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Wednesday, August 13, 2014


[The title of my post today is an homage to Karl Marx, who spoke and wrote German, French, and English interchangeably, sometimes all in the same sentence. ] As I was taking my walk this morning at 5:45 a.m., the HU bus passed me along Finley Golf Course Road on its way to the UNC medical complex down Highway 54.  I waved and the bus driver, with whom I have established a relationship, honked in reply [something that could never happen in Paris, by the way].  I wondered idly how much he makes for driving the bus -- not very much, I thought.   That got me thinking about Rawls' original position, Walrasian tâtonnement, the neo-classical explanation of wage rates as determined by marginal productivity, and what a real free market in labor would look like [which gives you some idea how unwise it is to give an aging philosopher too much time to think.]  By the time I had taken my turn at the intersection with 54 and was on my way back past the Ronald McDonald House and the waste water treatment plant, I had conjured up the following theoretical fantasy, which I present as a thought experiment designed to exhibit the fact that contemporary economics is, dare I say, full of it.

Let us imagine that Americans got together and decided to set the wages and salaries for all the jobs in the economy by strict supply and demand.  To begin with, we would make a list of all the jobs and divide the total number into the total amount paid out in wages, salaries, bonuses, and fringe benefits to every working person in America, from the housemaids in hotels to the Masters of the Universe on Wall Street.  Every job would provisionally be assigned this average or mean wage.  How much might that be?  Well, since this is a capitalist fantasy -- indeed, an Ayn Rand/Ludwig von Mises fantasy in a manner of speaking -- we will leave profits to one side, as belonging to the owners of capital, whomever they may be.  There are officially about 145 million men and women employed [never mind all the people who desperately want jobs -- this is a thought experiment, not an economic analysis.]  Roughly nine trillion a year goes to them in wages, salaries, and bonuses, so that works out to $62,000 a year average.  Not bad.  [You see how skewed things are by the enormous wages and salaries at the top.]

We now randomly distribute job assignment slips to all 145 million men and women in the work force, regardless of their preferences.   In other words, each person gets a slip saying "You have been assigned the following job."  There are obviously going to be huge mismatches in the assignment of jobs to people, with lots of people eager to switch jobs, but these mismatches, we may suppose, will not be evenly distributed across the job categories.  Some jobs will be very popular, with lots more people wanting them than can be accommodated by the distribution, while other jobs will be rather unpopular, with many of the people holding those slips wanting to unload them.  This is precisely the sort of situation envisioned by Léon Walras, so now what he calls a tâtonnement , or auction, gets under way.  [Never mind the role of auctioneer.  Keep this conceptually simple.]

I get a slip, let us say, assigning me to be a Walmart store greeter, but I really want to be a bus driver.  So I call out "I have here a slip for Walmart store greeter.  I would like a slip for bus driver.  Will anyone swap with me?"  [Or whatever.  You get the idea.]   If lots of people want to be Walmart store greeters and very few people want to be bus drivers, I will be swamped with offers to trade from people who got bus driver slips.  But as I am about to take the first one I am offered, one of those I have rejected says, "I will not only give you my bus driver slip in exchange for your Walmart store greeter slip.  I will also give you three thousand dollars of my salary a year."

Well, we all know what happens, if we have been lucky enough to take an introductory course in Microeconomics.  A market develops, and huge numbers of exchanges take place.  The wages associated with very popular jobs will fall, while the wages associated with very unpopular jobs will rise, until a point is reached at which there are no more trades being offered for which there are any takers.  [A trade is a swap of jobs with associated wage adjustments.]  A system-wide consistent salary schedule has been established for the entire array of jobs in the economy. 

There is one problem with this scheme that must be addressed.  Some jobs require considerable training, which the holders of those randomly distributed job assignments may not have.  I may receive an assignment as a tool and die maker, about which I know nothing at all.  You may receive an assignment as a brain surgeon, for which you also are not prepared.  There are two ways of handling this difficulty.  The first is to adjust the wage of each job to incorporate the cost of preparation for it.  If I hold a slip assigning me the job of doctor, which I do not want, I may have to pay some portion of the cost of becoming a doctor to a person who wants my slip but has not been trained as a doctor.  But not more than that amount!  I may be willing to pay for the cost of job preparation of someone who wants my slip, but I am not going to be willing to pay for a surplus wage accruing long after the cost of the preparation has been amortized.  The forces of competition and bargaining will wring that surplus inequality out of the offers. 

The other way to handle this difficulty is to make job preparation free to those who are willing to do the work and can succeed at it.  If too many people want to be prepared for a job, then of course the compensation for that job will drop, as a result of competition.

The interesting question now is this:  In such a system, which jobs would tend to be paid more than the national average and which less?  The beauty of the free market is that we do not have to figure that out.  We can just let market forces tell us the answer.  But at least we can speculate [since this is, after all, a gedankenexperiment.] 

What about college professor?  Well, first of all, it is very easy work.  No heavy lifting, as the saying goes, and you never  get your hands dirty. What is more, you keep hours that would make a banker envious:  a Monday-Wednesday-Friday teaching schedule, with maybe three hours on those days in class, a couple of committee meetings each month that you can skip if you want to, and you only work thirty or thirty-two weeks a year.  All those eager young faces gazing up at you with awe and respect.  I figure this would definitely be one of the jobs paying well below the national average.

Garbage collector?  There are pros and cons.  It is physically hard work, and you spend your life licking up other people's garbage, but on the other hand, it is outdoor work, which some people like, and you don't have to wear a coat and tie.  My guess is that it would certainly pay more than college professor.  Hotel maid?  That strikes me as not an attractive job at all, so the salary should rise for it.  Wall Street trader?  Inside work, dress code, lots of stress, but physically easy -- maybe average.  But then, maybe no one would ever want that job except for the big bucks, so it might end up paying as much as hotel maid.

And so it would go. 

This would be a true free market way of setting the wages in the labor market, wouldn't it?  What is that you say?  No self-respecting defender of capitalism would ever consider such a system?  Hmmm.  I wonder what that tells us about capitalism and its defenders.

At about this point I rounded the corner, passed Brixx Pizza Parlor, and headed back home to have breakfast. 


Will said...
This comment has been removed by the author.
Robert Paul Wolff said...

Iwouldn't be too sure. Ask the women who clean up and make the beds in hotels. Ask the men who drive the garbage trucks.

Chris said...

Robots will always be taking jobs away from humans, and then this will in the long term hurt the economy, and people will have to be put back to work. Marx of course perfectly predicted this trend in Vol III of capital. It's always upsetting when I hear lefties (so often on NPR) saying comments like "soon this robot will take your job and you'll have more free-time", or "the more robots we have working, the more free-time we'll have", well that would be true if we didn't live in a capitalist society. But so long as we do, those dreams of excess free time will never surmount to anything for the large majority of real people.

Robert Paul Wolff said...

Quite right, Chris. Capitalism has already created a large surplus population without the aid of robots, a fact that in the US means that there are millions of people who have simply been rejected by the economic system.

Will said...
This comment has been removed by the author.
Magpie said...

"Robots will always be taking jobs away from humans, and then this will in the long term hurt the economy, and people will have to be put back to work."

Sorry, Chris, but who can guarantee us that "people will have to be put back to work"?

Here in Australia we know very well what happens with surplus population. Here we call that "Aborigines", or "slow genocide" and it's not a pretty picture.

This is what our masters may have in store for us:

"Philosophers suggest slavery as alternative to welfare"
Thursday, 29 July , 1999

Chris said...

Magpie, let me be more specific, because I don't for a moment doubt that capitalism - as an economic system - doesn't thrive off permanent displacement of large sectors of the population. This is afterall the Marxian reserve army, that ensures lower wages to the working class, and higher profits for capitalists. But I do think in general for profitability to be maintained, after a crash occurs from too many cross machine replaced layoffs (be it a Keynesian crash because there's no consumption, or a Marxian crash because no one's producing surplus value), some people need to be put back to work, either for Keynesian reasons of reigniting consumption, or for Marxian reasons to be create more value. Now it very well may be the case that not everyone is put back to work, and some of those people will not find work again, and will be treated in a harsh manner, as you rightfully point out. Now I'm not saying ALL people will be put back to work, only some. And again, I stand by the reasons I already stated, either to increase consumption, or to increase value production. One can both agree that some people will be put back to work, and that surplus value will be brutalized. These aren't mutually exclusive facts within capitalism.

Chris said...

Typo, i meant:
One can both agree that some people will be put back to work, and that surplus people* will be brutalized.

J.R. said...

My career as a philosopher has so far netted me salaries ranging between 15-30k a year, adjusted for the cost of training I would say that garbage collectors do, in fact, earn much more--so the free market must work after all.

(Not that I begrudge garbage collectors their salaries--their job is several times more dangerous than that of police or firefighters and every bit as necessary for the literal survival of the population, yet they get none of the love of that the former two groups do.)

Magpie said...

I believe I see what you mean, Chris. Normally, I'd agree with your points: capitalism cannot exist without a working class.

But, who says our masters want to keep capitalism going on forever?

Prof. Wolff proposed his thought experiment. Allow me to propose a scenario: a society where an aristocratic few have swarms of servants, who design, make, repair and recycle themselves with the only purpose of satisfying their master and who'll never rebel against them.

The masters only need to swap raw materials between themselves.

Sure, there's no profit. So what? There's no growth, alright. But growth cannot go on forever, anyway.

The rest of the population, a few excepted to serve as slaves, providers of biological spare parts, or in zoos, would be left to die out.

Maybe that's too nightmarish to think about, maybe you can say that's unthinkable, but, the thing is, I am thinking of it.

Chris said...

I don't have any comments on future utopian or dystopian societies. It's fine that you're thinking in, but I'm more concerned with understanding and changing the world we presently occupy.

I was only attempting to explain why the always popular idea of humans being replaced by robots leading to more leisure time is as old as capitalism, and is inherently false within capitalism. That's all.

Now on a seperate note, we probably part company with this comment:
"who says our masters want to keep capitalism going on forever?" There's no individual person, or particular clique of people, that I would say should be considered our masters. Capitalism is a system that flourishes completely outside the control of any cluster of capitalists, as Lukacs rightfully pointed out:

"Man in capitalist society confronts a reality ‘made’ by himself (as a class) which appears to him to be a natural phenomenon alien to himself; he is wholly at the mercy of its ‘laws’, his activity is confined to the exploitation of the inexorable fulfillment of certain individual laws for his own (egoistic) interests. But even while ‘acting’ he remains, in the nature of the case, the object and not the subject of events. The field of his activity thus becomes wholly internalized: it consists on the one hand of the awareness of the laws which he uses and, on the other, of his awareness of his inner reactions to the course taken by events."

The capitalists stand towards capital is to be in a position to reap its rewards, but it's never successfully in a position to truly control the operations of capitalism in toto.

Magpie said...

Hopefully Lukacs is right on that.

Call me stubborn, but I know I'd feel better if I didn't read stories like these:
"Debt-hit students urged to sell their kidneys"
Published 02/08/2011 18:50