Is the profit motive essential to innovation?

Based on study and years of experience.

If it is not intentional it is not "punishment". I believe the theorists are taking too much latitude.

Bullcrap! I know I have lost an argument when you present documentary proof I was wrong. Has not yet happened. Since you obviously did not understand what I meant by true socialism I presumed you needed a lesson from an authoritative source since you obviously don't accept anything anyone says.

One thing I have learned, don't accept your opinions at face value as it relates to economic theory, especially after our discussion about George Reisman.

 

"I'm right, I'm right" screech? Crikey, we might as well have an upper class tantrum. Try supporting your argument with economics and empirical evidence!

What you believe is irrelevant. Its only based on not understanding the economic theory and simply ignoring the empirical evidence.

To be fair I was wrong. You haven't even joined the debate! See above

You don't understand socialism. That is why you just keep on pasting in the dictionary definitions

I've never seen you refer to economic theory. Get trying!

 

Sounds like your style.

Of course it is, just as what you believe is irrelevant.

You ARE wrong, but not about joining the debate.

 

Supporting my argument with economics and empirical evidence? Just bloomin obviousness!

I don't deal with "in my opinion".

I have bothered to study socialist political economy. You haven't.

And you're very open here in your limitation! One doesn't quote economic theory. One embeds it within one's argument. Why haven't you?

 

Let's try something more productive. Why are firms offering efficiency wages instead of other mechanisms that can prevent shirking while NOT causing equilibrium unemployment? My go-to example is using a tournament model. Of course, there is the "bonding" critique, but I always thought that was taking the simplifying assumption of homo economicus too far. Some type of dynamic subjective compensation always seems very plausible to me ,where you learn to like your job, e.g. making friends with your co-workers and that acts as a type of compensation.

In response to the OP: The profit motive is not NECESSARY for innovation, as you clearly outline in your counter examples. However the profit motive can imply innovation. As such, the profit motive likely increases the amount of innovation in a given area. This is not without some caveates. For instance, I read an article where they said that patents only increases R&D within developed countries and even after accounting for that, patent laws can be too strong and then they are found to decrease innovation. For example, too strong of patent laws allow pharmaceutical companies to merely tweak their medicines and keep their legal monopolies.

 

The question doesn't make sense. They simply adopt the profit maximising choice. The reality is that efficiency wage theory ignores the limitation of the supply & demand approach: i.e. human resource management, through internal labour markets, dictates proceedings. Mass unemployment is then the result of that game amongst a sub-set of workers

 

What is your definition of efficiency wages you are working with? Are you using wages above one's marginal productivity? It sounds like you are twinning this with monosopy and institutional economics. I'm talking about the basic stiglitz (I think stiglitz?) where you get paid above your marginal productivity so you don't slack off. Shouldn't there be other more economical ways to prevent shirking?

So, firms use unemployment and underemployment through their use of internal labor markets? But then why refer to efficiency wages, which is a market based approach? Or are you referring to some other type of efficiency wages? Not to mention, I thought there were problems with efficiency wages. Forgive me, but I do not find many theoretical "explanations" of sticky prices that compelling. I agree prices (especially wages) are sticky, but I just do not think menu costs etc. are that large of factors.

 

There isn't one definition. There are numerous explanation for why wages and productivity are linked. The issue I raised is how its the 'distribution of wages' that is important (i.e. through the internal labour market economic rents can be further protected)

The shirking model allows us to understand the limitations of supply/demand and also how even efficiency criteria predicts mass unemployment. The problem is that it doesn't embed the other means to minimise labour power. And that leads to more general comment about labour market segmentation.

Its about how the result is delivered without overpayment. With internal labour markets, the overpayment is skewed towards white males.

 

No Reiver, you are not an authority.

Yet you continue to state it.
I have bothered to study socialist political economy. You haven't.[/quote]The why don't you understand what the definition of Socialism is?

Oh? when do you plan to start?

Because I am not a snobbish as you in assuming everything out of my mouth is "embeding theory" like you do. Some of your arguments have value. Others do not. And personally I could care less about your arrogance relative to economic theory. I remember just how much of a fool you made of yourself in the first discussion in which we were involved.

 

Further, when you discuss efficiency wage which in some markets, pays more than market wage with the expectation that labor's productivity/efficiency will increase and that will save costs by reducing turnover, fine. I accept that there tends to be increased productivity of labor and that it justifies the higher wages.

That this might increase unemployment may be true, sometimes, but as punishment? I think more like, the process of recognizing that more training and higher production justifies higher wages. Those higher wages do not necessarily mean more unemployment, just what unemployment there is likely results from workers not producing to their level, or their training does not allow for that additional production.

So my contention is simple, unemployment may result in their being insufficient demand for labor or that the labor may not be of the quality desired by the industry. Now if the company was willing to hire labor which was not as efficient or as well trained as those being paid higher than market wages, and pay them a lower wage commensurate with their productivity and training, that is quite acceptable; providing, it does not occupy costly physical plant to the point of overall detriment in production.

It is also my contention that unemployment as a punishment device is no more than the presumed threat some employees may feel can be exercised against them if they do not perform satisfactorily. That is entirely different than the company using it as punishment. I prefer to consider the higher wage a carrot, rather than unemployment being considered a punishment.

 

Follow the comment! "Supporting my argument with economics and empirical evidence? Just bloomin obviousness".

The definition is clear: ownership and control of the means of production

Its about validity. Your use of state capitalism, for example, is Error 101.

The problem is that you have opinion. You foot stamp over that opinion and you crow about that opinion. But what is it but opinion? Why can't you at least construct something around it? Why are you reliant on the dictionary, rather than theoretical argument? Why are you reliant on opinion, rather than empirical evidence?

Its nothing to do with arrogance. You're simply making comment without knowledge

 

No Reiver, your argument is not "just blooming obviousness." I am sure you think it is, but by no means is it obvious or always correct.

Exactly what I said. Thank you!

I don't recall using "state capitalism." I have discussed regulated capitalism as opposed to laissez-faire capitalism, which I don't believe has ever truly existed. That said, all states have some regulation over capitalism.

As do you.

The only one of us doing any foot stamping is you because I won't swallow your snobbish "never make an error" bluster.

I only went to the dictionary because you made the incorrect presumption about my understanding of "socialism." I presented my argument. When empirical evidence, which you have not used either, is required I will post it.

Since my comments were correct in so far as they went, they were made with knowledge. Your assumption that your comments were automatically correct reflects your arrogance.

Gotta go, my wife wants to go out for dinner.

 

Again, supporting one's argument with theory and evidence is bloomin obvious. Why don't you?

You confused socialism with state capitalism. You do that regularly, despite correction. Bit of a shame that!

Laissez faire doesn't exist. Your discussion must be within the fiction literature.

Its all you have when it comes to socialism. Happy for you to pretend otherwise. Critique some socialist political economy! Knock yourself out

 

dude, merely having a free trade area the size of the United States does wonders for any economy.

 

Our social contract provides for the means of production of the State, potentially, regardless of cost:

 

What "evidence" have you supported your argument with? None!

I have, especially as to what socialism is.

Not so!

You are trying to correct something already correct.

Much more shameful that.

I said that! And if you had posted my entire statement, I have discussed regulated capitalism as opposed to "laissez-faire capitalism, which I don't believe has ever truly existed. That said, all states have some regulation over capitalism."

The only fiction is in your mind.

Gee, you give up so easily.

Your pretense is that you have posted support for all your arguments. You have not.

There has never been a long term successful truly socialist experiment. If you believe I am wrong, point one out. So far we know that despotic leadership destroyed any vestiges of socialism in the USSR and China, and that Cuba has been a dismal failure. Venezuela is trying, but it won't last because it is a virtual dictatorship.

erstwhile USSR was a centrally planned economy. It functioned by the imposition of production quotas and the clearing of goods was done was by a central planning authority. Even prices for allocation of goods and services were predetermined by the state.

The socialist states were later deemed to be corrupt with government mandarins appropriating too much power and with excessive state controls, the state of “communism” or distributing power evenly among the population with decentralization of power from the state never really occurred.​

What some people call "Modern Socialist Systems" are not true socialism as originally conceived. Some of the Scandinavian use some very extensive social programs based on high taxes and a more balanced wage system, and universal medical care, but they are not true socialist systems. You can stamp your little feet all you want, but true socialism has never succeeded for any length of time. I leave you with a couple of my favorite quotes from Ludvig Von Mises, "For it is an essential difference between capitalist and socialist production that under capitalism men provide for themselves, while under Socialism they are provided for." Socialism p. 405 Capitalism vs. Socialism and "Liberalism and capitalism address themselves to the cool, well-balanced mind. They proceed by strict logic, eliminating any appeal to the emotions. Socialism, on the contrary, works on the emotions, tries to violate logical considerations by rousing a sense of personal interest and to stifle the voice of reason by awakening primitive instincts." Socialism p. 460 Capitalism vs. Socialism and "The interventionist policy provides thousands and thousands of people with safe, placid, and not too strenuous jobs at the expense of the rest of society." Socialism p. 457

Do you have anything positive to say about socialism? Or will you just come back with your "I am smarter than you so shut up" like you usually do. Like I said, I support my opinions with support from economists, not blowhards.

 

I haven't referred to one specific paper, I've referred to a whole debate: the socialist calculation debate. That refers to how market socialism has evolved and how, for a change, Austrian economics did have a significant impact (with spillover effects on general economic analysis). No dictionary needed!

You think you can avoid political economy through the use of dictionary. Very poor form! The definition of socialism is actually straight-forward (control and ownership of the means of production). The complexity is over feasibility. My post-Hayekian stance, for example, does not necessarily sit comfortably with the Anarchist approach (typically because a different school of thought is used to understand economic relations)

So you'll finally in a position to admit that innovation in capitalism is characterised by market failure and government interventionism in R&D is key? Well done!

There you go again with the references to state capitalism. Socialism requires focus on the individual (thus the reference to Austrian economics). You have to show that there is no such thing as feasible socialism. You cannot do that with the dictionary!

Nice example of how you haven't joined the debate. The nature of material balances is discussed by Hayek's use of distributed knowledge. Socialist political economy isn't reliant on central planning (the idea that the Walrasian auctioneer could somehow be replicated was rejected yonks ago!). You refer to it as you haven't bothered to teach yourself what feasible socialism entails. Indeed, central planning is more relevant to capitalism as- given its prone to economic crisis- macroeconomic control is vital.

 

Socialism is a requirement for States and statism to exist and, not only that, creates that form of wealth in the process. The proof is, that capitalism has yet to achieve any success without it.

 

So you don't believe it is essential to prove your point? Strange! There are some things you say which scream out for support. I personally believe that linking to something which supports one's opinion is the most valid way to go, and I personally don't believe you are so knowledgeable you don't need to do that.

Nope, it is always a good form to post what things are and link to a reasonable authoritative source of verification.

It is, and I have expressed it exactly like that many times, but when you erroneously said I did not understand what socialism is I clearly proved you were wrong.

OK, I accept that is your opinion.

I don't remember having admitted to anything like that, but some government intervention in R&D and even in stabilizing the economy with targeted bails. I have never suggested to the contrary, and if you think I did you obviously either did not read my posts or understand what I said.

I said nothing about state capitalism in the quote to which you responded, and since state capitalism refers to a system in which capitalism is varied in some degree by government ownership and control, it is not what I have referred to at all. In fact, when you so vehemently disagreed that nationalizing industry was heading in the direction of socialism I realized that there is a lot about economics you don't know as nationalizing industry is very common to socialist states. There is little difference between what you call state capitalism and what state socialism is. Where I disagree mostly about state capitalism is that the government exerting a little control or creating some social programs does not go far enough to call it state capitalism. In the US, even with some government regulation (to which I agree) there is not enough control to go so far.

I was not trying to show that with a dictionary. What I did was prove conclusively that I do know what socialism is, not whether or not it was feasible with my comment. I personally don't believe socialism is feasible over the long term as there is too much according to needs or abilities and I don't believe government is the best source of day to day economic decisions.

I have not really been debating and likely will not, especially with any arrogant individual who believes he knows all of the subject off the top of his head.

We have not addressed Hayek's use of distributed knowledge.

You are trying to suggest that modern socialism is changed significantly over the last 100 years. I believe that what you intimate is changed or modern socialism cannot be socialism at all if it approaches eliminating one of the more important functions of socialism, that being central planning, or control of production, distribution and even wealth. I have used the term "true socialism" several times and I am referring to socialism in which the government owns or controls production and distribution through central planning. So far nothing you have said suggests socialism is anything different and you have mostly just criticized what I post as opposed to stressing what you believe about economics. You have used a few terms commonly only used in economics, but what do you believe? Don't you think it is time you relate that? So to reiterate, if you no longer accept central planning as a major part of socialism, you are obviously not talking about true socialism. Just like classic liberalism is not neo-liberalism, neither is disclaiming central planning is not socialism. You can call it what you want, call it umphism if you wish, but without central planning you are talking about a different system than socialism.

- - - Updated - - -

Bullcrap!

 

You're not making sense. Of course you're doing that as you can't respond to the comment. Here it is again (have another go):

"I haven't referred to one specific paper, I've referred to a whole debate: the socialist calculation debate. That refers to how market socialism has evolved and how, for a change, Austrian economics did have a significant impact (with spillover effects on general economic analysis). No dictionary needed!"

If you're struggling, its a simple point. I haven't gone for the ridiculous "in my opinion and my dictionary" approach. I have ensured that my analysis is embedded within political economy (which evolved with the socialist calculation debate). The repercussions for the thread aren't difficult. In general, we cannot make any "profit is needed for innovation" comment. This is because its not profit which drives innovation (as shown by the concept of market failure), but it is the entrepreneur that drives the exploitation of innovation. And, specifically, to your efforts. We see that your state capitalism efforts make zero sense. Socialism has of course adapted to the Hayekian attack on the original attempt at suggesting socialist planning could achieve perfect competition by somehow replicating the Walrasian auctioneer. That adaptation differs according to the feasible socialism adopted. For me there is necessarily a shift to an individualism approach which focuses on the importance of the price mechanism (not as an invisible hand mechanism, but as a information surrogate)

Its not in the dictionary? The problem is that you don't actually quite understand your own comments. The focus on 'regulated capitalism' and rejection of 'laissez-faire capitalism' necessarily leads to discussion over market failure such that government becomes a key economic agent

Nationalisation is neither a sufficient or necessary condition for socialism. Those suggesting otherwise are simply innocent of socialist political economy. The Tory nationalisation of Rolls Royce was obviously nothing to do with socialism. The recent nationalisation of failing banks is obviously nothing to do with socialism. And confusing state capitalism with socialism is a standard error, typically American orientated (arguably because McCarthyism still hinders the ability to make rational comment on this subject)

So capitalism and socialism have little difference? Make sense dear chap!

You're not making sense again. State capitalism refers to the likes of the Soviet Union, where the market is rejected for a bureaucratic means to maintain labour exploitation.

You've proved access to a dictionary, nothing more.

This is a good example that you don't understand socialism. First, socialism would ensure greater equality through payment according to worth. Underpayment, for example, would only exist in terms of internal error (but one would expect it to necessarily restricted through democracy in the firm, particularly compared to internal labour markets which exaggerate wage differentials). Second, there is no need to refer to government making 'day to day economic decisions'. As noted, its easy to embed socialism within the Austrian perspective. Indeed, there is a reduced need for government interventionism in socialism (given we can expect less market concentration and therefore less tendency towards economic crisis)

You haven't as you've just got the dictionary. By 'definition', I have. Hayekian distributed knowledge is a key aspects of the socialist calculation debate after all. All this means is that a market socialism outcome should be pursued.

That is just matter of fact. It just happens that Hayek's output (the most important aspect of the Austrian perspective) failed to 'win' the calculation debate. Instead it enabled socialist political economy to shift away from the one dimensional debate created through neoclassical economics.

The idea that central planning is required is merely a corruption of the economic spectrum (from command economy to laissez faire). Its one of the most common, but also one of the most tiresome, errors made by those that do not understand socialism.

Is the term "true socialism" in your dictionary? You've merely constructed a term to try and justify your blinkered approach to socialism. And, whilst you deny it, it really is just a variation of the "government is socialism" error.

This is just you saying that you don't understand socialism. There is zero need for central planning. Given anarchists have played such an important role in socialist analysis (though I favour the post-Hayekian approach, which is able to understand the efficiency gains from socialism), there is no excuse for it!

 

Only in your mind, which apparently not very well used.

Until you show me some supporting information with a link I will continue to believe you are blowing smoke.

Yet you have not shown or linked us to an iota of proof.

I agree!

 

I stopped reading after this. Given your comments have been mere error (and poor crafted error at that), these sort of personal attacks are just boring. Goodbye

 

Your loss! Read it, you will learn something instead of relying on your particular brand of thinking.

 

Clearly not. Even your response is immature. Bye bye

 

It is obvious that you are not as versed in economics as you think you are, and in case you missed it, many of your smartalec comments to be were personal attacks as well. Just responding in kind as best I can without breaking the rules.