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Saturday, February 2, 2019


One of the less fortunate side effects of living so much of my life in my head is that I tend to think that if I include a qualification in a subordinate clause or make a passing allusion to a complex argument, what I say or write will be as clear to others as it is to me.  I could puff myself up and say that I am, in this regard, imitating Aristotle rather than Plato, but the truth is I simply forget that the world is not as intimately familiar with my inner thoughts as I am.  I fear I was guilty of such a failure of communication in my response to Professor Kates, a response that elicited comments from Professor Kates himself, from Daniel Langlois, and from S. Wallerstein.  The purpose of this post is to make amends and provide some clarification.

First, in response to S. Wallerstein, I had no intention to conflate Rawls with Becker.  As I have said elsewhere, Rawls’ writings strike me as an elegant and rather baroque rationale for New Deal/Fair Deal Safety Net Welfare State Redistributionist Liberalism of the sort I grew up with and, alas, took for granted as the unquestioned background for my more radical desires.  I am actually not interested in Rawls’ adjustments to his “theory,” because I do not find it a useful way to approach questions of economic and social justice, but I would not want to misrepresent him in the process of ignoring him, so to speak.

Professor Kates says that the Difference Principle is “agnostic between competing economic systems (say, capitalism and socialism).”  In my view, that is a deeply confused position.  Capitalism is an economic system that rests on private ownership of the means of production and the consequent exploitation of the working class.  Socialism rests on collective ownership of the means of production and the consequent banishment of that exploitation.  Any moral or political theory that purports to be agnostic as between these, in my judgment, does not understand the world well enough to have a coherent stand on any issue of major social importance.  I cannot imagine a plausible and defensible argument that would arrive at some first principle of social justice, such as the Difference Principle, while remaining agnostic along the way about the fundamental organization of society.  You will recall that Marx and Engels were scornful of theorists whom they called “Utopian socialists” precisely for conjuring ideal sets of social and economic arrangements without first undertaking an analysis of the structural reality of capitalism.

Now to Daniel Langlois’ rather overheated animadversions: a word or two about marginal product.  I have written about this before at some length, but as I observed above, I really must stop assuming that everyone has read everything I have written!  The concept of marginal product, strictly speaking [and in regard to this matter, I find it helpful to speak strictly] is parasitic on the concept of a production function.  The production function of some output is a real valued function that maps each n-tuple of production inputs onto the quantity of that output that is, of all the indefinitely many good, bad, and even absurd ways of using those inputs to produce that output, the maximum output achievable with that set of inputs.  With regard to each n-tuple of inputs, we may then ask:  Holding all inputs but one constant, and adding one unit to the remaining input, what change, if any, is there in the maximum output achievable with the resulting n-tuple of inputs?  [There is no assumption at all that the actual maximum technique of production with the revised n-tuple will bear any resemblance to the maximum technique with the original n-tuple.]  That change is called the marginal product of that input for that original n-tuple of inputs.

OK.  Is that absolutely clear?

Why on earth does this matter?  Well, a great 18th century mathematician named Leonhard Euler proved a lovely theorem about a special species of functions of real variables called homogeneous functions.  One sub-species of homogeneous functions, linear homogeneous functions, has a mathematical property that, with some heavy breathing and creative imagination, can be interpreted as saying the following:  “If an economy can be represented by a production function of two variables, Capital and Labor, and if that social production function is linear homogeneous, and if Capital is paid the dollar value of its marginal product and Labor is paid the dollar value of its marginal product, then what is paid to Capital and what is paid to Labor exactly exhausts the total social output, and this can be construed as showing that if we leave Capital and Labor alone and do not muck with them by imposing minimum wage laws and such like social engineering, then Capital and Labor will each receive a reward exactly equal to what it contributes to society, and ALL WILL BE FOR THE BEST IN THE BEST OF ALL POSSIBLE WORLDS.

Holy Becker, Batman, can this really be true?

Sure, if a capitalist economy can be represented by a linear homogeneous production function.  But can it?  Alas, no.  How do we know that?  Well, we know because if a capitalist economy has a linear homogeneous production function, then among the variety of things that follow mathematically from this fact is the conclusion that the economy has a zero profit rate [not a zero interest rate – that is something else.]  Has there ever been a functioning capitalist economy with a zero profit rate?

Uh, no. 

But don’t those super smart Economists know all this?  Of course they do.  They teach it to their students in their graduate courses on Microeconomics.  They just don’t mention it in their undergraduate courses or their Op Ed essays or their presentations at Davos.


s. wallerstein said...

Rawls is almost completely apolitical.

That is, he shows ethically why a certain social order is called for, but he never ventures into the political question of how we can get there.

Even if he shows with the clarity of Descartes' cogito that the only social and economic order consistent with his difference principle is democratic socialism, that matters little to the guys (they are mostly males) at Davos, who, history shows, will defend their class interests at gun point, whether or not those class interests are consistent with well-thought out academic ethical theories. If you have any doubts about that, just look at what's happening to Venezuela.

So Rawls is even more utopian than those branded "utopian socialists" by Marx and Engels. After all, Robert Owen did get some model factories functioning according to his theories.

Although I do not question Rawls' philosophical ability and creativity, in fact, his theories are about as effective in bringing about social change as the sermon on the mount is.

Jerry Fresia said...

I wish I had something more substantive to say about your elegant presentation, but I'm hung up on how socialists will "banish" the exploitation of workers. Will it be made illegal for the entrepreneurial minded to control the work lives of others?

Anonymous said...

I love it! Every time I read Dr. Wolff I feel smarter.

Tom Llewellyn, philosophy enthusiast.

marcel proust said...

2 observations:

1) The colloquial meaning of the word "profit" is quite different from its meaning among (neo-classical) economists. The colloquial meaning is the sum of what NC economists would consider the marginal product of capital and what they mean by profit. So the question "Has there ever been a functioning capitalist economy with a zero profit rate?" is not exactly on point, if only because it's not clear which meaning is being used.

2) It has been roughly a quarter century since I last spent time thinking about Sraffa, but IIRC he demonstrated that one could speak equally well about the exploitation of any input to production, not just labor. My recollection is that he used the example of iron and showed how iron could be considered exploited. Again, IIRC, this was based on substituting an iron theory of value rather than a labor theory of value, the former as valid as the latter mathematically. Whatever good was used as the basis of value (labor or iron) would invariably be "exploited".

At least mathematically, exploitation is not a consequence of capitalism, i.e., private ownership of non-labor inputs which used in the pursuit of ever-increasing wealth. Rather, it is due to the use of inputs which are produced, inputs which are the outputs of other production processes (i.e., inputs other than land or labor).* For reasons that now escape me, this change to the production process introduces both the possibility and actuality of exploitation.

*I don't believe he gave any thought to chattel slavery, where one could consider labor to be a produced input.

Jerry Brown said...

I'm just so happy you've been living your life inside your own head. Mine is altogether confused already. So there is not much room available.

Michael Llenos said...

[Capitalism is an economic system that rests on private ownership of the means of production and the consequent exploitation of the working class. Socialism rests on collective ownership of the means of production and the consequent banishment of that exploitation.]

Makes you wonder which economic system the fictional Star Trek Earth is specifically based on? The movies don't explain it and neither do the tv shows. I believe somewhere in Star Trek 6, Scotty said he just bought a boat. But the actor's high fees and Star Trek merchandising and conventions are surely in favor of capitalism. Maybe the only thing socialistic in Star Trek is the agricultural high yield grain like quatto-tritto-kay-lee.

Michael Llenos said...

I tried spelling out quatto-tritto-kay-lee but it's really Quadrotriticale. My mistake.

Dean said...

This is completely OT, but I just love the aptness of a comment by none other than "marcel proust" using the texting abbreviation IIRC.

LFC said...

@M Proust: That all inputs are "exploited" is basically what Wolff argued in his PPA article on Marx's labor theory of value (as explained here and in his online Marx lectures). But one can still refer to the "exploitation" of labor b.c workers, unlike capitalists, can't readily move their "capital" (ie their bodies or brains) from one line of production to another. This is no doubt oversimplified but I think is the nub of Wolff's view (but of course Wolff is the leading authority on what Wolff thinks, so will correct me if I'm wrong).

Anonymous said...

I know this is late, but hopefully Prof. Wolff will see it.

I'm really interested in the argument about the production function and marginal product. Is there a paper of yours that discusses this argument (I read some of your old posts on this blog, but I want something more in depth)? I couldn't find anything obviously about this just skimming the documents in your box. Can you direct me? If there is nothing written by you, could you direct me to an accessible piece by someone else? For reference, I'm a philosopher by training (although with more mathematical training than the average philosopher), so I can't read anything too technical. Thanks.