The Wealth of Nations, Revisited

A Contradiction of Interests

I’m not sure if this is a real contradiction or not. But it seems to me that Adam Smith has a perspective problem. Smith famously argues that what is best for the individual is best for the society, and yet at the same time he argues that slavery is not best for the society because slaves lack individual incentive to work hard. This may be true, but it certainly seems to serve as a counter-example to the notion that what is best for the individual is what is best for the society. For when he suggests this, we must sincerely ask, which individual? The slave or the slaveholder?

What is true in Smith’s slave argument is that it is not best for the slave to be a slave, and correspondingly it would not be best for a society that the slave be so either. The slave’s disincentive to work would lead to less work performed in general, and correspondingly to a less productive society. However, is that which is best for the slaves or the best for the slaveholders? As a slaveholder, owning many slaves is what is best individually. If the rule holds, we must conclude that owning slaves is what is best for society. Is this not a contradiction? It cannot be both best and not best for a society to have slaves. Perhaps we could claim that being a slaveholder requires the existence of slaves, which we just said were not beneficial to society. But then the question becomes, why should we take the slave as “the individual” and not the slaveholder, as Smith clearly does? 

Smith’s problem seems to be one of perspective. The value of the rule that societies do best when people are free to pursue their own interests is debatable. It may depend entirely on which individuals’ perspectives we adopt. Is it better that a landlord is allowed to collect rent or that every person own the property they live in? Is it better than an employer negotiate wages before the sale of the product or that laborers are paid in accordance with their efforts? These perspective questions shoot holes all through the idea that liberty is the best policy and its more general precept that individual interests can be used as the best guide for social action.

The Utopia of Competition

It seems to me that competition itself becomes romanticized under most libertarian writers. The reason for this is if they use it as a cure-all for many economic injustices. The assumption works like this: as long as the rules are fair, then competition will lead to the best possible use of resources. And so it would, as long as we had some way to ensure the fairness of the rules. What does it mean to be fair? Who decides what is fair? On what basis is that decision to be made?

One can always succeed in competitions through two different methods. The first method is exactly what the libertarian writers imagine, a system where everybody follows the rules, the rules are fair, and then the winner deserves what they get, and this would work out best for society, just as Adam Smith suggested. The reason is that if everyone competed this way, we would all benefit from the maximized effort competition elicits. But unfortunately, there are no umpires or referees in economics, no one to turn to and say, “Hey, that’s not fair!”.

The second method for success in competition is free and unrestricted. Players follow their own best self-interest, and when the “rules” of fair play get in the way, they abandon them. In this method, one might succeed by making their competition under-perform or advance themselves through some form of subterfuge. This method focuses on distinguishing oneself by making all of the others look worse. This, of course, is a natural tendency of free competition that ultimately degrades society.

So we have a choice. Either competition is regulated to enforce an external set of rules that foster fair-play or economic competition is not good for society. If we were to have the former, a sport-like instead of war-like competition, then we would have to insist that the players do not get to dominate the body that makes up the rules. In real terms, this means that businesses would have to have minimal effect on political determinations of economics.

The Fable of the Bees?

It is perhaps ironic that Mandeville’s “The Fable of the Bees” features so heavily in Smith’s thought. The poem presents the idea that it is private vice (greed) that drive humanity to the public good (prosperity). The irony is not what climate change and over-use of pesticide have done to the bees, but the fact that Mandeville chose bee’s as his perfect society turned waywardly toward virtue to the ruin of all.

Bees are hive-minded totalitarians. The structure of bee society is based on homogeneity. The hive is comprised of nearly identical genetically speaking. The small individuality comes in the form of castes: the Queen, the product of royal jelly is tasked exclusively with all the breeding for the entire colony; the drones, a small subset of males, whose only function is impregnating the Queen; and the workers who do everything else to make the colony run. There is some break down among the work performed by the workers but this too is regulated exclusively by age. The high organization by nature is related to the Orwellian suppression of individuality inherent in bee society.  

There is no private vice in bee society because there is no individuality. Private vice requires individuals whose interests, even if entirely dependent on the efforts of others for their survival, can still conceive of themselves outside of the society. If private vices are public virtues then it perhaps proves that what is best for the individual is not what is best for society and vice versa. For it seems that public vices can just as well be private virtues.

The Philosophy of Politics

Politics is a broad term. It is often used to describe everything from being an asshole on the internet to being a statesman and nation founder. It is denigrated and revered, usually at the same time. This post is my attempt to create some clarity around the question: what is politics? I do not want to give a hackneyed definition, such as a litany of the term’s historical development or a cross-reference of modern usages of the term. What I want to do is identify and explore the different ways people talk about politics, so that we can perhaps begin to understand when we are talking about different things that all fit loosely under the umbrella of politics.

To this end, I conceive of four approaches to politics that I feel need to be sketched out. Listing them from the most abstract to the most concrete, we have: “the political”, “political architecture”, “politics”, and finally “realpolitik”. The four share a concern for group identity, shared ideology, group direction, shared responsibility, and group action. But each takes a particular concern as paramount. I should be understood that all four of these ways of talking about politics are necessary at particular times and all are vital to a culture of flourishing political debate. All four must see their particular concerns addressed in order for a society to resolve an issue. To solve a political problem in three of the four ways is not to solve it at all. Hopefully, this will be clearer after I introduce the differences between them in greater detail.


The Political

By far the most abstract is a sort of metaphysics of politics; the concept of the political as Carl Schmitt saw it. Its primary focus is on how to create and maintain group unity. Imagine a Maslowian hierarchy of political needs, the political is the base. It is the formation of a group, who counts as its members, who are responsible for its duties, who are the beneficiaries of its privileges, but most importantly can the group maintain itself in its given formation? i.e. is it able to cohere? Schmitt elaborated the primary action of the political as determining the friend/enemy distinction. It is the establishment of an “us” by the identification of a “them” which we are not and do not like. Us and those like us, are friends and those unlike us are enemies. This relationship is primary and will determine how we treat others in our sphere of influence.

For example, what is the role of poor blacks in the USA? Are they really citizens? Do we (white America) have an obligation to treat them as citizens, that is to treat them just like us? Are they accretions upon the body politic? Enemies, who may be used for labor and discarded? What we say and what we do will be partially determined by whether or not we really consider them just like us?

Schmitt’s distinction is but one way to affect unity, others included shared economic benefit, shared culture/language, simple homeostasis, and—on small scales—kinship (and possibility others). There are many ways group identity can form and dissolve, but at the base, without group identity, there are no more political questions to even ask. To call a group of people a society, of any kind, is to assume the kind of political connection discussed under the concept of the political.


Political Architecture

The second most abstract topic of political discussion is what I have termed political architecture; which we might define as the organization and arrangement of power structures and institutions in a given society. The focus of political architecture is largely on how to effectively and efficiently deploy the power that comes from “group effort”. The many battles over the “rationality” of politics, from Carl Schmitt to Michael Oakeshott, fall under this category. Political architecture deals in terms of democracy, monarchy, aristocracy, and anarchy. Its terms are those of organization and arrangement, law and principle, government and property. As well as terms of design, such as the separation of powers, the nature of sovereignty, how to affect the popular will, and much more. This is the realm of order, harmony, stability, and security.

By far the most important question of political architecture is striking the balance between liberty and equality. Always with an eye to the necessity of maintaining group cohesion, a political architecture cannot go too far afield in either direction. We cannot even conceive of a polity where there are but one abusive tyrant and a whole mightly population of abused subjects. This is because such an arrangement is unstable, it will tip over into chaos, despite the many horrors chaos brings. 

The goal of political architecture is to establish the minimum number of institutions to effect relative and fair equality. The “minimum number” preserves freedom, while the institutions protect the equality vital to group cohesion. All the grand schemes of political arrangement and political economy are attempts to find the balance in whatever situation a group of people happens to find themselves. It is important to note that, no one solution is right for all situations and so political arrangments and political economies, to remain stable would change with the situation.


Politics

The third most abstract is what we could call politics proper, i.e. the traditional idea of politics, as it was held by the ancients. This type of politics deals with the human condition, the current situation, economic need, justice, balancing the needs of the people, and much, much more. The primary focus in standard politics is deciding where to direct our group resources and energy and when, where, how, and—most importantly—why to use the power of group unity, including the institutions that harness and focus that power. This includes the creation and enforcement of policy, the allocation of resources, declaring and fighting wars, and the settlement of inter-member disputes. It always has an eye towards the maintenance of unity, but its concerns are particular and practical, unlike the general and theoretical concerns of political architecture. 


Realpolitik

The least abstract, or most “real” approach to politics, goes by the label realpolitik. This approach focuses on the effective use of the existing power structures to achieve desired ends among the rival choices of politics proper. This is the aspect of politics that is the most disreputable and deals with the strategies of sub-unities or factions to attain control of the power of group effort and use it to better their own situation. The strategic maneuvering of realpolitik is limited only by the prevailing political architecture and the constant pressure to retain group unity. When unity fails, it’s always factional strife behind the dissolution.

The goal of realpolitik is managing logistics. How do we actually get the job done? The proverb of the mice who decided to hang a bell around the cat’s neck but cannot decide on who will attempt the feat is a question of realpolitik. The best-laid plans of a presidential candidate mean nothing if they lose the election. Winning elections then are just as important as making decisions, if that is what the political architecture calls for. This, of course, brings up the ugly business of gaming politics: gerrymandering, suppressing votes or buying them, and much, much more. This also includes the political and economic viability of enforcing the ideals and decisions of the other forms of political conversation.


All four approaches impact others and affect them in particular and limited ways. Some can be used to delimit and control others to some extent, but all four are always present and necessary in every polity. There is a strong relationship between the political and politics proper, and between political architecture and realpolitik. The former pair creates unity and maintains it in a real, concrete way. The latter pair prevents abuse of unity while managing to get needs met and actions accomplished.

The political and political architecture constitutes the realm of political theory or political philosophy, as they form the primary assumptions upon which all other political decisions are based. These two deal with the possible and the impossible. Politics and realpolitik are better informed by political science as they deal in the observable world of the probable and the improbable. Let me reiterate that there is no conflict between these aspects, merely different goals.

Beyond all four aspects lies the realm of ethics, in two distinct senses. First as virtue ethics, which instills in the individual the skills and abilities to get along well in a given political arrangement and culture, and then pure ethics, including the ethics of care, which hope to determine individual actions about what is to be done in the concrete situation. Ethics are not politics, but they do relate to it because they form the preconditions and boundaries of politics. Ethics is to politics as wood is to a table. A table is made from some substance, but the essential “tableness” of the table has nothing to do with which particular substance that it is formed from. Ethics then can disagree with our politics, that is the two can be in discord so that realities do not match ideals, or they may try to agree with political consideration so that either the individual or the polity itself must be changed into harmony. This is because all forms of ethics deal with the individual and politics deal with groups.

Murder by Libertarianism

I’ve written more and more in-depth on the problems with libertarianism before, but in this post, I’d like to delve into a specific absurdity of libertarianism. Let me start by summarizing Nozick’s understanding of why he feels there is no exploitation in economics. He argues that people cannot be faulted for taking actions that limit the opportunities of others even beyond the point that some of those others have intolerable lives. The implication is that, while unfortunate, these people’s misery is justly derived and nothing should be done to alleviate it because any form of redistributive justice would assault the rights of the beneficiaries and thereby, be unjust.

In a section of his magnum opus, Anarchy, State, and Utopia, where Nozick discusses capitalism and force, he claims that what limits the choices determines whether or not an act is voluntary. He further claims that when choices are limited by other peoples’ rightful actions, the remaining choice is “voluntary”, even if it is limited to a single option. He helpfully provides a concrete example of his position: imagine 26 pairings of marriage partners A-Z and A1-Z1, so that A1 is the most desirable for all letters and A is the most desirable for all primes, B1 and B are the second most desirable, and so on through the list, so that Z1 and Z are the least desirable in each group. Naturally, we could assume that A and A1 would get together, thus delimiting the options of all the rest by removing themselves as available options. Sure, B1 would like to get with A, and B would like to get with A1, but they simply do not have that option. The actions of A and A1 getting together limits the actions of all the others but is just. By rational extension, B and B1 get together, C and C1, etc., until we reach Z and Z1. In this case, Z and Z1 have no choice but to marry each other or remain single. Nozick asks, have they been forced to make this decision or is it still voluntary on the part of Z and Z1? 

Nozick’s point is not that the situation is not unfortunate for Z and Z1, but that the only alternative, forcing one of the other couples to not get married or give up their chosen partner to make the situation of Z or Z1 better, is worse. In this Nozick is right, however, that’s not the whole story. Nozick has chosen a rather disanalogous example. Z and Z1 are of course free not to marry without being harmed. Would the situation be different if they would be killed if they did not marry? Would a threat of death be enough to change the ethics of the analogy?

Imagine the same situation except for this time a dictator threatens each couple with execution if they do not agree to choose any mate. Would there be a violation of rights? I imagine Nozick would say yes, it is the dictator who violates the rights of the couples. But let us tweak the situation slightly again, and this time say that the dictator will only provide food to those individuals who agree to marry so that if they do not, they will starve to death. Here, you are free to choose the harm, but the question becomes is it within the rights of a dictator to choose how food is distributed? Again, Nozick would probably argue it is not. However, if the dictator choosing how food is distributed is a violation of individual’s rights then would it be less so for the dictator to decide to distribute food on the grounds of who worked to produce it? If the dictator doesn’t have the right to choose the one method, they do not have the right to choose any. Let me try one more tweak before we quit this example: imagine this time instead of a dictator, we imagine an incredibly wealthy individual, who gained his wealth through entirely justified means. This individual has had his love rejected by you and as a result, he has made it his life’s goal to revenge himself on your romantic endeavors. Towards this end, every time you have fallen in love, he has paid off your would-be lover to quit you so that you are never able to marry. Would this still be just according to libertarianism?

I think it must be! It meets all the libertarian criteria for “voluntary” action. The spurned suitor has the right to spend their money as they like, and the would-be lovers have the right to break off with you in exchange for his money. It may seem unfair to you, but it is not unjust according to libertarianism. It would be a breach of justice to protect your happiness by interfering in the rights of the spurned suitor. But if this is justice, would it be different if the actions were deadly? This time imagine the same rich individual, except now he’s decided to escalate matters and take your life. In this case, every time you go to buy food to feed yourself, he offers the food purveyors more money to sell it to him instead. This is well within his rights. He is simply buying food. Since he has a right to do with his money as he pleases and the money is indubitably his, and purveyors have every right to get the best price for their food, all the transactions are therefore legitimate. Through the exercise of his rights, the spurned suitor is able to prevent you from buying any food, effectively and willfully starving you to death.

The Nozickian libertarian must conclude that it would be perfectly just for the rich man to starve you in this manner. This reductio ad absurdum comes about because libertarianism insists that the government cannot take any action to prevent your death as long as the agent of your death were legitimate in their actions preventing you from getting any food for a long enough period of time to intentionally cause your death. The fact that this scenario is highly unlikely is immaterial. The point here is that libertarianism allows such absurdities as part of its ethical ideology.

The fact that the spurned suitor is not buying the food to use, but merely to prevent you from having it is also immaterial. This could only be seen as a violation of your rights if and only if we observe something like the troublesome Lockean proviso that forbids ownership in the event that there is not “as good and enough left over” for others. I will spare the details of Nozick’s treatment of this proviso, except to say that he doesn’t explicitly reject the proviso; he merely points out the unsatisfactory nature of it as a solution. Sadly for libertarians, there seems to be no alternative. They are forced into a dilemma between accepting a dangerously unsatisfactory proviso or uncomfortably admitting that there are ways in which it is permissible to intentionally murder another individual under the ethical framework provided by libertarianism.

If you accept my argument, it is but a small step to the idea that there are other places where libertarianism leaves gaping holes in its ethics. I am perfectly willing to suggest that at least one such hole is its treatment of owner/laborer negotiations under capitalism. It’s entirely keeping with Nozick’s premise that if the situation is unacceptable in an individual instance it is equally unacceptable at larger scales so that the reductio ad absurdum given above is sufficient to condemn libertarianism altogether.

However, as I do not agree with his premise, I will not offer such an argument here. Instead, I would want to show that the situation is no better on a large scale. The ultimate condemnation of libertarianism comes from the fact that it can be found absurd both individually and socially. Imagine a situation in which a rich man, goes on accumulating through legitimate means until the whole of the Earth is their exclusive property. This, when combined with the minimal state and without the Lockean proviso, would create an autocratic libertarian nightmare. Such leverage would make all life entirely dependent on the will of this libertarian autocrat, annihilating the possibility of free choice since one would have to “voluntarily” agree to whatever the autocrat asks of them or die or watch their family die, or both, or worse. At this point the difference between the worst kind of authoritarianism and libertarianism vanishes and the two become identical. Libertarianism requires only that the autocrat has derived his total leverage via “legitimate” means. So on this scale too, libertarianism could justify absurdities.

I obviously believe that it is a failing of libertarian ideology that it can be used to justify totalitarianism. A zealot of the ideology could always argue that libertarianism is correct despite such arguments and the unlikeliness of such extreme situations reinforces this view. But I am not one to follow absurd ideas. On the other hand, this condemnation of libertarianism should not be read as a suggestion that governments can or should dictate all aspects of individual life. It only suggests that there are times when society has the right to intervene in the lives of its members. Freedom is not always the best policy, although it is generally the best policy. There are the places where we slip beyond the ethical into the political, and such places are blind spots for libertarians. It is in these places, however, that libertarianism must give way to libertarian socialism if it is to retain the aspect of justice.

 

How to be a Nonlinear Progressive

In the most basic sense, to be a progressive is to believe that human beings are capable of progress. For example, if you believe that human beings can be “civilized”, live in “civilizations”, and are not entirely subject to the animal nature of primates, then you may be a progressive. But progression implies a linear movement. We progress from point A to point B along some path and the very idea of a path, suggests we are moving toward a destination. Somewhere we believe we can go. To be a progressive then is to have an idea in mind and strive to achieve it.

If you’re anything like me this notion seems to fit most human projects, but not humanity itself. There is no ideal human just as there is no human ideal. I take an existentialist bent on this idea of progress. We exist first, then we decide on what it means to exist. If this is the case, then we struggle to understand progress. How can we progress toward a better civilization–a better us–if starting places and destinations are impossible. Perhaps, I’ve gone too fast here. Perhaps civilization is one of those human projects and not really substantive of humanity itself. We should ask, does society shape our being? Unfortunately for “progress”, I think it must. The society we are born into will dictate many parts of our being. It will set the bounds of our potential, our understanding–both of ourselves and the world around us. It will form our reason, our logic, even our imagination. Whether we are wealthy or poor, white skinned or black skinned, Hindu or Jewish, Midwestern or Tujia, an anglophone or francophone, highly educated or illiterate or aliterate or one of thousands of more distinctions, our civilization will have great impact on the meaning you make of your life, even on your physical existence.

If society shapes us, as I suggest, then the project of progressing toward an ideal state of existence seems doomed. There seems to be no ideal state to progress toward, only suggested states. One person’s Utopia is very likely some other person’s living hell, and vice versa. The problem with progress, however, is not that we have no ideal state of existence, but that we have too many. We have utopias aplenty. The idealists of the world all have their own utopia, and guess what so do the realists! Everyone has a vision of the right way to act, the right way to think, the right way to be, and when they imagine that vision as dominate in a society, they imagine utopia. More radically still, each and every one of them has the right utopia. The Nazi and the Israeli both have utopian ideals, as much as the capitalist and the Marxist, the pastor and the scientist, the technophile and the Luddite, and they are all right; all of them. Right for them alone, anyhow. What we really are interested in then is a shared Utopia, not an iconoclastic one.

But of course, a single shared vision of society cannot move in all directions at once without tearing itself apart. And while I have argued elsewhere sometimes tearing society apart is what is best for everyone involved, many times the situation is not so drastic. If an idea can be settled on, then we can mark progress toward or regress away from it. Say you were an American just before the advent of the Civil War. You would likely have an opinion of slavery, and that opinion would likely be shaped by the then important social distinction of living either north or south of the Mason-Dixon line. If you grew up north, you were most likely an abolitionist, especially after the attack on Fort Sumter, while if you grew up south, you were most likely pro-slavery. Depending on your side then, progress looked different. The issue could only be settled by force, the vision of who and what America is, was what was at stake. The battles were all real enough, even if the war was really over ideas. That one side won set the standard for progress but had the other side won, the idea of progress would have been the same, just reversed.

Libertarian philosophy offers us no outs here. There is no way to settle such disputes except war and compulsion. Libertarianism is a subjugated political philosophy; one dependent on the unity of the political order. It cannot give us our rights or guide our morals in discord or disagreement. It has no way of settling issues of rights or membership but only of recognition of member’s rights, taken as given. Libertarian socialism, on the other hand, does not necessarily place the individual as sovereign and recognizes the importance of group unity as the primary question of politics. 

The question for libertarian socialists is “can we have progress that doesn’t look for any final end?” If there is no ultimate telos or end of history if each end is maybe just another beginning, is there really progress? I think so. Let’s look at the swinging pendulum of politics in the United States. Every four years or so, the country lurches right or left. A miserable back and forth that almost everyone hates and almost everyone blames their opponents for. This oscillation is not merely an effect of systems of election or the American political architecture, although these contribute to it, no doubt. It is really the effect of a shared ideal with two radically different paths to its attainment. The ideal is prosperity. The paths are social and individual, and those come with an entire host of corresponding belief systems making it virtually impossible for either to see the other’s perspective. Progress has hung up again over economic prosperity, just like it did over slavery.

But the stakes seem much lower this time. Slavery is fundamental state of being that brings with it different laws for different people, hierarchies based exclusively on permanent attributes outside of one’s control, and even a difference in the very humanity of some individuals. Our modern hang up is more like a difference of opinion about the shortest route to the airport. It most likely will not take a civil war to figure this one out. However, it will take some serious philosophic and political effort. What is important for us is that the lower stakes stem from the real fact that both “paths” are sometimes right. Unlike with slavery, this is not something we really want to be decided once and for all: we want to sometimes emphasize individual effort and sometimes emphasize social securities, and nothing says we can’t do both. In this case, progress is possible, but it must be nonlinear or plural.

Nonlinear progress feels strange, like being able to move forwards or backwards and still be going the right way. The strange sensation is cleared up at once if we realize that “moving” is the wrong metaphor to be using here for our idea of progress. We should be thinking of progress as adapting. In this metaphor, the situation changes and we change with it. What is wisdom one minute is folly the next and vice versa. More like putting on a coat or taking it off depending on how the temperature fluctuates.

I think of this in terms of a social version of Aristotle’s ethics. Aristotle didn’t have a universally right answer for every situation. In fact, he disavowed the very idea that one could have a single right answer. But neither did he argue that any action was as good as any other. A virtue must be identified before an action can be judged as in accordance with its approach to that virtue. Aristotle focused on the pragmatic task of adapting the self to the situation in this way. More of this or that action is called for, depending on two things: who you are–or more specifically what you’re capable of–and what situation you find yourself in. Perhaps it’s the time to stand up and fight your enemies or perhaps it’s time to run like hell. To know if you should stay and fight or head for the hills you need to know your abilities and exactly what you’re up against. The goal then, according to Aristotle, is to find the sweet-spot in the middle of the two options. To not be foolhardy or cowardly but appropriately brave. If the situation changes, a revaluation must also take place.

If the target is always moving then our aim ought to be also. There is no time when utopia will be reached and we can sit back, kick up our heels, and rest on our laurels. It’s just not the way the world works. Utopia is not a place, it’s a process, and progress is actively processing. Seen this way, we only stop progressing when we get hung up. Like now. Dangerous gridlocks, like over slavery, or prolonged squabbles are equally progress-halting. The goal of progressives then is to build bridges, level obstacles, and keep the ball rolling. This doesn’t mean giving up on pushing the ball the direction you believe it should go, but it does mean demanding of yourself that you have to give the other side it’s due and equally demanding that they give you yours. We all fail when the ball stops moving, and it takes so little to give in some, compromise a bit, and roll in a new way.

Marx, Markets, & the Major League

For Bob Weick

Economics is hard. Political economy is even harder. In order to structure and justly award and distribute material goods in a society, we must have at least some idea of the nature and determination of value. No theory thus far has managed to get it all right. Arguably, no theory thus far has gotten enough of it right to understand political economy. Today the division between theories usually breaks into two camps: the classical economists and the Marxian. On the neoclassical side, we find brilliant economists like Alfred Marshall, who discover fantastic formulas like the law of supply and demand, but who are dismally ignorant of whatever it is exactly that supply and demand consist of. On the Marxian side, we have Karl Marx himself, who paints economic vistas into the broad landscape of human society, but who–along with his followers–fails to satisfactorily provide us with a pragmatic economic model for the conduct of individual life.

The division between theories leaves a crack in academic economics a mile wide. The big questions upon which all economic knowledge rests seems to have slipped through that crack: Should we have private property? Is money a boon to or a flaw in a just economy? What is the source of poverty? Trying to understand economics today is like trying the solve the word jumble in the daily newspaper, only it’s written in a lost language, with innumerable symbols that no one, not even the experts, really knows what they mean. At the bottom of this well of confusion is the simple fact that after more than three hundred years of economic theory, we still don’t know how material things come to be valued in human societies. The Marxians will say it’s labor, just the labor that goes into production, nothing more, nothing less; but when you try out that theory, it falls flat. The classical economists have a theory that doesn’t fall flat. It does have predictive power, but it consists of units of measure that are mysterious and ineffable.


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Our situation is a little like being lost in the wilderness: we keep trekking, despite not being sure where we are going and without bothering to really ask why. And our leaders in this trek, the economists, are the least sure of us all. This would be bad enough, but to make matters worse, value theory, that is economic value theory, the search for a what gives material things the prices they command, has all but been abandoned by both camps; Marxians because they think they have it and neoclassical economists because they think they don’t need it. Sometime in the 20th century, capitalist businesses realized they don’t really need to know where value comes from to turn a profit, and in fact, it might be dangerous for business to find out. Thus, they prefer their economic explanations to be functional but not terribly explanatory. It’s the economic equivalent of going to a doctor to treat the symptoms: “Doc, my whole left side hurts.  I don’t want to know why and I certainly don’t want to have to do anything differently, but can yeh gimme something for the pain?” Economics departments the world over dole out drugs like corner boys around a west Baltimore high-rise. To be fair, they can’t really do any more than that, it would be beyond the scope of their science. Economics, you see, is a political function and just as there is a world of difference between politics and political science, so is there between political economy and economics. Where the former questions the nature of human relations through material things and worries about things like justice and group cohesion; the latter is the comforting realm of science, merely observing how nomological systems operate and reporting the patterns that are useful.

The first thing we’ll need to understand is that politics is primary and economics is derivative. Marx, according to his partner Friedrich Engels, over-emphasized the economic component of his theory because economics were the intellectual fad of his day. Marx then presents the material necessities of human society shaped their ideologies, including their politics. It was the available means of production that determined if a society was to be primitively communist, feudal, capitalist, socialist, or communist; and those dominate economic relations would determine if that society would have a monarchical, oligarchic, aristocratic, or democratic government. Things only moved from the material to the ideal for Marx, who was reversing Hegel on this point. However, ideas shape what we desire, and its that which truly determines our needs, and our needs which determine our labors. Ideas shape materials, and materials, in turn, reshape our ideas. The pattern is cyclical. For example, we have yet to develop mass production techniques for the “artificial appendix” as we have for the horseless carriage.

“AH HAH!” the orthodox Marxists triumphantly shout, “You’ve misunderstood Marx! A thing without use-value has no value at all, accord to him. So, of course, the ‘artificial appendix’ being useless, would have been a waste of labor, because it wasn’t socially necessary! That is why we never build one.” But Marx’s belabored theory of socially-necessary labor is precisely the problem. It’s a long walk he had to create because he had to discount the role of use in determining price.

Marx’s error–to put it playfully–was the assumption that there is no use for use-value in determining price. A commodity either has a use or it does not, according to Marx. Use-value then functions as an economic data bit; it’s either 0 or 1 and nothing in-between. It has no quantifiable distinctions. On this bold assumption, Marx launched the armada of his economic theory, which held some striking conclusions: 1) consumers don’t matter one tiny bit in the creation of value (outside of determining whether labor is socially necessary labor or not), 2) production, specifically the labor units of production, is the only input of value, 3) labor, measured in units of time, can be counted objectively and so the value of everything should be able to be calculated objectively, 4) markets are unnecessary for determining value, 5) money, as a lubricant of exchange, is only necessary if markets are necessary, so given four it’s also unnecessary, and 6) without the need for markets, money, or consumers, we could eliminate private property as vestigial organ of economics, an invention of the bourgeoisie, which we are now free to evolve beyond. As anyone who has read Capital Volume I will attest, Marx does nothing small.

But if Marx was wrong and use-value is quantifiable then all six of his conclusion given above are suspect. And sadly, the quantifiability of use was staring Marx right in the face; he even said it himself: the value of capital to the capitalist is its ability to reduce the need for labor. He just didn’t take the next step and realize then the use of all commodities is their reduction of the labor of the consumer in the tasks they employ them for. Marx didn’t see this, because he couldn’t see it. It would make his theory subject, a subjectively determined value, which in his mind would threaten his theory of surplus-value and thus the idea that laborers were being exploited by capitalists. It’s a very forgivable mistake.

Nevertheless, if every commodity, even food, can be reduced to a sort of “labor-savings” or negative labor it can be quantified just like labor can, and what is more, the units will exchange with labor in exactly the way a negative integer, exchanges with a positive one. Thus we can weigh labor-savings against the labor required to produce a commodity and determine a subjective value, but the result of this equation is still necessarily a labor theory of value. Marx cleverly pointed out that in order for things exchange for one another some common substance must be present in both. For example, for seafood to exchange for say taxi services, something must be a common denominator of both. And Marx rightly deduced that this common substance was human labor. He just didn’t understand that the labor savings of the commodity play a role in quantifying its value. The implication of this undoes a good deal of Marx’s later economic theory, so that: 1) consumers are in fact necessary to determine value, 2) markets are thus required, 3) so then is money. But the one theory of Marx’s that is not undone; rather, is actually confirmed by this insight, is that labor and only labor is the source of value of things. And the implications for that… well, let’s just say that employers, landlords, investors, lenders, or in a word, the bourgeoisie, will not be happy.


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This is the beginning of a brave, new socialism, but before we get to that, we should make sure that Marx was actually wrong about the role of use-value. To do that, we’re going to reconsider use-value from a purely materialist standpoint. For his theory, Marx’s needed to solve the “use paradox”, that is the problem of understanding why water, which is so useful, is so cheap, whereas a diamond, which is so useless, is so expensive. Marx did so by eliminating it. But this masterstroke blinded him to what his own method of inquiry, regarding material necessities, should have laid plain. Use-value is a fancy name for simply being able to consume a commodity, that is, actually use it; and here’s the kicker, we can’t consume any material commodities communally.

Non-material commodities, like the music that streams over the radio, can be shared by consumers within earshot simultaneously; we can all sit around and listen and no one loses out on enjoying the music just because I am listening to it. The radio device itself, on the other hand, is a material thing, and can only be set to one station at a time. But who gets to decide where it’s set? The owner, of course. This is what we mean by “owner”, whoever gets to determine where the radio is set. Unlike music, it cannot be simultaneously enjoyed. Individual owners are necessary to determine the use of any material thing, from your toothbrush to the means of production. So, at the same time, individual owners determine use-values.

This suggests that ownership is a necessity of use and so, contra Marx, private property turns out to be necessary. Let’s call this the consumer theory of private property. When it comes to material goods, private property is an essential fact of human existence because those goods cannot be consumed without an exclusive right to them. While it’s true that Marx overlooked this, he was right that use plays no role in determining the productive labor that goes into a commodity. The error was to think that consumers play little to no part in determining a commodity’s full value. Productive labor confronts consumers as a burden, a cost which decrease the labor-saving value of the commodity to them. That’s why we would all rather pay less for the same good if we can. If producer A can get a commodity for you for $10 and producer B for $12, then we will buy it from A. Let’s say that we think this commodity will provide us $X labor-savings. Then the actual value of the commodity to us is either X – 10 or X – 12; X being constant, and -10 being higher than -12, producer A’s commodity is more valuable. Producer A’s commodity is literally worth more to us. 

Compare this to Marx’s theory that suggests that the amount of labor time that went into each producers commodity would determine its actual value. In this case, producer A and B should be charging the same amount. The fact that they are not is evidence that something shady is going on. But that is not necessarily the case. Perhaps the metal used in the manufacture is hard to extract for producer B than for producer A. Thus it took more labor for producer B to bring his product to market than producer A. The question then becomes, can Marx’s concept of socially necessary labor time save it. Yes, it can. But it is a costly intervention. By determining that producer B has wasted some labor time by extracting less attainable ore, Marx has spun his entire system around. He has reversed the order of price determination and now is using the relative market prices as fixed, in order to prove that some labor was socially unnecessary. This is a serious problem because using Marx’s system we never would have been able to get those market prices in the first place, so how could we rely on them to tell us when labor was socially necessary or just a waste of time? 

So, we cannot share the things we consume, at least not as we consume them, and we need private property. If we need private property we need all the trappings that come with them: markets, money, trade laws, etc.. This has resounding implications for the remainder of Marx’s theory, but at the same time it certainly doesn’t justify capitalism. Marx’s intuition that capitalism is highly exploitative, unfair, and unjust is still intact. What has changed are the reasons why those things are true. The trouble with capitalism is that it also fails to recognize the role of use in property, but from another side, another angle. If you are reading this as a classical economist, I imagine that last line strikes you as something very odd. Isn’t use inessential to determining price? Well, no, and that’s why your profession has struggled to understand anything for the last two hundred years. Price, for the consumer, is how much labor you would have to expend to acquire a property right in a commodity, its value is the amount of labor that commodity saves over and above that cost. No one buys anything that costs them more than it’s worth or is worth to them individually at least.


Baseball


So you might be thinking, “okay, but really who cares!?! How is the role of use, not some economic pinhead on which a thousand angels dance?” Well, including use shows that while the Austrian school might have the math right, it’s the socialists and the Marxists who have the moral right. They’re both right, just about different aspects of economics. And that means we can finally understand where injustice enters in our system of economics. We can synthesize the labor theory of value with the subjective theory of value and arrive at a subjective labor theory of value. Doing so is certainly anathema to Marx’s theory, but it is not a vindication of capitalism because it firmly establishes the role of use in justifying ownership over a particular piece of property. This is to say, that in order to claim we “own” something, we must demonstrate our exclusive need to use it, not merely the labor we expended or traded to acquire it. This delegitimizes many of the so-called “uses” of private property that socialists condemn as a matter of course: namely rent, interest, and profit, all three of which can be shown to be anything but exclusive. Without these three, capitalism loses its exploitative element. This is certainly a step in the right direction and what I have elsewhere argued is the essential step in transforming capitalism into socialism. However, it not the last step. This libertarian socialism will still face other problems inherent in any private property and trade based system. 

To see this problem we need to go back to the idea that political economy is a subsection of politics. You might say that if politics is the study of human relations in groups, then economics is the study of human relations through material things. Politics surrounds economics on all sides and channels it. Even the quasi-sacred law of supply and demand is really only relevant inside a community, it does nothing to describe the economic decisions of Robinson Crusoe, alone on his little island. This is best understood through an extended analogy, so let’s introduce one.

Major League Baseball can be imagined as a microcosm of our political economy. There is a league that oversees the rules, just like a government that oversees the laws. There are teams and players, just like there are businesses and laborers. There are club owners just like there are investors. There are competition and cooperation. There are incentives and disincentives. The whole thing seems sometimes chaotic and sometimes orderly and well understood. MLB differs from the political economy mostly in impact and relevance. Far fewer people suffer extreme poverty at the hands of a misguided club owner than at the hands of a misguided Federal Reserve Board. But the most important difference is that every now and again, MLB resets everyone back to zero. That’s important! That’s really, really important! In baseball, unlike the real economy, you can’t just keep riding on your laurels indefinitely, games and seasons eventually end, and you have to start all over from the beginning again.

But why? Why does professional baseball reset at the end of a “season”? They could just take a break and then pick back up right where they left off. Why don’t they just keep chalking up victories and defeats? Well, mostly because that’s boring to watch. But it’s boring because the cooperative elements of the sport are essentially ruining the competitive elements. It doesn’t matter if the league decides to just declare the Yankees the winners of every game they show up at (like a totalitarian regime) or if they just allow them to start every game with a merit run for every world series they’ve previously won (like a capitalist regime); the end result is boring. And it’s boring because it’s unfair. We want victory or defeat to be the exclusive outcome of the efforts (dare I say labor) of the players on the field, not some privilege for previous labor. Each game and each season requires the teams to start as equals in order to ensure that it is this effort that leads to achievement, this is what it means to be fair.

It’s the same with economics. Competition between businesses is supposed to lead us to the best products, the best production methods, and the best law and regulation. This is what we mean by a just economy. But competition has to be fair in order to provide these results. So, we want a political economy were the profits and losses are a result of the efforts of the laborers, not the merits held-over from some bygone era. Imagine two restaurant owners in the same area. Producer A starts their business with a loan and producer B with a grant from family. Even if producer A offers better fare and earns more patronage, they may still lose to producer B who has lower-overhead. This is not a natural law of economics but is a choice at the political or “league” level. The choice is between two goods: one is protecting competition which tests out differing methods allowing us to determine the superiority of one or the other, while the other is allowing people to benefit directly from their efforts. The two goods at some point come into conflict. This is the problem of capitalism: it ceases to progress and be a good for society the more it allows individuals to benefit from their efforts and it ceases to be a benefit to individuals the more it insists on competition. We can see it’s different from the problem with state socialism which solves the problem with an ax, eliminating both the individual benefit and competition. Such a solution is accompanied by different, and arguably worse problems, which is beyond our scope here.

Capitalism, then, is like the league that allows teams to horde up runs for use in other games. We allow businesses to save profits by reducing wages to less than the full market value of their products, either voluntarily or exploitatively. But this “forced savings” is not necessarily a problem; what is a problem is that the beneficiaries of those savings are not the people doing the saving. The horde of runs is not for the players benefit, but for the club owners. Eliminating profit, making all business would merge the class of club owners with that of player, thus making those who save, those who benefit from the savings. However, what that solution does not do is protect society from the ill-effects of private monopoly. For that, we need something else, specifically something that will counter-balance the self-interested tendency to dominate a market by growth. One solution accompanies the loss of rent, interest, and profit, which is the great reduction to the interest to make income beyond a certain finite amount. This is the real result of putting use-value back in economics. But what we really require is something like the league equalizing the teams after every season.

We need a “league” that will maintain a healthy competition between “teams” and fair play amongst the “players” without micro-managing the games either, the way Keynesian economics do. The league cannot maintain competition through laissez-faire practices, so the league must set rules that foster competition, then and only then can we step back and let the umpires enforce the rules. The goal of any political economy then, is to set the right rules to maintain a healthy competition between businesses and fair and equitable treatment of all participants while allowing as much individual benefits from effort as possible.

The occasional forced economic redistribution that brings everyone back to some kind of equality before setting them loose again to follow their self-interest would do this, but I have nothing so ham-fisted as a yearly revolution in mind. Instead, I suggest we think about the other type of cooperation in baseball, that between teammates. Teammates work together in competition with other teams who are all cooperating together in the league for the good of the sport. Understood this way, competition is really just a different kind of cooperation or cooperation at a higher level as Hegel might say. In this case, even competition with winners and losers still benefits everyone in the long run. This Rawlsian, pro-capitalist line, has long been used to justify capitalism, I’m well aware. But without the exploitative element, we discussed above removed, we can actually be sincere about it. Competition can be benevolent, it just has to be fair in order to be so. Players in baseball, show up and do their best only because they believe the game isn’t rigged. If they knew they were being cheated, they would just stay home and there would be no game for anyone. The whole system then relies on everyone involved in it believing that it is fair and if I may be so bold as to say if everyone believes something is fair it is fair.

The solution then is a guaranteed income, preferably one that is pegged to some general economic indicator, e.g. providing a quarter of the per capita distribution of the GDP to everyone who doesn’t make more through labor. This simple solution allows for the social benefits of competitive experimentation in production while still allowing the benefits of large-scale productive activities that result from self-interested reinvestment in the enterprise. Not to mention countless other social benefits elaborated by better authors than myself, see a list of them here. I have argued other reasons why such a system of compelled taxation to finance a guaranteed income is necessary, but this one alone would be sufficient.

In sum then, I tried to lay out the basic economic theory that undergirds a theory of libertarian socialism. This theory calls for the abolition of rent, interest, and profit and the provision of a guaranteed income to every citizen. These two changes convert capitalism into stable libertarian socialism by maintaining the trade-based private property system of capitalism but removing its ability to be exploitative individually or socially. There is no doubt in my mind that other problems with libertarian socialism will appear if it is established and the hegemonic economic order. However, I cannot anticipate these and thus I have no solutions to offer. I leave that to other thinkers.

Collective Action & Social Responsibility

Introduction

Whenever collective action is required we are confronted with a choice, whether to use the coercive power of society or whether to preserve freedom by encouraging voluntary participation.  What is called for is a criterion that would help us distinguish which tactic is best suited to the task. To start this examination, we’ll look at Iris Young’s examination of just what social responsibility asks of us in her book Responsibility for Justice.  To help us understand the interplay of individuals in a social matrix we’ll examine Mancur Olson’s book The Logic of Collective Action, where he describes how and why individuals form groups and the mechanisms necessary to keep those groups providing optimal amounts of the goods they formed to obtain.  Additionally, I consider two empirical accounts analyzing the interests of corporate directors in making socially responsible decisions. Altogether these draw a portrait of human beings as social animals imprisoned in unique subjective perspectives.  These perspectives lead to patterns of behavior or norms that, if widespread enough, confront individuals as though they were forces of nature. Despite their presentation, these norms remain contingent and can be changed through sustained organized group action.  Achieving this group action, I show, requires the use of coercion whenever the group is so large that the normative structure of group interaction cannot be managed by trust.

Social Responsibility

In her book, Responsibility for Justice, Iris Marion Young gives her account of how individuals should be responsible for the social condition of justice.  Her book elaborates a “social connection model” of responsibility for justice. In this model social connection links every individual in any position within a social structure that is linked to injustice as equally responsible for the injustice (Young, 2011, p. 104).  Mere membership in the structure is cause for responsibility. That said, Young disassociates responsibility in this sense from blame and guilt, which she feels should be reserved for questions of punishing infractions inside an established system by isolating individual rule-breakers from the innocent (2011, p. 105).  Questions of justice, which involve the normative background conditions of moral and legal judgments (Young, 2011, p. 106), in the social connection model are “forward-looking”, in that they are more concerned with setting the rules right, rather than punishing rule-breakers (Young, 2011, p. 108). Essentially, the questions her model are concerned with are ones where everyone in the structure are already responsible for both its good and bad aspects.  This makes responsibility for justice a shared condition of every participant, no matter how tangentially involved or positively/negatively affected (Young, 2011, p. 109), and as such it can only be affected through collective action (Young, 2011, p. 111).

Young is concerned primarily with the consequences of activity.  Social ills are implicitly assumed to be synonymous with bad outcomes.  How we assess such outcomes is left untreated by Young. Assuming utilitarianism then–for the sake of argument–would allow us to say that if an outcome does not lead to the greatest happiness of the greatest number then it is a social ill.  Everyone involved in the structure that allows for the social ill is, under Young’s model, equally responsible for it doing something about it. Although the individual actions one must undertake in order to discharge their individual responsibility is unique to the position they occupy in the structure itself, according to Young (2011, p. 142).  The particular actions Young leaves up to the deliberators themselves, since she holds no philosophy could possibly prescribe them (2011, p. 124); however, she maintains that responsibility for justice can only be discharged through the use of collective action (2011, p. 111). Young means civil or social action by collective action, not individual action.  In this model, ethics is reserved for individuals but justice is a property of collectives and only as a collective agent, acting to modify the whole collective can one discharge their responsibility. For example, you might spend a day picking up litter from a park, and that is ethically right, but it is not a collective action and does not discharge your social responsibilities.  To do that you would need to work with others to remedy the litter problem in the park. This could take several forms, such as organizing regular cleanings, outlawing the sale of non-biodegradable packaging in your town, or petitioning to add to the number of waste collection bins in the park, etc. The point is that the action must be collective in order to resolve our responsibility for justice.

Young’s model then leaves us perpetually facing the challenge of ascertaining when to use coercive force or supra-incentives and when to allow individual freedom and hope to align individual interests with social goals through practical incentives and adherence to a mere ethical ideology.  

Young hopes philosophy can assist us, by setting out some “parameters of reasoning” (2011, p. 142).  These parameters helps us to assess our position in the structure and so our particular relationship with a perceived injustice.  From a sound appraisal of our role, she assumes we will be able to assess our unique obligations and discharge them in concert with others.  She names four such parameters: “power, privilege, interest, and collective ability”, (2011, p. 144). The most relevant to our discussion is interest.  What is essential in this parameter is that there is almost always–in any sustained injustice–an individual or set of individuals to whom the injustice is beneficial and equally another to whom it is detrimental.  Those who benefit by perpetuating the injustice will have a difficult–if not impossible–time coming to understand how their actions should be voluntarily changed, despite the adversity to their own interests. In other words, given the current social norms that permit this injustice, these beneficiaries are unlikely to change their behavior in the name of justice (or any other ideal) because doing so directly harms them.  Young writes, “Aligning interest with responsibility is not a problem; indeed, one way of looking at what taking political responsibility means is to figure out how to align one’s own interests with those of agents that suffer injustice” (2011, p. 146). Still, the choice remains whether coercion or supra-incentives are necessary to align the interests of beneficiaries of injustice with those of the sufferers of injustice.     

Young has provided us with the impetus to act socially to cure structural injustice, but she has not provided us with an apparatus for doing so.  Power and privilege are always protected by an interest in preserving them, and the collective ability to act can be mobilized as readily to protect and extend those interests that perpetuate injustice as it can to thwart them.  The question is how do the weak, the underprivileged, and the unorganized sufferers of injustice create systemic change against the overwhelming adversity of those total and partial beneficiaries? Against libertarian doctrine, does Young’s theory advocate or allow political action to limit the freedoms of the privileged and powerful in order to carve a place for themselves in the society?

The tragedy of Young’s account is that those most in need of structural change are generally the same ones in the worst position to go about organizing collective action to change it.  Typically these victims of injustice are limited to merely being vocal about their plight, hoping others might join them and create change. This leaves them very vulnerable to being ignored.  Young lists four rationalizations of those who would rather avoid social responsibility: reification, denying connection, immediacy, and displacing responsibility (2011, p. 154). For the sake of time, I’ll only describe the first, reification, since it is the most relevant to our discussion.  Reification, put simply is the making natural of that which is contingent. External forces may be either controllable or uncontrollable, and reification is the mistaking of the former for the latter kind. Typically these are contingent social norms that are either reified as human nature or mistaken as some natural or formal law.  A reified norm is believed to be immutable and so must be worked around rather than confronted, changed, or denied. The powerful may easily reify the plight of those less fortunate than themselves. This may be both unethical and unjust but, assuming a libertarian sentiment of non-interference, this is the best that we might expect.      

To see why, we must turn to the mechanisms for effecting collective change.  But at this point our earlier assumption of utilitarianism becomes untenable.  Either we have to prove that utilitarianism is an acceptable justification for any or all coercive or supra-incentivized political actions or else discard it in favor of some other criterion.  Assuming that we want a libertarian (as opposed to a totalitarian) government–by which I mean only that we want a government that intends to leave its citizens free except where there has been established a justified social need to delimit their freedom–we need a methodology for determining when a structural injustice is neither natural, nor self-correcting, nor inherently unstable, nor likely to be remedied by education or an appeal to an ideal.  In other words, we need to answer the question: when would it be justifiable to coerce free people?

Collective Action

In The Logic of Collective Action, Mancur Olson theorizes about why individuals organize into groups and how those groups function internally.  Specifically, he is interested in the way public goods, which he defines as good that even when consumed cannot feasibly be withheld from the other members of the group (e.g. security or freedom of expression), create, sustain, and define group activity (Olson, 1965, p. 14).  Olson (1965, p. 7) reasons that groups organize around particular member interests that cannot be met at all or as well individually. Public goods are necessarily interests of this type. The problem that sometimes arises, according to Olson (1965, p. 21) is that “[t]hough all of the members of the group… have a common interest in obtaining this collective benefit, they have no common interest in paying the cost of providing that collective good.”  Left at this point, it is easy to conclude that coercion of the members to get each to contribute their share is a necessary conclusion of all public goods. However, group interplay yields different results at different scales. Olson finds (1965, p. 33) that “small groups can provide themselves with collective goods without relying on coercion or any positive inducements apart from the collective good itself”. Although, he finds, they are unlikely to do so optimally (Olson, 1965, p. 34) and that “the larger the group, the father it will fall short of providing an optimal amount of a collective good” (Olson, 1965, p. 35).    The result of this situation, according to Olson, is that “the larger the group, the less it will further its common interests” (1965, p. 36).

This analysis, prima facie, seems to preclude the possibility of very large groups.  But Olson (1965, p. 37) goes on to show that groups act either inclusively or exclusively regarding the movement of members in and out of the group.  Inclusive group members benefit proportionally with the greater the number of members in the group, while exclusive group members benefit proportionally to the lower the number of members in the group.  Olson notes (1965, p. 39) that groups can act simultaneously as inclusive or exclusive depending on the type of goods the group is seeking. For example, a franchise might act exclusively to protect its share of the consumer-base by seeking to limit the number of other franchises operating in the vicinity.  On the other hand, the same franchise might act inclusively, by joining with as many other franchises (or even other companies) as possible, in seeking changes to government policy respecting their industry. When the goods in question are not public, there is an interest in exclusivity, but when the goods are public the groups tend to be inclusive.  Inclusive groups grow large because the need for bargaining and the strategic actions of individual members towards self-interest is greatly reduced, making “group-oriented action more likely” (Olson, 1965, p. 42).

The drawback is that group size affects efficiency because of the limited perceptibility of individual efforts.  Olson writes (1965, p. 44) “in a large group in which no single individual’s contribution makes a perceptible difference to the group as whole, or the burden or benefit of any single member of the group, it is certain that a collective good will not be provided unless there is coercion or some outside inducements that will lead the members of the large group to act in their common interest.”  The limit of perceptibility here provides us with the dividing line, separating the large group who–left to its own devices–will fail to provide public goods, and “the oligopoly-sized group which may provide itself with a collective good” (Olson, 1965, p. 45).  The difference “depends upon whether any two or more members of the group have a perceptible interdependence,” Olson says (1965, p. 45); that is it depends “on whether the contribution or lack of contribution of any one individual in the group will have a perceptible effect on the burdens or benefits of any other individual or individuals in the group.”  

Olson elaborates three key factors that keep larger groups from furthering their own collective interests:

First, the larger the group, the smaller the fraction of the total group benefit any person acting in the group interest receives [relative to costs], and the less adequate the reward for any group-oriented action, and the farther the group falls short of getting an optimal supply of the collective good, even if it should get some.  Second, since the larger the group, the smaller the share of the total benefit going to any individual, or to any (absolutely) small subset of member of the group, the less the likelihood that any small subset of the group, much less any single individual, will gain enough from getting the collective good to bear the burden of providing even a small amount of it; in other words, the larger the group the smaller the likelihood of oligopolistic interaction that might help obtain the good.  Third, the larger the number of members in the group the greater the organizational costs, and thus the higher the hurdle that must be jumped before any of the collective good at all can be obtained. (Olson, 1965, p. 48)

The takeaway here is that larger groups, beyond a perceptibility threshold, simply cannot maintain provide optimal amounts of public goods without coercion.  Without the optimal amounts of public goods group cohesion breaks down, since groups are only formed around the receipt of these goods. We might conclude from this that large-scale groups that do not break down do so by the use of coercion; whether that coercion is by force or supra-incentive.  Thus the libertarian assumption of freedom is already questionable beyond the perceptibility threshold.

Olson summarizes his conclusions this way:

The smallest type of group–the group in which one or more members get such a large fraction of the total benefit that they find it worthwhile to see that the collective good is provided, even if they have to pay the entire cost–may get along without any group agreement or organization… In any group larger than this, on the other hand, no collective good can be obtained without some group agreement, coordination, or organization.  In the intermediate or oligopoly-sized group, where two or more members must act simultaneously before a collective good can be obtained, there must be at least tacit coordination or organization. Moreover, the larger a group is, the more agreement and organization it will need. (1965, p. 46)

By coordination and organization Olson means the use of political force to coerce people into behaviors that allow for the provision of the optimal amounts of public goods.  In effect then, Olson is saying that the larger the group, the more political force must be applied to achieve the same goods as the small group can achieve without any force at all.  Recalling that the benefit of the large group is the reduction of individual costs to achieve a good, a trade-off must be struck between where a public good is still beneficial despite increases in organizational costs to achieve it.  We should expect to see different scales of political activity, pursuing different public goods, and that is what we do see.

Problematically, Olson’s theory assumes a good deal of individualism; he presupposes individuals as atomic and fully-formed units prior to the inception of any and every group.  This is a state that has never existed and limits the applicability of some of Olson’s conclusions. However, the ability to remain or leave or otherwise alter the composition of some specific groups of which an individual member, would enable one to see his or herself as an atomic whole relative to the group.  In this sense, Olson’s theory does help us to understand the movements and actions of groups as they struggle to maintain themselves in a turbulent social environment. For our purposes, Olson provides us with a minimal guide to where coercion or supra-incentives become necessary in order to provide public goods or discharge our responsibility for justice.  As a group exceeds the limit where individual contributions are perceptible group cohesion breaks down, requiring the application of external action in order to retain unity while obtaining the optimal amount of any public good at grand scales.

It is too simple to argue that groups over a certain manageable size (e.g. a hundred members) should apply rules to bind individuals in order to obtain public goods.  We must also inquire about the particularities of the public benefits and their necessity. It might be a public good that everyone abstains from cigarettes in a society, it is another thing to demand that all do so.  We might think of Olson’s theory as providing the borderline where we should expect coercion or supra-incentives to become necessary, and optimal at some scale. Looked at this way, we should not have to spend effort on enforcing participation from small groups because they will largely monitor themselves and achieve the public goods in question, without any sort of external force.  It is only as a large, disorganized group that the need for such external compulsions arise in the first place. So we have our first criterion.

In questioning whether or not to limit individual freedom, we should examine the structure inside of which the actions in question take place.  To do this we cannot rely on courts or existing laws. Instead we must debate the action from all angles in political deliberation. The reason for this is that–viewed structurally–every action is connected to other people.  These sets of relations carry their own interests, so that it is possible–prima facie–to have conflicts between one’s social interests and one’s individual interests.  The problem is epistemological. One’s social interests are difficult to ascertain (because they rely on relationships to others including others relationships to even further removed others and so on) whereas one’s individual interests are often immediately perceptible.  As we saw perceptibility is key. It should be obvious that one’s social interests, if recognized are in fact one’s individual interests. Thus without the epistemological gap there could be no conflict between one’s social and one’s individual interests. Societies then have a vested interest in keeping the peace, and reducing the epistemological gap would greatly facilitate social understanding, mutual respect, and a comprehension of one’s shared responsibility.  

In Practice

To explore this issue in greater detail, let’s turn now to a couple of empirical examinations before trying to generalize our conclusion.  The first is an article by Sally Simpson and others which explores “the extent to which decisions by managers to violate environmental laws are affected by command-and-control or self-regulation prevention-and-control strategies” (2013, p. 234). In essence what is being measured here are the “intentions to act illegally” of decision-makers in corporate business organizations (Simpson, 2013, p. 250).  Similarly with the second article, Jacob Rose details his study of the decision making processes of those who primarily determine the social responsibility of corporate behavior: the corporate directors. Simpson et. al’s study is complementary with Rose’s, since both examine similar situations. The relevant difference for us is that Simpson looks primarily at strategy to curtail illicit corporate behavior while Rose focuses more on why individual directors are likely stray without regards to any strategy.  The findings together propose a picture of individual human interests inside and a part of a matrix of social interests, as we saw in Olson.

Sally Simpson et. al. contends that “scholars and policymakers know very little about “what works, what doesn’t, and what’s promising regarding corporate crime-control strategies” (2013, p. 234).  One reason for this is the general complexity of controlling the behavior of multiple agents by multiple agents. “Regulatory instruments and institutions are interconnected…” so that any talk of so-called strategies is purely conceptual to begin with.  However, the authors find they are useful heuristics for comparing “particular instruments” especially in light of the way context and interaction may affect their results (2013, p. 235). In statistically analyzing the results, the authors combined different relevant factors in six different models showing, for example, the changes of the effective deterrence of informal sanctions alone versus when combined with formal sanctions (Simpson, 2013, p. 258).     

The two basic “strategies” discussed in this paper are command-and-control and self-regulatory.  “In command-and-control strategies, legal authorities dictate the terms of compliance, relying on the threat of formal legal sanctions to achieve compliance with those terms” (2013, p. 236).  In simple terms, this approach involves outlawing certain behaviors and then policing corporate activity and punishing violations, in other words what we’ve been calling coercive actions. “Self-regulatory approaches (typically offered as a complementary strategy in conjunction with government-enforced regulation) presume that prosocial norms and values coupled with effective internal compliance systems (e.g., clear accountability, communication of expectations, effective monitoring, and appropriate reprimands when violations occur) will secure compliance” (2013, p. 238).  In this strategy, the hope is that companies will come to adopt certain norms proscribing the unwanted behaviors, this will lead to self-policing and internal punishment for violations. This sort of internal regulation is what saw was achievable for small groups in Olson, but not large ones. Additionally, the authors examine informal sanctions that are associated with both strategies, such as bad publicity.

Simpson et. al. draw several particular conclusions from their data.

For each unit increase in the respondent’s estimate that the behavior will advance the manager’s career, the odds that the respondent would be willing to violate environmental regulations increase by almost 26%.  For every unit increase in perceived thrills, the odds of being willing to offend increased by about 53%… For every unit increase in perceived business-related informal costs, the odds of being willing to offend decrease by 62%. (2013, p. 261)

None of the self-regulation variables significantly affect offending intentions, nor do they mitigate the effect of the individual- and firm-level risk factors…  A one-unit increase in the formal sanctions costs scale decreases the probability that the respondent is willing to violate environmental regulations by about 54%. (2013, p. 262).

More generally, the authors conclude that “our results suggest that both formal legal and informal… sanction threats can inhibit environmental noncompliance” (2013, 263).  Additionally, they stress that “none of the interventions appears to substantially lessen the powerful influence of career benefits on offending intentions” (2013, p. 263). The authors continue,

This implies that when a person perceives a large career benefit, she is less likely to consider informal sanctions before deciding to offend. The perceived benefit of illegal behavior for this group appears to trump any anticipated loss of respect and future harm to job prospects associated with the informal discovery that promotes crime inhibition for others in the sample” (2013, p. 264).

This conclusion suggests that if corporate decision-makers have an individual incentive in violating the law then they are significantly more likely to do so and that neither formal or informal social sanctions seems to affect that decision.     

The findings themselves merely “reinforce what sociologists have emphasized since Durkheim—social norms influence how we behave” (Simpson et. al., 2013, p. 266).  The authors conclude, “[w]hen norms fail, the government must be ready and willing to intervene” (Simpson, 2013, p. 267). More importantly, the findings imply that individual incentives play a marked role in neglecting social responsibility.  In light of Young’s and Olson’s contributions, this evidence seems to suggest that individuals will excuse themselves from social responsibility despite easy recognition and full knowledge of what they are doing and even in the face of public shaming, if and only if that there is an individual reward for doing so.  

Jacob Rose suggests a structural reason why this is the case.  His study of corporate director’s decision making processes finds that directors sometimes sacrifice personal ethics and social responsibility in favor of legally defensible actions.  They do this, Rose claims, in full knowledge of the implications of their decisions. They act in such an unethical and socially irresponsible manner because they believe the law, requires them to maximize shareholder value, demands they take such actions, (Rose, 2007, p. 319).  Rose suggests that, “additional ethics education will have little influence on the decisions of many business leaders because their decisions are driven by corporate law, rather than personal ethics” (2007, p. 319). To some extent then, Rose’s findings confirm Simpson et. al.’s findings that individual incentives can influence moral decisions and that it is the normative field that is the greatest influence.  But what Rose draws out is that the normative field also influences the motives behind the individual incentives.

The specific findings of Rose’s study are succinctly summarized by the author,

The results of the experiment indicate that: (1) directors that have duties to shareholders consistently give up corporate social responsibility for increased shareholder value, even when their personal morals and ethical standards suggest alternative courses of action; (2) directors making decisions from the perspective of a business owner, rather than a director, do not consistently trade ethical standards or social responsibility for wealth maximization; (3) directors recognize the ethical implications of decisions that affect social welfare; and (4) directors favor shareholder value over personal ethical beliefs and social good because they believe that current corporate law requires them to pursue legal courses of action that maximize shareholder value. Taken together, the findings indicate that our corporate leaders make decisions that emphasize legal defensibility, rather than ethics or social responsibility. The results also suggest that additional ethics education may have little influence on the decisions of most business leaders because their decisions are driven by existing law, rather than personal ethics. (Rose, 2007, p. 319-320)

The formal law is rightly seen by these directors as overpowering normative ethical concerns.  In other words, the coercive spirit of the law is a norm itself or a supra-normative norm. We are prepared to follow the law even as it leads us into unethical and unjust action. Specifically then, when the law dictates the maximization of profit for shareholders in all situations that it does not otherwise forbid, the directors feel they have no choice but to follow the law, even when it drives them to act unethically and socially irresponsibly.  This is most obviously demonstrated by Rose’s second finding; where the decision-maker was also the owner, they were much less likely to violate their own ethics and act irresponsibly. In this latter case, the law leaves them free to choose. The major implication here is that the social structure of capitalism that pushes businesses to maximize shareholder value drives the decisions of directors that lead to socially undesirable results. We might be inclined to forgive the directors for this clear double bind.  However, this commonly held belief of the directors is actually only a reified norm; the law does not in fact require them to maximize shareholder value (Stout, 2015). Following Young, we would see their actions as the excuse of reifying the demand to maximize the shareholder value. They are simply justifying their actions by absolving their own responsibility. That said, the common belief is likely reflecting a very real norm in the economic world: that is if directors do not maximize shareholder value, they will be replaced with someone who will.  This fierce competition for the job requires then a certain amount of ruthlessness in anyone ambitious to attain it. In other words, while the law does not require directors to maximize shareholder value, the structure of capitalism most certainly does and that confronts these directors with all the coercive force of the law. Interestingly then, it is the supra-normative belief that the law is rightfully coercive that does all the work of keeping behavior inline and so providing public goods or preserving structural injustices, without regards to written law at all.

One possible objection to my connection between Rose and Simpson et. al. is that what they are comparing is not precisely the same.  Simpson et. al. is analyzing the tendency to knowingly violate a real law, while Rose is analyzing the tendency to choose a belief in the law over personal ethics.  In the specifics these are not the same things at all. However, we are concerned primarily with the fact that individuals making larger social decisions do so exclusively in light of their individual perceptions.  These perceptions shape both their individual and social interests. Viewed this way, Rose and Simpson et. al. both find that decision-makers act in their own best interests first and their social interests second, if they may.  The conclusion we wish to draw from Rose and Simpson et. al. is simply that individuals view themselves subjectively, and so have a tendency to see themselves first.

From this we can draw the conclusion that individuals can be expected to do what is socially right if and only if what is right is aligned with their individual interests.  They may be compelled to do what is socially right by bringing the individual’s interest into alignment with social interests. This can only be done through some kind of threat of coercion, either a punishment which reduces the individual’s interests in committing the offending behavior (if they’re caught) or through a reward that entices them to obey.  

Conclusion

While we do not find fully formed atomistic agents, we do find socially-constructed agents doomed to view themselves as atomistic agents.  The normative structures these agents are fully in control of, nevertheless confront those same agents as external forces beyond their control.  The coercive power of an organization is one such force. Organization is thus required to harness the control of these structures and make them either more beneficial or less harmful.  This organization necessarily limits individual freedoms, but does so to provide optimal amounts of public goods, when scaled appropriately. Logically then, the large structures, such as nations, states, cities, corporations, and collectives, must threaten some coercive means upon its membership whenever it is confronted by a structural problem.   The criteria for whether or not to apply coercive means is based partially on the scale of the group in question, specifically concerning the perceptibility of individual contributions, and partially whether or not the act is the result of structurally patterned behavior which incentivize individual norms to supercede collective ones.

This makes Young’s theory something of a communitarian theory.  In order to require that we discharge our social responsibilities, those responsibilities have to be superior to our individual interests in all cases.  Libertarianism is only consistent with the entirely isolated individual. Inside a society, communitarianism is the background assumption. Thus we might hold each other accountable for not discharging our social responsibilities.      

References

Olson, M. (1965). The Logic of Collective Action: Public Goods and the  Theory of Groups. Cambridge, MA: Harvard University Press.

Rose. J. M. (2006). Corporate directors and social responsibility: ethics versus shareholder
value. Journal of Business Ethics, 73, 319-331.

Simpson, S. S., Gibbs, C., Rorie, M., Slocum, L. A., Cohen, M. A., & Vandenbergh, M. (2013).
An empirical assessment of corporate environmental crime-control strategies. The Journal of Criminal Law & Criminology, 103(1), 231-278.

Stout, L. (2015, April 16). Corporations Don’t Have to Maximize Profits. The New York Times. Retrieved from
https://www.nytimes.com/roomfordebate/2015/04/16/what-are-corporations-obligations-to-shareholders/corporations-dont-have-to-maximize-profits

Young, I. M. (2011).  Responsibility for Justice. New York, NY: Oxford University Press.

 

Socialism, What’s the Difference?

Noam Chomsky, Bernie Sanders, and Vladimir Lenin walk into a bar. The bartender says, “What’ll it be?” Lenin immediately climbs up on a stool and loudly proclaims, “We, the intellectual vanguard of the people, shall seize the means of production in the name of the people!” Bernie Sanders gently replies, “No, my dear Lenin. It is the freely elected government of the people who must seize them.” To which, Noam Chomsky quickly retorts, “Not at all, it’s the individual people themselves, who must seize them.” The bartender picks up the phone, “Officer, I got a trio of thieves at my place. Come arrest ’em.”

In the eyes of the doctrinaire capitalist, all sorts of socialism are the same, they are all theft. Internally, there is a good deal of division. The media has what I’ll call the short-division understanding of political economy. Remember learning short-division? Where five divided by four was one, remainder one. It’s like that, but with economics. This elementary-school version of political economy has capitalism on one end of a short spectrum and socialism/communism at the other. Essentially, it boils decades of diverse economic and political theory into capitalism and others. Obliterated are the intricate nuance and subtle variety that separates even pro-capitalist thought into over a dozen distinct theories. There are a few, ill-defined buzzwords that get carelessly banded around the information superhighway like drunks on the freeway. Terms like “neoliberal”, “neoclassical”, and “democratic socialism” take on a loose association with a political side like “neoclassical” = right-wing and “democratic socialism” = left-wing, or falls helplessly in between them confusing most people who hear them like “neoliberal” and “libertarian” and “libtard”. Are those that left-wing or right or good or bad? How should I feel about them? The point here is that the names don’t matter, but the theoretical positions do. So I want to take the next five minutes of your life and give you the gift of understanding the difference between “libertarian socialism”, “democratic socialism”, and Soviet-style communism.

Soviet Russia is indisputably the icon of socialism the world over. It’s not the original socialist theory and you’d probably be surprised to learn that it is a dubious successor to Marx’s theory. The Bolsheviks claimed descendancy from Marx and Engels, but Leninism grossly over-emphasizes economics, twisting Marxism into something ideologically self-defeating in order to make it negotiable under the labyrinthine socio-political climate of Czarist Russia. Leninism agrees with Marx that the bourgeoisie illicitly own the means of production and that it would only be through revolution that they can be used for the betterment of all rather than for the eternal enrichment of a few. And that’s where the important similarities stop because Lenin had to invent a practical scheme to bring about what Marx said would occur naturally. There is little dispute that the first Russian revolution, the February revolution was a spontaneous occurrence, revolting from tyrannical Czarist and oppressive aristocratic rule. The October revolution was not so spontaneous, in fact, it wasn’t a revolution at all; it was a coup d’etat. The freely elected government of Russia was seized by the Bolshevik party and democratic rule was supplanted for autocratic rule of the communist party. This, according to Lenin, was necessary because the people, having labored so long under the false-consciousness of bourgeoisie propaganda–what today would be called “fake-news”–could not be trusted to follow their real interests. His evidence for this was the fact that his party failed to win a majority in the general election. Lenin determined that socialism would need to be guided from above, structured by a cabal of intellectual elites who were not deceived by false consciousness. This vanguard would centrally-plan and command the economy for the people without any input from those people.

It seems obvious, now, when I put it this way, that Lenin traded economic freedom for political enslavement. He would enslave the people to free the people and then, maybe, someday, when they proved themselves ready, return them their freedom. It didn’t work out that way, obviously. We needn’t trouble ourselves with why not, because the next alternative cannot work the same way at all on principle. Democratic socialism is an alternative to the Soviet-style communism in that it believes it is the people who ought to decide on what uses the means of production are put to. In this version, the state still controls the means of production, but the state is necessarily a democratically controlled one. Myriad questions ensue, such as at what level will they be determined: nationally, communally, etc.? Or will the particulars be determined the people directly or through representatives or the appointees of representatives? Or how will the workers be paid, by the state on a fixed scale, by production rates, or by contract negotiation? How will prices be set or will products be doled out on some scheme? But these questions don’t really affect us here. The point is that democratic socialism hopes to overcome the difficulties of Soviet-style communism by bringing in the voice of the people, that is allowing them to weigh in on how socially controlled economic mechanisms are run.

Is such a system possible? Of course, it is. Take central planning, one could “centrally plan” an economy democratically by taking orders from every individual and making products to correspond with the orders. Technically-speaking that’s not a market, it’s a centrally planned economy with a single producer. Would it be efficient? Hmmm, that depends on what you mean by “efficient”. Would we overproduce, no, it would never produce anything for which there was not already an order (at least not in theory)? But it would be terribly inefficient having to wait for your order to be made and difficult to anticipate your needs well in advance. Plus, fairly limiting how much each consumer could order at a time. Still, it could all be worked out. The real question is, “is it more desirable?” I’m not so sure. Such a market would be like letting Amazon take over everything and then nationalizing Amazon. Monopolies are unquestionably efficient but they are also condensers of power. By reducing options to one, they eliminate choice to everyone except the one who decides on what to produce. Maybe we could all decide, but how? It’s unfeasible to think we’re all going to vote every time there is a decision at “National Amazon” and even if we did, how should we count the votes? Majority rules hardly seems fair. The logistical encumbrances quickly swamp the advantages the democratic socialist system provides.

A point should be made here about the so-called Nordic socialist countries. To be clear, they’re not really socialist at all. These countries share a strong devotion to welfare-state policies. We might add a fourth type of socialism in here, “welfare-state socialism” but this would be more confusing than illuminating. Capitalism, as I have argued elsewhere, should be defined by the legal determination that the owners of an enterprise or an estate be the owners of the capital in that enterprise or estate. These countries economic systems fit this description and therefore are best classified as capitalist. They simply use these myriad social programs to buttress capitalism and hedge in its worst tendencies the way the United States used to under Keynesian economic policies from the nineteen forties to the nineteen seventies. The best term for these countries then would be “welfare-state capitalist” and not socialist at all. It has been a rhetorical deception of laissez-faire theorists to classify such systems as “socialist”.  

Returning to our main discourse, we’re not stuck choosing between democratic socialism and unfettered capitalism; we might choose libertarian socialism. This oxymoronic sounding theory is unlike the others in that it disagrees that market mechanisms and private property in the hands of the bourgeoisie are the root cause of the problems with capitalism. Libertarian socialism holds that the problem of capitalism has to do with the organization of private property and not the existence of it. In this case, we can imagine a principled order that allows for private property, market exchanges, and most of the other staples of capitalism, but removes the exploitative rules regarding rent, interest, and capitalist profit as contradictory with private property ownership itself. With these exploitative elements eliminated, many attributes of capitalism change form, e.g. the overwhelming and incessant need to accumulate more wealth. This desire is capped by the concept that you cannot make money from money without rent, interest, and profit, so there is a finite amount of labor you’re willing to do beyond what you need to meet your needs. The desire to come to dominate all other businesses, the desire for monopoly, the desire for ruthless business practices, all have their teeth pulled. Included also is a guaranteed income which is required to prevent anyone in a society from forcing anyone else into a life of servitude in order to attain one of unearned leisure; in order to remove the one, the other must be dispensed with as well.

Libertarian socialism differs from other forms of socialism in that it emphasizes the freedom of individuals to make individual choices. It differs from libertarianism by arguing that societies have rights and privileges that individuals do not. The basis of this argument rests on the needs of groups to foster a sense of unity, without which there can only be lawlessness. The preservation of unity is a responsibility of societies which cannot be reduced to the individual members who make them up. This disagrees with libertarianism which assumes that all rights and responsibilities of groups can and do reduce to individual rights and responsibilities. There is a thing called society from which we are each individuated. Another way to imagine it is that the rules cannot be set with any particular individual or association in mind and be just, in the same way, that a baseball league cannot create rules favoring any particular club, either explicitly or implicitly without those rules being unfair. Libertarianism, which is a close cousin to anarchism, asserts that such a league would be unnecessary except as guarantor of the rules the clubs themselves agreed to. There is the possibility of fairness here, as long as we can assume that each club was equally well off when the bargain was struck, which is a pretty remote possibility. Libertarianism is simply unlikely to turn out to be fair.

Libertarian socialism offers us our greatest chance at a sustainable, just, and fair economic system. It is the most likely to produce the massive economic requirements of our modern large-scale societies and do so in a manner that is sustainable and harmonious with our natural environment and is at the same time compatible with human dignity and our political sense of fair play or justice. Libertarian socialism is the most feasible economic system, requires the least amount of change from capitalism, and could be produced without a bloody revolution. It is quite simply our last, best hope for a better world.

Socialism & Communism, What’s the Difference?

In lay terms, Socialism and Communism are virtually interchangeable. A few people sometimes reserve communism as a reference to Soviet, Chinese, or Cuban-style economic policy, characteristically defined by a top-down power-structure, central economic planning, and a tiny cabal of party elites that plot the Revolution from a smoky, wood-paneled, underground conference room. Socialism, for these people, is whatever the Scandinavians are doing. In this post, I’d like to untie these terms from each other and–perhaps necessarily–from capitalism.

Academics do this by looking at the history of the socialist theory. They trace the course of theory as it develops nearly concurrent to capitalist economic theory in the last days of feudalism. This is a thorough way of distinguishing these broad and esoteric words, although it is a rather useless way since it is both objective and neutral and doesn’t position us–the would-be truth-seekers–in any place from which we might moralize and judge the competing theories. If you would like a thorough and unbiased history of the development of socialism and communism, I’d recommend Socialism: A Very Short Introduction by Michael Newman. Otherwise, you have a few years of study ahead of you before you can begin to untangle the mess that is political economic theory. I elect to skip all that and instead base these fundamental definitions of respective theories by identifying their essence.

Now, I probably lost the post-modernists right there, but I maintain that essence can be distilled or more accurately implanted into concepts–even grand ones–through the same method we use for everything else: reasoning. I will simply argue for an essential quality of capitalism against socialism and communism against socialism. In this case, we’ll leave socialism more or less alone, letting it be defined negatively by the essences of the theories that surround it.

To start us off then, I have argued elsewhere that the essential quality of capitalism is the set of private property rights that give the nominal owners of property claim to the products of the same. This is a fancy way of saying if you own a hammer, a nail, and two pieces of wood, it doesn’t matter who drives the nail to fix the wood together, you still own the final product. This is as true for landlords as it is for business owners. It doesn’t matter if all the money to pay for a mortgage and the maintenance of a real estate property come from the renters who live there, the landlord is still the owner. It’s not private property per se that is the essential quality of capitalism, or markets, or freedom, or anything else. It is only this legal preference regarding property that is “owned” by one person or persons while “used” by another person or persons. Essentially capitalism is about renting property. The property owner rents the item to another to use for money, just as it is done in a sale, except they retain the ownership of the item being sold. The landlord rents the house to the tenant; the capitalist rents the means of production to the proletariat; the investor rents the use of money to the entrepreneur; the lender rents the use of money to the lendee; etc., this is essential capitalism.

Against capitalism, we can lay both communism and socialism. Both reject the essential part–renting–of capitalism. However, communism goes much, much further than socialism. Communism too has an essential element and that is the abolition of private property itself. Essentially communism is an economic system founded on common property. Common property is that which everyone–or perhaps more accurately, no one–owns. Common property is confusing precisely because it is common. The main problem humans have had to deal with in material relations is the problem of common property. The world is given to humankind in common, it did not come all neatly divided up and no one has something more than a mere nominal claim to any private ownership. So, it would be easy to conclude that this natural state is the best, and communism does just that.

There is only one problem with communism: we consume individually. I can’t both eat an apple and continue to share it with everyone else. At some point the apple becomes indistinguishable from my body, it is me, and if I am to have autonomy at all over my life, the apple must be said to be mine at some point. Private property then seems to be a material fact of nature, and communism an impossibility. But that is probably going too far. An apple is not like an idea. We can share an idea commonly without making it private, that is to say, I can consume an idea entirely without the need to exclude the rest of humanity from its enjoyment, everyone else can consume it as well.

Communism then is essentially an attempt to balance private needs against social provision, and while it is possible, the same way spinning a billion plates on sticks is possible, it is impractical. I’m not saying communism is undesirable, in fact, should the technology eventually develop in which each individual is the sole producer of each and all of their wants and desires, the only common production being for common goods, such as ideas, then communism might very well prove to be the best economic system since this situation would technologically eliminate the need for trade. But we’re not there yet. We need trade and not planning. I don’t know about you, but I can barely plan for my own wants and needs, which change and evolve constantly. If I can barely do it for myself, I don’t have a snowball’s chance in hell of doing it for you, and even less for doing for thousands or millions. The best way to spin a billion plates on sticks at the same time is to have billions of individuals each spin their own.

Now my communist comrades are no doubt objecting that I have conflated private property with personal property. The difference they say is lying in what use the property is put to. There is a grave difference between the “means of production” and your toothbrush as the saying goes. I completely disagree. All property is usable. All property must be consumed individually. (Even fifty men pulling a rope, the space for each hand cannot be shared.) All property is labor-saving. All property is of this one kind. What my comrades mean to say, is that the essential quality of capitalism I mentioned earlier is not socially necessary or desirable. What they really mean is that capitalism is exploitation, and they are right. I have argued this several times elsewhere and so I won’t go into it here. But the point is that communism must ban the private ownership of the toothbrush as well as the means of production. In a world without trade, this is not really a problem, because no one else would need your toothbrush for other reasons. But in a world of trade, someone else is coveting your toothbrush and so common ownership of it would be a recipe for disaster.

Against these two we may now set socialism, which allows for private ownership but does not allow for rent. Albeit, this is a libertarian socialist conception of socialism. I will deal with intestine arguments about socialism elsewhere.

Liberating the Invisible-Hand from Libertarianism

Libertarianism often conceives of the “invisible-hand” explanation as a form of get-out-of-jail-free card. It is not the only doctrine to do so, others include neoliberalism and some strains of conservatism. In this essay, I will lay out why libertarians are inclined to believe in the absolving ability of the invisible-hand and why that may be wrong. To begin with, I will examine Robert Nozick’s concept of “invisible-hand explanations”. From there I speculate about how “invisible-hand explanations” are used by libertarians to exonerate individuals from claims of extortion and exploitation. Finally, I will show why such extortion does, in fact, take place despite the invisible-hand mechanism at work. In this essay, I will mean “extortion” to be the unacceptable situation of profiting from the unproductive coercing or defrauding of another to loss, and by “intention”, I mean deciding with reasonable knowledge of the expected outcome of one’s actions.

Nozick wrote, “[a]n invisiblehand explanation explains what looks to be the product of someone’s intentional design, as not brought about by intentional design.” The emphasis here is on the unintentional quality of a complex process. No one intends the results of the process that brings about a good or bad result. While there is a concerted effort, the effort is not coordinated because it is unknown. Each actor is acting in the dark, irrespectively of all the other actors, and consequently cannot know what the ultimate result of their efforts will be. The quintessential example is the self-interest of individual proprietors to feed, cloth, and shelter society. After all, every morning Philadelphia gets food from all over the country to feed its citizens and no one has to coordinate the effort. 

Nozick’s concern with the invisible-hand is for protecting the rights of the beneficiaries of such unintentional processes from intentional efforts at redistribution by others who feel the need to correct the results of such unintentional processes because they feel the results to be unfair, unjust, or just plain bad. But Nozick and other’s of a similar mind, defend these results as fair and just, even if they are not “good”. They claim, it is not the fault of these beneficiaries that they are beneficiaries, since the entire process that made them such developed unintentionally. I will not belabor the reader with an extended discussion of Nozick’s and other’s arguments for such an explanation. Instead, I will simply assert that this argument is used most often to defend against redistributive efforts by the left by claiming the lack of intentionality legitimates the uneven distribution of wealth on principle. Negative appearing outcomes say where one person is made insanely wealthy while tens of thousands of others work incessantly for near-poverty wages only seems unfair because of a vestigial sense of sentimentality, left-over from our primitive ancestors and an unhealthy obsession on human affairs being justified by logical reason. The question we will concern ourselves with is: when is an individual responsible for extortion? Libertarians do not deny that extortion exists. What Nozick et al. do argue is that when the process that creates what appears to be extortion is the result of an “invisible-hand explanation”, i.e. it is unintentional, no individual can be held responsible for extorting anyone. If no one is responsible for the extortion, it is not, in fact, extortion, our feelings of unfairness are misguided.

To really understand what Nozick et al. are up to, let us examine some concrete examples. Imagine you are carrying a briefcase with a quarter of a million dollars in it. You hail a taxi. Stepping in, the driver, with full knowledge of the money you carry, tells you to gift it to them or they will shoot you; they then credibly produce a pistol and aim it at you. You are of course free to choose. You can refuse to hand over the briefcase and take the bullet. Likewise, you can trade the money for your personal well being. Either way, we might say that since you were free to choose, no “robbery” took place. However, I think most of us would agree that your choice in the matter was coerced. 

The trouble with coercion is that it’s not always condemnable according to these theorists. We can easily imagine a scenario where you are nearly starving and a man offers you a job where you would work for an income that is equivalent to five percent of the value of whatever you create by your labor. You are of course free to starve, but if you take the job most libertarians would say that you chose this freely and were not really coerced. So, libertarians and neoliberals have left the burden of explaining what the difference is between the first and second cases.  It is here, where they must maintain that the former case is an example of extortion while the latter is not, that the “invisible-hand explanation” is deployed. 

The difference, they claim, is that the first case is intentional and the second case is not. The taxi driver who pulled the gun on you, set up the situation in order to get the money from you; while the boss who offers you five-percent is merely leveraging a natural situation that they neither created nor intended. While it is somewhat arbitrary whether or not and to what extent the taxi driver and the boss are creators of their situations, the point is nevertheless valid. The situation the boss exploited is not one of his own design, but that of the taxi driver is. Left here it would be reasonable to conclude that the first case is extortion and the second case is not.

But let us not leave it there, instead, let us further examine this by asking: what is it about intention that makes the first case extortion? We might speculate that Nozick et al. believe that intention is the product of specific knowledge and that without knowledge there can be no intent. This would make sense to us intuitively. Returning to the taxi, imagine this time that you merely left your money-laden briefcase in the backseat of the taxi after paying the fare. The driver takes off with it and it’s not until hours later you realize it has gone missing. Let’s further imagine that the driver about that same time discovers the money in their vehicle and claims it. Has the driver stolen or extorted your money from you? We are inclined to say no. This is simply a case of lost and found: you lost money and the driver found it. The driver lacked knowledge of the money about to come into their possession through some unintended process. This lack of knowledge equals a lack of intention. The complete lack of intention both on your part and that of the driver, in this case, legitimates the money really belonging to the driver after it was found. So, Nozick et al. would confidently conclude that the case with the boss is more like this case where the gun was pulled because of intentionality. 

But, it has not really been established how intention is made manifest. Let me assert that if we cannot have intention without knowledge, then we cannot have knowledge without intention or in philosopher-speak: knowledge of the consequences is materially equivalent to intentionality. Let us return again to the taxi and say that this third time, you have again forgotten your briefcase, but as you are exiting the vehicle, the taxi driver turns around and notices that the briefcase you brought with you is still in the backseat and not in your hand. Let’s also say that he knows it’s full of money. To be precise, the taxi driver, in this case, didn’t intend for you to leave your money and neither did you so again this case is unintended; however, the driver now has come into possession of the full knowledge that you have forgotten your money and that they stand to benefit from your loss. In this brief moment, a decision presents itself that did not occur when you forgot your money without the driver immediately realizing it. The driver, with full knowledge of the situation, has a choice. If they can choose, the outcome of the situation must–by definition–be an intended outcome. 

The taxi driver then–if choosing not to speak-up–is acting intentionally, hoping to profit from another’s unintended situation. Even though the driver did nothing to bring that situation about it is still intentional in its last act. This last act is sufficient to condemn it as extortion because it is an intentional design to benefit from another’s loss. The driver cannot be saved by our switching criteria from intention to action either. Not taking an action is to act intentionally when the lack of action is the result of a deliberate choice. Choosing to do nothing is an intentional action. Things are different when one acts or does not act without knowledge. Failing to act because of ignorance or confusion is not an intentional act. However, in the full light of knowledge that one will gain by not acting, to not act is intentional, and it is intention which, according to our libertarian theories, condemns an action as extortion.

Let us return now to the boss offering the starving person a five-percent wage. If the boss recognizes that poverty would allow him to depress the wages of the employee then the boss is extorting money from the employee even though the boss did not create the situation of their poverty. The creation of poverty is not the issue, the intention is. The boss is not extorting the employee by offering a lower wage if and only if the boss has no knowledge of the potential employee’s poverty or how that poverty would affect their choice to work for lower wages. By simply knowing that a starving person will accept whatever they can get and that this person is starving, one is in full knowledge of the situation. The choice to use it for leverage must, therefore, be seen as extortion. Contra Nozick and the rest, the boss’s case is more like pointing a gun at a person and demanding their money than it is like them losing their money in your car. The boss knew what it is was they were doing when they suggested a lower wage or they wouldn’t have known to suggest a lower wage at all. 

This illuminates what should have been obvious to Adam Smith and Robert Nozick alike: once the action of the invisible-hand is revealed, it is no longer unintentional, no longer innocent. The problem for libertarians is that the “invisible” part of the “invisible-hand explanation” is precisely what conveys the innocence, namely ignorance; but the “explanation” is the imparting of knowledge, and so promptly does away with the innocence. The unintentional situation is unintentional precisely because no one knows what exactly is happening or what the outcome will be. But the process of explaining that some good or bad outcome is the result of an “invisible-hand mechanism” is to reveal the hand at work! That is to say, explaining anything is to let people know what is happening, how their actions add-up to arrive at a specific outcome. To say that New York is fed by the self-interest of the butcher, the brewer, and the baker is to show us exactly how each contributes to the whole, and subsequently to necessitate our choice of intervening in that mechanism’s workings or to leave it alone. Either way, the leaf has fallen away and we stand nude in the full sun of knowledge.

Adam Smith himself–by the act of explaining the action of the invisible-hand in the market–made it possible to choose whether or not to hazard making corrections or by inaction leaves the system to its own devices and endure whatever consequences may come. So, the fact is that since Adam Smith’s time, the evils of economic activity brought about by the revealed workings of any invisible-hand at work are the result of an intentional choice on the part of those in power not to mitigate them. It may be that a choice to meddle will turn out worse than not meddling, but we cannot hide behind the “invisible-hand explanation” anymore. It is not invisible at all, it is a human hand, our hand, the hand of those in power and it moves as they will.

The Genius & Folly of Karl Marx

In this paper, I invite my reader to assume a particular view of Karl Marx and his theories.  In this view, we see Marx as a physician, treating an ailing society.  Through our examination of his work, we will conclude that his diagnosis is keen; in fact keener than any before or since.  However, his actual understanding of the disease is very limited, and his methods of treatment, where they exist, sadly misguided.  I don’t want to condemn him for efforts, but nevertheless, his theoretical faults are real and dire.

We will proceed by summarizing Marx’s general position on the exploitation of labor by capital and his explanation of it by means of his positive economic theory.  Our analysis will then focus precisely on the first chapter of the first volume of Capital, in which Marx attempts to render utility or use-value as a purely qualitative function of economic exchange.  I hope to show that Marx’s positive economic analysis is doomed because utility is not merely qualitative but quantifiable; in fact, it is quantifiable in units of labor-time.  With a reintroduction of use-value into the determination of an exchange-value, private property and markets for exchange become a necessary economic reality.  Finally, the paper will conclude that despite this error in Marx’s thinking, that capitalism is, in fact, exploitative of labor.   Thus, I will find that Marx’s conclusions ultimately prove correct, but not at all for the reasons he believed.


Part One

It is not clear, to me anyway, whether Marx’s theory of exploitation came as a result of his positive economic theorizing or whether his positive economic theory was devised to explain his theory of exploitation.  What is clear is that Marx ultimately links the two in such a way that future scholars, both opponents and followers of Marx, have acted as though the theory of exploitation is contingent on Marx’s positive economics.  The need to sever the causal relationship here is paramount.  To begin then I’d like to describe both of these theories independently, that is without the implicit assumption that they are causally linked.

Marx’s theory of exploitation involves only the question of who has the right to the value of the fruit of human effort?  For Marx, the answer is the same as it was for John Locke, the laborers and the laborers alone have a right to the value of the fruit of their labor.  For Locke, this meant the ownership of the concrete object itself, but for Marx, it was abstracted to value the object represents.  Marx saw that value, in this abstract form could be siphoned off through legal economic practices and in this Marx recognized exploitation.  If the value of the manufactured object was solely produced by the laborer, then the laborer who was not being paid the full measure of value was being cheated.

How this value was created and how it was extracted needed to be explained and, if possible, proved.  This was the work of Marx’s positive economic theory.  His theory center’s around the labor theory of value.  Marx’s labor theory of value–like that of Ricardo’s–finds its roots in Locke, who wrote,

For ‘tis not [merely] the Plough-man’s Pains, the Reaper’s and Thresher’s Toil, and the Bakers Sweat, is to be counted into the Bread we eat; the Labour of those who broke the Oxen, who digged and wrought the Iron and Stones, who felled and framed the Timber imployed [sic] about the Plough, Mill, Oven, or any other Utensils, which are vast Number, requisite to this Corn, from its being seed to be sown to its being made Bread, must all be charged on the account of Labour, and received as an effect of that: Nature and the Earth furnished only the almost worthless Materials, as in themselves.

This idea of value as an account of labor, a tally of each hour spent in every pursuit minimally necessary for the creation of each useful thing produced by human industry is taken virtually unquestioned from Locke through to Marx.  For simplicity’s sake, I’ll call this labor accounted for in the creation of a thing or commodity the labor of acquisition, which I define as labor necessary to bring about a commodity and deliver it into the hands of those who would use it.  For Marx, the labor of acquisition is a sufficient cause for and the sole determinant of the full value of every commodity.  Marx is alone in this.  Locke, Ricardo, and other economists all believe that there is more to the determination of value than the labor of acquisition.  

The advantage of Marx’s theory is that value can be objectively and empirically calculated, prior to markets of distribution.  It is obvious that, if the value of any given thing was exactly equal to the minimum number of human labor hours necessary to bring about its possession then we can objectively measure the value of every particular thing by simply counting up all the hours.  But there has always been a disadvantage associated with Marx’s cut and dry labor theory and that is use-value.

Political economists have–since Adam Smith at least–separated the value associated with the utility of an object, e.g. driving nails for a hammer or digging for a shovel, from the value it is said to exchange for with another object.  The former being the object’s use-value and the latter its exchange-value.  Smith and others suspected a relationship must exist between the two; however, by the time Marx was writing no one had yet to successfully formulate a theory showing how the two values related.  If use-value is a factor in determining exchange-value, as was suspected, then the labor of acquisition is not sufficient to determine value.  In other words, the central component of Marx’s positive economic theory, i.e. his labor theory of value, would be necessarily false.  Where Marx to simply include use-values, he would have to reintroduce markets and establish private property as necessary economic conditions.  Rather than do that, Marx opted to find a way to show that use-values were not a factor in value determinations.  


Part Two

Marx begins the first volume of Capital with a discussion of the commodity-form–that is a useful thing made for the purpose of exchanging it–which he considered the basic unit of capitalism.  At the very beginning of his investigation into the political economy of capitalism, Marx writes that the usefulness or use-value of a commodity is “independent of the amount of labour required to appropriate its useful qualities,” and a few sentences later, “use-values are only realized in use or in consumption.”  Now Marx realized, commodities, in order to exchange for each other at all, must have some common property, but Marx meant to prove that the value we associate with use, plays no part in determinations of appropriation of a thing (which recall is measured in labor), aside from the fact that it must have some use to even be considered worthy of appropriation.  Thus, utility or use is not the common property of all commodities, according to him.  

Marx then draws a bright line between subjective use-values and labor, dismissing the former as the valueless “material bearers” of exchange-value.  Like Locke in the quotation above, Marx has determined the material part to be worthless except that it is necessary as a value-bearer.  This role as value-bearer is unquantifiable, and so plays no part in the tallying of exchange-value.  Marx holds that use-values “constitute the material content of wealth, whatever its social form may be”.  By this he means that use-value is merely qualitative and has no value measurable in units, be they labor or anything else; it is–in Marx’s estimation–a function of the socially-determined, material form of the object.  He expresses it again this way, “As use-values, commodities differ above all in quality, while as exchange-values they can only differ in quantity, and therefore do not contain an atom of use-value”.  He means that when we are evaluating commodities for the purpose of trade, their usefulness is not a factor in determining their value to us.  Hence, Marx suggests use-values can and should be dismissed:

If then we disregard the use-value of commodities, only one property remains, that of being products of labour.  But even the product of labour has already been transformed in our hands.  If we make abstraction from its use-value, we abstract also from the material constituents and forms which make it a use-value.  It is no longer a table, a house, a piece of yarn or any other useful thing.  All its sensuous characteristics are extinguished.  Nor is it any longer the product of the labour of the joiner, the mason or the spinner, or of any other particular kind of productive labour.  With the disappearance of the useful character of the products of labour, the useful character of the kinds of labour embodied in them also disappears; this in turn entails the disappearance of the different concrete forms of labour.  They can no longer be distinguished, but are all together reduced to the same kind of labour, human labour in the abstract.

No one–as far as I know–questions Marx on this point.  Marx’s brilliance in finding a way to reduce value to the labor of acquisition, which is objectively and empirically accountable (at least in theory) is undermined by his inadvertently eliminating labor as a concept distinct from mere physical activity from his labor theory of value.  

To “disregard the use-value of commodities” is to assume that any random and purposeless physical action is labor.  Labor, however, is purposeful activity aimed at the creation of some particular object for which a use is intended.  Marx has abstracted use to being a property of a material thing, and in so doing he has missed use’s necessary relationship to laboring itself.  To be able to disregard use, Marx must claim that material things can have a use-value, without necessarily having a particular end (viz. use) associated with them by any human being.  That is to say that commodities may possess an abstract use, which requires no intention of any usage at all.  But such a thing is self-contradictory because it asserts that uses exist which do not require a user.  In other words, Marx is assuming here that although no human being has a use for a commodity, it may nevertheless possess an abstract utility (not a hypothetical one) which renders it a bearer of value as the product of labor.

Marx is entirely correct that use or use-value and the labor of acquisition are entirely distinct from each other, and that the latter is the concern of the producer while the former is the concern of the consumer.  He is also right to claim that in order to exchange at all, objects must share a common substance.  As we just saw Marx assumes that use has nothing to do with labor.  But it is consumption and thus use that drives the intention behind labor.  Without use, labor is indistinguishable from random physical activity.  It is through labor that we can see use’s relationship to value beginning to emerge.  Labor indeed is the common substance between all commodities, as Marx suspected, but labor itself is necessarily linked to use and so the use-value of commodities cannot be summarily disregarded without also disregarding labor from our theory of value.

To make this more concrete we might employ a simple reductio ad absurdum.  According to Marx’s theory, all value is equal only to the labor of acquisition.  Suppose now that you are tasked with digging a drainage ditch in your yard to protect your house from flooding.  Now rather than dig up the yard with your bare hands you seek a tool to assist in the excavation.  Now suppose that you find two digging objects that have the same labor that went into bringing them to you.  One is a large stainless steel cooking spoon and the other a steel-headed wooden-handled shovel.  Both of these commodities would be useful in digging up the yard, i.e. they would be better than using your hands, and both have the same labor of acquisition and so the same price at market.  According to Marx’s theory then they both have a use and so can bear value and the value to you the consumer should be perfectly equal.  Thus, since use-value is not a factor in determining value you should be just as likely to buy the spoon as to buy the shovel for digging the drainage ditch.  This obviously absurd.  The shovel is the better tool.  But to even say the better tool some quantitative measure of use must be employed.  If use can be quantitatively rendered, then use-values are not merely qualitative and simply the material form.  And if this is the case then use-values may, and probably do constitute a factor in determining value.


Part Three  

What is useful about an object is precisely that it saves labor toward some intended end and how much.  Marx’s divorce of the value of things–including things as commodities–from their material uses misses the obvious fact that to use a thing is synonymous with laboring with that thing and that laboring always has a use in mind.  Thus, labor can be found in both directions from one’s situational relationship to a particular commodity.  Just like every act of selling is an act of buying, so also is every act of valuing an act of appraisal of usage.  The use-value differs from the labor of acquisition in that it is future-oriented and evaluates upcoming labor expenditures in which the object might be some measure of assistance.  The labor of acquisition, as we well know, is past-oriented and evaluates the labor required to legally lay claim to the object that it may be used.  These two labor evaluations are both necessary to sufficiently yield a final value determination or exchange-value.  Value is recognized only in the combination of use-value and the labor of acquisition relative to the particular seller, buyer and the buyer’s task at hand.  

Locke showed that human beings need to come to possess a thing in order to use it (i.e. acquisition through labor), but they also require a reason to come to possess it in the first place (i.e. they need an intention to use that thing).  Also instructive here is Smith’s notion that labor itself carries both a utility and a disutility.  While I grant Marx that use is only possible when there are possession and possession requires a certain amount of labor expended to obtain an object, that labor is not the only labor with which we associate the value of a commodity.  The other labor involves the object’s deployment, i.e. it uses.  How many hours will it take you to dig the ditch with your bare hands?  How much less with the spoon?  How much less with the shovel?  If the shovel has less than the spoon and your hands it has a higher use-value.  This use-value is then set against the cost of the labor of acquisition.  If the shovel is so expensive, that it would require more hours of labor at another job for you to acquire it than it would take for you to dig the ditch with your bare hands, your interests would be best served by digging the ditch barehanded.  

The problem Marx hoped to solve with socialized abstract labor is that different physical labors are qualitatively different from each other, so that–for example–tailoring is different from weaving.  By abstraction, labor can be divested of its qualitative aspects leaving only its quantity, measured in labor hours.  Physical labor is different from the general pool of hours available to all human beings of the same relative abilities.  These temporal hours are all abstractly alike and so can be rendered merely quantitative, i.e. an hour of anyone’s labor-time is equal to an hour of everyone’s labor-time. 

And this is true as far as the labor of acquisition is concerned; for when the the buyer is confronted by the commodity, the particular skills, tools, and substances of its creation are all equalized in an abstract averaging.  There are exceptions, but those exceptions tend to fall on the side of use-value as opposed to the labor of acquisition.  Note however that this averaging is only true from the perspective of the buyer.  The seller rather sees the labor of acquisition as the lowest starting point of the object’s value, the minimum for which the commodity may be released; to the labor of acquisition, the seller always wishes to add the use-value of his would-be customer.  

Socialized abstract labor is an average in the mind of the buyer, and as such, it cannot be individuated although it is individually generated.  The effect is that socialized abstract labor appears as “one homogeneous mass of human labour-power”.  This mass can be divided among the “world of commodities”–supposedly providing their exchange-values–but it is not individuated because it has been averaged.  For example, if three workers produce use-values in x, y, and z quantities of physical labor-time, then their abstract labor would be the mean of x, y, and z.  It would be a statistical error to then reassert that each worker produced one-third of that average.  What can be asserted is that the commodities produced by the workers have a total labor of acquisition (from the point of view of the buyer) equal to the mean of x, y, and z.  

To understand the problem with this averaging, we need only return the fact that when divorced of the link to use and use-values, all of the “productive expenditures of human brains, muscles, nerves, hands, etc.” are not in fact labor.  What is deceptive in this quotation is Marx’s inclusion of the word “productive”, which attempts to sneak “use” back in where it was supposedly being disregarded.  To be productive is to produce something, and by the expenditure of human power.  With that broad definition, every action could be an act of socialized abstract human labor, including sleep which produces rest, or television-viewing which produces leisure.  This interpretation of “productive expenditures” renders every hour indistinguishable from every other hour of every person.  The only measure of socially necessary labor time, i.e. socialized abstract labor, would be the total amount of available hours for every conceivable human pursuit (viz. twenty-four a day) multiplied by the total number of human beings currently in existence.  Another absurdity! 

Surely Marx did not intend to reduce the meaning of “labor”–by socializing and abstracting it–to mere physical activity, any physical activity; instead, I imagine that he had some subset of physical activity that is purposeful.  To be purposeful is to have an end in mind, and that is the same as saying that there is some use to the activity in that it brings about some end.  Further, because this end is socialized, it cannot be just any end, but one that is socially defined (to be laborious).  Thus, not all “productive expenditures” that take human hours constitute labor; labor is only the hours of “productive expenditure” devoted to completing a socially-defined work task.  The “task” is necessary to distinguish labor from mere physical activity, which is to say that the qualitative aspect is what identifies the activity as labor.  When Marx abstracts it away, we can no longer tell what is and is not labor.  The “homogeneous mass of human labour-power” must include leisure hours as well as work hours.  Clearly if leisure can be considered labor then the capitalists are contributing their fair share of socialized abstract labor to society, by handling all of its socially necessary leisure time.  

Marx is sneaky with his words; the “socialized” in socialized abstract labor is meant to sneak “use” back in, for what could be socialized except the tasks labor is set to accomplish?  This is not to condemn abstract labor, but merely to show that such abstractions can only be quantified at the subjective, individual perspective.  To put it another way, I can count the number of hours it would take me to perform any kind of labor, because I–and I alone–know my relative abilities to complete a task.  My estimation would need to include my skills, my knowledges, and my relative physical situation, along with any and all tools at my disposal.  My present situation is vital.  Consider that an apple on the tree five miles from you takes longer to gather than one growing right in front of you.  The situation changes the labor of acquisition as well as use-value.  Thus, only I can estimate the abstract labor-time necessary to complete a task and that estimation applies only to myself.  These kinds of abstractions cannot be generalized, and so it is an error to socialize abstract labor as Marx has done.  A subjective labor theory it stands to reason does not commit this error.   

Before explaining the real problem, we should get a false problem out of the way.  The fact that the market value is not fully derived from labor-input, i.e. there is a subjective component of value appraised by the consumer, does not defeat Marx’s complaint of exploitation.  The value appropriated by the capitalist is merely the exchange-value already paid by the consumer; the use-value component of the consumer is not a factor between the laborer and the capitalist.  The exchange-value cannot be realized until the price is already attained, in this sense the price is merely the actualization of the mutually agreed upon exchange-value of the buyer and seller.  In order to keep the surplus-value the capitalist must be said to own the product before it is sold, i.e. the capitalist must also be the sole owner and seller of the product, and in order to ensure that there is a surplus-value the capitalist must ensure that the wages of the workers are below the price the commodity will fetch, whatever it will fetch.  What exploitation occurs then, happens prior to the commodity every reaching the market, and is equal exactly to the extent of surplus-value, as Marx claimed.  The subjective aspect of value-determination does not save the capitalist from a Marxist accusation of exploitation.     

The real problem with Marx’s theory is that his explanation is not sufficient to prove the exploitation of the laborers.  This is a result of the subjective component, for Marx’s argument is only sufficient if socialized abstract labor is solely responsible for the total value of a commodity.  Now, I have no doubt that if the laborers are being exploited by capital, the mechanism Marx describes is the one by which it is taking place.  But describing how workers could be exploited is a different thing from proving that they are being exploited.  In order to prove that workers are being exploited–assuming a subjective labor theory in necessary as I have claimed–one would have to show that the individual laborers are fully entitled to the product of their labor; that is that laborers are the sole owners and sellers of the commodities they produce.  

The difficulties this presents are more formidable than Marx understood.  The socialized production system–the form of socialism or communism that Marx recommends–would not necessarily entitle the laborers to the full measure of the exchange-value of their product any more than capitalism would.  If the products are common property or State property, Marx may have merely exchanged potential exploitation by capitalists for potential exploitation by demagogues and bureaucrats.  Socialism and Communism, as Marx understands them, do nothing to protect the laborers–their labor being only an abstract part of the whole–every individual laborer is just as alienated and just as vulnerable.  Without a theory proving that the individual laborers are solely entitled to the full value of their individual or collective productive input, Marx has yet to prove exploitation or provide a bulwark against it for workers.


Part Four  

Marx’s sense of the labor-process is incomplete without his understanding of the role of capital.  To understand capital’s role we need to examine the “self-valorization” appearance of capital.  “[C]apital is money, capital is commodities”, Marx said.  Commodities must possess a useful aspect to have a value, and the use of capital–according to Marx–is Kapitalverwertung or self-valorization.  Self-valorization is the appearance through the process of labor-production and exchange in which capital seems to conjure from itself a profit.  Seen from a particular view-point a certain investment of capital yields a certain amount of return, which is above and beyond the value of the investment itself which is retained or reclaimed.  In concrete terms, the use of capital qua capital is to yield a profit.  To yield a “profit”, the value of the capital invested must itself be maintained.  This is obvious, for if the investment depreciated correspondingly with the return–as David Ricardo believed–the loss of capital would equal the return.  We might benefit by thinking of this as simply selling to the laborers, there would be no return beyond the price of the capital sold to (rather than invested in) the firm.  The process by which capital self-valorizes is mysterious and still heavily debated today by economists.  Marx’s theory reveals self-valorization to be a subterfuge from where the exploitation of labor results in profit, through the ownership of the means of production.

To elucidate this process, we may simply build on Marx’s basic model of exploitation given above.  As the owner’s of the means of production, the capitalists’ lay claim to the products of labor.  The product is sold for more than it cost the capitalist to produce creating a profit.  This profit is appropriated by the capitalists thus valorizing their capital.  Marx maintained that the market value was fixed at the socially minimal amount of labor necessary to produce the product and thus the only way the capitalist could extract a profit would be to pay the laborer’s less than the full amount of value their labor produced.  Economic logic would prove that the more capital investment the more profit, and so the capitalist is likely to invest at least a portion of this profit into more capital.  Thus perpetuating the cycle of capital reinvestment.

Marx recognized that the material use of capital is its ability to save labor, and by so doing increase the productivity of labor and cheapen commodities.  The inherent conflict comes from the tendency–also noted by Ricardo–for wages to drop as a result.  The laborers experience the increase of productivity as a reduction of the value of their labor, while the capitalist experiences the same as an increase in their profits, at least for a time.  The conflicting interests of laborers and capitalists Marx details forms the basis for his belief in class warfare, which is inherent to the capitalist mode of production.

As a condemnation of capitalism, this argument is sufficient; but in order to correct the problem capitalism merely represents, we need to better understand the role of capital in production.  Towards this end, we might assert that the value capital adds to a commodity (or a service or end of any kind) is in the labor it saves through its usage.  This saved labor is necessarily different from the labor involved in the production of the capital itself.  To put this in Marxian terms, we might argue that just as there is a difference between labor and labor power, capital, also, has differing costs and productive value capacities.  A labor cost (the exchange-value of the capital) and a use-value (measurable in labor-saved) work much like labor and labor power; so while the average healthy laborer’s ability to produce value typically exceeds the cost of sustenance necessary to reproduce the laborer’s efforts, well-deployed capital has the ability to produce more labor-savings than the labor costs to produce and maintain it.  History bears this out, since the whole productive increase of the industrial revolution is a testament to this fact.

The value of capital is equal to the reduction of the necessary labor required to meet some end, e.g. produce some thing or benefit from some service–its use-value–minus the labor cost of producing the capital–its exchange-value.  Since, as Marx said, “capital is commodities”, all commodities are also capital; and thus, all commodities share this determination of value.  This definition of value is a serious problem for the rest of Marx’s theories, but a major insight for us: use-values are quantifiable in units of labor-saved and are also necessary factors in the determination of a commodity’s value to a consumer, who must be the ultimate source of all economic evaluations in this theory.  Keep in mind that this determination is necessarily subjective, although it can be plural, it is never communal or social.

Marx’s labor theory, which supposes that the value of a thing consists wholly in the labor that went into its construction, provided a technique for objectively calculating the absolute value of a thing without the need for markets.  If his labor theory were correct, then it would follow that markets could be dispensed with, which is tantamount to saying exchange-value could be independently determined, as long as the quantity of (absolute) use-values, i.e. the material object themselves themselves, comprising the total social need could be determined.  Without any need for market determination, money in such a system loses its function and may also go extinct, taking with it the irrational desire for endless accumulation, or what Marx’s perceived as avarice.  Privatizing property for consumption becomes reducible to what we find useful as a society and nothing more, this would effectively restore natural checks and balances to the economic system while keeping modern production methods in place.  This–I believe–is what Marx had in mind by “scientific socialism”.  From where Marx sat, a society of modestly intelligent people, living and laboring in a particularly communal political arrangement should be able to assess and meet their own needs–as use-values–quite easily; thus the only thing holding back a just and equitable society of such individuals must be the oppressive historical development of capitalist greed; held in place by the tyrannical political force of the monopolists of the means of production, viz. the bourgeoisie.

Scientific utopia, then, wholly depends on just one thing: the ability to derive absolute value from the calculation of socialized abstract labor in a commodity, which I have just shown is not actually possible.  Without it, scientific socialism is an impossibility because we can never determine the true value of things merely by accounting for their production labor.  We need to incorporate use-values, which means, consumers fulfill the role of ultimately deciding for themselves how much a commodity is worth.  Thus, markets and money will prove to be indispensable.

But all is not lost here.  The upshot of capital having a use-value in saving labor is that the labor savings could potentially be made beneficial to the society at large, contingent on a restructuring of the economic order.  Scientific socialism may be dead, but some flavor of socialism may yet prove triumphant.  But to prove it, the real culprit behind economic oppression must first be identified.

To summarize then, Marx’s genius was to identify the mutual exclusivity of interests between capitalists and laborers and to recognize the exploitation of the laborers by the capitalists.  His folly, on the other hand, was to develop a theory of value based entirely on labor that failed to recognized the necessary factor of use-value in total value determinations.  I have attempted to show that use-value is a factor determining the exchange-value of all commodities at market and thus it is not the labor of production alone that determines value and price.  I have also shown how the labor of production or what I call the labor of acquisition reduces the general value of a commodity on the market and so the lower the labor of acquisition, the more valuable the commodity.  Use-values, contra Marx, are in fact quantifiable and serve as the positive value that allows consumers to spend more on a commodity than the labor of acquisition.  Without the labor of acquisition as the sole determinate of value, most of Marx’s subsequent socio-political and economic theories fall apart.  Nevertheless, I insist that capitalism is still exploitative and that the theory that proves it is yet to be addressed.


Afterword      

I believe that profit, rent, and interest are the real agents of economic oppression in the capitalist system.  As a family of economic behaviors we might call these acts by the collective name of rent.  Essentially, neither private property nor bourgeois greed, but rent that is the source of class conflict and exploitation in capitalism.  Without going into the details, I want to briefly outline the structure of a non-Marxist theory of labor exploitation.  While Marx’s theory based exploitation on positive economic theory, this theory bases it on the political right and social necessity of private property.  In other words, the same theory that provides private property rights to the members of a society condemns rent as a practice just as surely as it condemns thievery.

The justification for a right to private property–according to John Locke–is based on the labor of acquisition and relies on the necessity of individual use and/or consumption.  In other words, without the need to individually consume the property, the labor of acquisition is insufficient to bestow private property legitimation.  The right of the landlord against the tenant farmer to the ownership of the farm land falls on the side of the tenant farmer who actually needs the land.  Those who both need the land and do the work of acquiring it have a rightful claim.  It follows from this that when the need to individually consume is dispensed with, the prior justification for ownership goes with it.  One might only own private property when one both legitimately labored to earn it, and retains some need for its exclusive private usage.

So it is that rent, in any form, fails to justify ownership for the renter.  The problem is obvious: when I lease out my object for money I give up my claim to a personal need to exclusively use that object.  My claim then rests only on my legitimate possession of the object through some labor of acquisition.  However, we just saw that this is inadequate.  Further troubling the matter is the claim of the rentee, who does possess the back-ground need necessary to justify exclusive ownership.  But the two aspects cannot be spread across two people, as exclusive rights must in fact be exclusive.  If the property rights are shared between the renter and rentee, then the property in question is by definition common property, and neither party has an exclusive claim to it.  This is all well and good, until a superfluous charge is made by the renter upon the rentee, i.e. the rent itself.  In order to charge this rent, the renter would have to hold exclusive property rights upon the object being lent.  But the act of lending itself simultaneously dissolves these rights.  The actual ownership of the lent object is shared or common and no charge may be made to property the rentee has a fully justified claim too, i.e. the rentee “owns”.

The “use” of renting is not a legitimate use because it is self-defeating.  To lend is to share property rights with another, to charge rent on shared property cannot be legitimated.  And this is where capitalism is exploitative.  Capitalism allows for rent in all its sundry forms.  The most serious problem with capitalism has never been private property or greed or markets or money, but only the family of illegitimate economic procedures we call rent.  Rent allows those with a claim of prior ownership to extort value from the value-generating labor efforts of those who use that capital.  This extortion cannot be legitimated despite the fact that capitalism allows it.  Here then is the source of economic inequality and oppression we find inherent in capitalist countries.