It wasn't difficult to understand. You haven't understood a primary source of profit: economic rent through underpayment. Neither have you referred to the other important aspects, such as market concentration. We know that worker ownership is more productive. We wouldn't expect it to flourish, however, in capitalism. We'd typically expect it to be focused on specific aspects (such as firm closure despite profit being available with a more efficient hierarchy)
I understand you underpayment of labour just fine. It's irrelevant to my point, so I'm not sure of your point. Other than to confirm my point, they frequently can't compete.
Its very much relevant as it helps us understand the divorce of productivity and profitability. Underpayment is, by definition, inefficient. It also provides the rents to help reinforce growth and the market power problems then generated
A discussion of efficiency wages is irrelevant to my points he was responding to and irrelevant to his point I was responding to. That's likely why he brought it up
Whatever. Irrelevant to my assertion regarding productivity or profitability of a worker owned firm in the real world.
Why not man up and identify the error. I've said before, in regards to economics you are primarily a critic of capitalism as oppose to an advocate of some alternative. When pressed the only alternative you've offered is market socialism, Burczak style. He considered himself to be a Marxist
I suspect it is more cultural than Economics for Anglo-American underclass problem. It might has to do with education system as UK and U.S. consistently shows strong correlation between parental income and how well kids do in school.
What is your alternative? If it wasn't for capitalism, you wouldn't be typing on a computer and posting it to the internet. Certainly capitalism has it's issues, that's because it's an invention of humans and run by humans. Humans have, since day one, had flaws and these will never go away. People love to bash many elements of capitalism, yet use every single invention to the extreme that is a direct result of capitalism to do so. Governments create tyranny, capitalism creates opportunity. You can choose. History is our friend, we should listen to it.
That can be seen as rather anti-American and Brit in explanatory tone! You'd have to go for some sort of social capital explanation, with the lack of social mobility somehow generated by more extreme income inequalities.
Maybe the federal government in control of a central bank is the problem, seems the central bank allows the banks to make bad investments which are covered by the tax payer. Make the banks play under real capital rules and see what happens!
There is no need to emotively rant about the evils of capitalism. However, the innovation angle is a red herring. First, technical progress often goes hand in hand with economic planning or government coercion (from the creation of capitalist markets through protectionism to the use of military R&D to supplement civilian expenditures). Second, the mechanisms that create know-how aren't specific to capitalism (from the public good of education to markets that allow entrepreneurial spirit to flourish). Indeed, within market socialism, the reductions in inequality of opportunity, provides a means to improve on those mechanisms
History is not on your side. The economic system of Capitalism did not emerge, as Friedrich Hayek posits with regards to free market, through the process of spontaneous order. If free markets truly emerged from spontaneous order, the global economic system would remain centered around social principles. After all, that is how truly free markets, when left alone to regulate themselves, develop themselves. Humans were and are ultimately social animals, not economic ones. Therefore, construction of the profit-based economy (Capitalism) and the economic animal (homo economicus) required the legitimate force of the state. It necessitated the breakdown of socially-rooted markets in favor of deregulated profit-based ones. Now that Capitalism has highly entrenched itself in global society, the legitimate force/coercion/aggression of the state is only its defenses. Private entities are now capable of using illegitimate (or at least questionable) force/coercion/aggression with qualified backing, indifference, and half-hearted objection by the state. Henceforth, I must say that you should be cautious in your assumption that governments and Capitalism are separable, and if they are, that one creates "tyranny" while the other creates "opportunity". Both emerge out of force/coercion/aggression/, use force/coercion/aggression, and survive on the backs of force/coercion/aggression.
Rational economic man is an interesting one. We need it to promote the efficiency call from capitalism, but we're then into a world oif inconsistency between social norms and outcome based on economic incentive. The orthodox economist tries to get around the problem with changes to the utility function. The right winger will just ignore the problem.
Wow, really? We are social animals? I think you forget history, or how the effect of power comes into play. History shows the benefits of so called Kings. They get power, want more power, corruption abides to keep the thrown or to keep it handed down, wars are waged for more power and land, and yet the peasants suffer. Social animals? Really? You have systems and you have humans. Some systems allow humans to better themselves, others don't. The humans are the major factor in any of these. The human has a choice in capitalism, none in the others. When the government pays you more to not work than to work, or to have more kids, there is a fundamental flaw, and it isn't caused by capitalism. We have a capitalistic society, however it is highly "influenced" by the government. True capitalism and freedom are the best man can achieve. What he does with those is up to the humans.
Just an example of how well such "social" policies work. A worker that used to work 40 hours a week at a Taco Bell without medical benefits. Now that worker gets cut to 28 hours a week so the Taco Bell doesn't have to pay the Obamacare Tax and afford to stay in business. Now this worker continues to not have medical care, but now has to go out and find another part time job to make what she did before and still not have medical benefits. How does this help anyone? You see, the person paying the checks needs to continue to profit in order to continue to pay checks. That person was way better off before he/she was guaranteed healthcare and so was the business.
You have freer systems without any coercion. And what is coercion? For me a way of coercion is limiting the access to the resources, or having people starving and then they must accept determinated conditions if they want to survive. That is coercion, and capitalism is full of this kind of coercion. Capitalism is one of the most coercive systems that can exist. With or without presence of the state. Capitalism and freedom are like the water and the oil, never can be mixed. - - - Updated - - - Because the socialist methods stop the big deficiencies of capitalism. It is not thanks to capitalism. It is thanks to the socialism. A communist system in its ideal would work even better.
Yeah, do you think that people don't do. LOL Because there is the war. The fact is that managers are in war, and they know it. The problem if that many workers don't know and they are losing it. There is a war of interests, the interests of corporations and workers are not the same, and never will be. And that the boss works more hours is pure bull(*)(*)(*)(*). There will be cases, but the normal is aboslutely the opposite. There is the warfare of classes, the rights of the workers are being diminished every day while the corporations becoming more powerful...
Private property is essential for resources that are rival-diminishes upon uses. If there is a piece of bread it either belongs to you, or me or someone else. If not it will be a pure hobbesian predatory society that kills incentives for production. But I am a critic of none-rival "intellectual property" which are bogus ideas.
So be it, as I do not see Anglo-American underclass problem as a pure Economics problem but also cultural and institutional. Underclass in Anglo-American society are not really poor in wealth or knowledge like other countries (afterall we are rather affluent societies), but characterised by "opting out of society norm" in terms of values like hardwork, thrift and courtesy. It is a complicated problem and hence cannot be simply reduced to the lack of human capital. I also do not see how capitalism impeded the access to human capital for the less well-off in income (or it is the entry barrier created by the special interest you are thinking of), though I admit that competition and globalisation highlites the strength and weakness of economic agents, be it for individuals or nations alike. It is rather an acceleration of the discovery process saying that the emperor has no clothes, inflicting short term pain but long term good. Right now in U.S. we have a problem of uncompetative public school teachers lowering the teaching standards, with American students failing to compete with Asian and European students on many standardised tests, and this impedes equality as richer parents could afford private schools. The challenge to equality that comes from economics phenomenon here are rather standard "barrier to entry from special interest" kinds of model, instead of 19th century kids skipping school to sweeping chimneys kind of stories.
You can't divorce culture and institution from economics. Institutionalism is an example! We've known that poverty is a relative concept since the likes of Adam Smith. We also shouldn't underestimate the consequences of an underclass problem. Zero mobility cannot be understood in terms of supply-side analysis (making the usual comments about fecklessness look decidedly silly). The negative externalities are also significant, given the elimination of opportunity will certainly encourage other 'pursuits'. No one has suggested that it can be. However, it should be noted that the US and the UK are both known for a long tail of low skilled labour (and therefore a lack of opportunity) Education is costly. Even with grants and elimination of fees, the human capital model will still predict a greater investment by those of greater income (from the consequences of 'lost wage' to the ability of the rich to effectively invest in education at a much lower interest rate, given income transfers within the family) The international evidence into education standards doesn't show that the US is doing spectacularly well, neither does it show- however- that the US system is 'failing'.
Doing well in school is a motivation only for those who can afford to go to college. As long as college means going four years without a job in order to get a job, it is only attractive to those whose parents can afford to pay them a high allowance. It is class-biased indentured servitude. It should be designed only for those who would do well in school if it meant getting paid to learn. As it is, it can only promote inferior minds to superior positions, eventually causing a collapse of the economic structure. In order to create strong support at critical points in the economic structure, college education must be replaced with highly paid professional training. That will attract the most talented people and motivate them to study. Economics, a captive science controlled by the ruling class, ignores quality and treats only quantities. It treats a human society as if it were constructed with inanimate components. Typically, in education it demands more graduates, not better graduates.
A self-serving history produced in Capitaliban madrassahs. Investors only hike the ball; they don't create the action. The scientific revolution caused the industrial revolution; capitalism merely pirated it and took credit for it. Inventors create the value of the investment, so they should make the rules governing distribution of the wealth created by themselves. If they were allowed 50% ownership of corporate patents, of which they are the most important factor, then they could become investors themselves and drive out the uncreative parasites. The class-biased university is designed to humiliate the talented and put them in their place. It is the Goose That Laid the Golden Eggheads. Capitalism originated in feudalism hijacking the technological revolution that started in the 18th Century. Unearned inherited wealth pushed its advantage by loansharking to those who create all wealth through intellectual capital. But those with such capital are lamed and tamed to not use it against inert capital, forgetting that empty hot air can be destroyed by fire.
Yes, humans are social animals. Economic systems that naturally formed prior to the advent of Capitalism, meaning without the force of the state, were centered around social cohesion and regulated by social principles. It is through the use of power (the legitimate force) by the state that Kings enforced Capitalism on the populace through elimination of socially-rooted markets in favor of deregulated profit-based ones. Capitalism has never emerged through spontaneous order, and therefore does not possess the qualities of "True capitalism and freedom", or free market/laissez-faire Capitalism. That is a myth that has been invalidated by countless scholars that study the origins of the state and Capitalism. One contemporary scholar on this matter, Tanisha Fazal, calls the two necessary factors for the advent of the modern state coercion and capital. This is much in line with my analysis, which utilizes the work of John Gray. By the way, I am a proponent of Capitalism, so my comments are simply a brutally honest analysis of its origins.
Nowadays schools fees and loans are subsidized so much that unless a student has to contribute to the family income, it is almost certain that one could afford a college experience. The problem is that with so much government support and public opinion in favour of such programmes I see it as a detriment to the economy. In the 70s and earlier college was kind of an option when we had factories, it made more sense for people to gain experience in factories to rise to a production line leader, but with globalisation that kind of option was vanishing in the 90s, and the higher pay check in the country went to the ones in highly qualified service sector jobs (who had a degree). And nowadays the trend seems to go back to the old days that the white-blue collor wage divide is vanishing soon, for two reasons as I observe: 1) There are too many graduates and there isn't much divide between the mediocre graduates and those who completed high school numerate and literate but chose not to go to college. Afterall, schools admit that they don't teach you much relevent skills and it is a signal of your work ethics, IQ and all the potential "good stuffs'. 2) With the advance in technology people educated folks whose task are rather routine were very quickly displaced. Better accounting softwares kill accountants and better information system kills computing engineers. We are not getting rid of drivers, cleaners, hair-dressors or chefs any times soon in the next 15 years as I see. And therefore I agree with you that professional training do have values in the future, as far as I see it. But given so much money and hope dumped on college education it is going to be a national disappointment. We have huge land to develop agriculture and mines to satisfy a growing Chinese and Indian middleclass demand, but don't see young people wanting to give up a formal education to get their hands dirty. The only "Western country" that didn't have continous recessions after 08 was Australia. People don't see these and still invest as if next 20 years will be the same. Everyone wants to be a doctor, professor, enginneer or trader...
The class-biased nature of education doesn't lie in "it being too expensive" because that is not a problem in some places (Australia and the United Kingdom for instance, Scotland in particular provides completely free university for nationals) and they see only slightly more social mobility than the United States, I think you are grossly oversimplifying the problem. The problem lies in that there are numerous different approaches to education, but our system only rewards one, thus those who value maintaining their families' social stature adopt it. It also penalises a lack of understanding of the curriculum. This has the effect of erasing social mobility because social standing is seen as a goal in and of itself, one that can only be achieved by radically changing one's preferred approach to the process.
