of the investment of it. By that definition there might be more and more capitalists but in fact because the standard of living rises, and because a capitalist is expected to live at a higher standard of living (and it hurts their business credibility if they don't demonstrate this ability in any way) the bar gets higher and higher. But in the old days, any member of the middle classes was someone who could hire at least servants and assitants.

In the 20th century one demonstration of Marx's predictions was the transformation of the "middle classes" from independent property owners to more typically, highly paid employees. C Wright Mills wrote about it in _White Collar_. "Death of a Salesman" is all about it. The characteristic middle classes of the 20th century were highly dependent on the decisions of their economic betters. But politically and socially they saw themselves as elevated above ordinary working people because their work brought them into closer contact with their betters, and held out the possibility of dealing themselves into the ruling game as players instead of just agents. This was necessarily an illusion for most people but a necessary illusion. The middle classes of the 19th century supported property because they owned a big share of it; in the 20th because they worked for its owners and might be _granted_ a share.

All the praise of Keynes ignores the context, that capitalists in the Depression and WWII were not free to do as they liked, because the system had broken down so visibly the all-important _political_ role of the middle classes was dangerously weak; more and more middle people could see they were nothing more than well-paid workers. It was _necessary_ to buy off large segments of the working classes with concessions and guarantees. Before the Depression and World War I, all capitalist countries had been experiencing rising revolutionary sentiment. The war gave the rulers sticks to beat this movement down but carrots were also needed to recreate the illusion that the system worked for _everyone_ which is the basis of the liberal government of capitalism. In places like Italy and Germany where the danger of leftist revolution was very real, the rulers panicked and went fascist. Fascism gives the ruling class an overt organization and the authority to rule in another name than the democratic will of the majority. It is economically dysfunctional since it tips the balance of competition in favor of cronyist insiders, and saps the illusion of working people that they can better themselves in the workplace, and also because it is inherently militaristic and so lures its victims to their deaths in grandiose struggles for glory. But the alternative was the end of capitalism and the rulers have their priorities.

The end game of capitalism is when all wealth is visibly concentrated in a few interlocked conglomerates. When this is happening, even if the society has somehow avoided going explicitly fascist, it is drifting in that direction anyway--instead of some Minister of Procurements forming cartels, the cartels have formed anyway and they eventually create a Minister of Procurements to guarantee their stuff gets sold. At this stage, even professionals like doctors and lawyers increasingly see they are not independent but forced by lack of alternative opportunity to work as employees. They see that the real power of all economic decionmaking is in few hands and they have little chance of joining those circles.

At the same time, the arbitrary power of these ever-wealth hungry oligarchs becomes more and more obnoxious to working people in general. The power of concentrated wealth tips the balance in all negotiations and the share of wealth of working people grows _relatively_ smaller though the standard of living may rise, if slowly. The social fact that the capitalists live in a different world and have little concern for the fates of the vast majority of humanity becomes obvious.

But meanwhile, precisely _because_ the standard of living has risen, the workers have become more technically capable and more vitally interlinked than ever. They are in fact the ones who do all the work, including the mechanics of corporate decisionmaking. They know how the machinery works because capitalism has triumphed and turned them into living machines. Capitalism has assimiliated them into a global system and so they begin to think globally.

The crisis of capitalism then is a political one, when the myths of liberal society no longer work. At that point the capitalists must impose fascism and try to invent new myths, of racial destiny or divine will, to base their society on.

Where Marx went wrong was perhaps in underestimating the ways that working people can be successfully manipulated. But the game is not played out yet. When capitalism had new worlds to conquer--colonies in Africa and Asia, or arming for a watchful crusade against Communism, for instance--it was easy to recruit middle class people to divert discontent into useful channels. But that comforting layer of social fat has been burned up in the lean and mean post-Communist order. Fearing no enemy, the capitalist rulers have contemptuously broken all their promises and gleefully opened the floodgates of unchecked competition. We have seen an orgy of mergers and see our whole world globalized. At the same time the sovereignity of nations is trampled and every people who dared, on _any_ terms, by revolution or by democratic vote, to set up systems to care for ordinary people have seen them challenged in by the World Bank and World Trade Organization, to be shut down and replaced with raw competition for the poor--and more likely than not, privilege and lenience for the rich.

In the end, the proletariat is everyone but the tiny minority of billionaires who rule, and as people realize that, the world becomes very unstable politically. At this point the ruling class is very good at destructive interference, at throwing up more and more violent divisions for us to all quarrel about so we don't unite our forces--which are in fact all the forces there are in the world. Revolution comes when capitalism essentially creates the centralized organization of the global economy and at the same time demonstrates the moral bankruptcy of the rulers. It is not that they are meaner than their ancestors--it is that they are less clever, because they have run out of options except destruction. But we are the instruments of destruction as well as creation--we have it in our hands to turn the weapons away from killing each other and refuse to take these orders any more.

It remains to be seen when that day comes, whether the rulers will use the power they do have to massacre us all. And who will pick up the pieces.