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.
