Re: Don't Forget Mises -- and Dump the Third Way!
From: jmh (j_m_h_at_cox.net)
Date: 09/08/04
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Date: Wed, 08 Sep 2004 13:10:17 -0400
Robert Vienneau wrote:
> In article <%dv%c.28149$Ka6.4343@okepread03>, jmh <j_m_h@cox.net>
> wrote:
>
>
>>Robert Vienneau wrote:
>>
>>>In article <Mzm%c.167405$Lj.139132@fed1read03>, jmh <j_m_h@cox.net>
>>>wrote:
>
>
>>>>Robert Vienneau wrote:
>>>>
>>>>
>>>>>In article <Sy7%c.162274$Lj.66939@fed1read03>, jmh <j_m_h@cox.net>
>>>>>wrote:
>
>
>>>>>>Robert Vienneau wrote:
>
>
>>>>>>>In article <eRM_c.152501$Lj.130523@fed1read03>, jmh <j_m_h@cox.net>
>>>>>>>wrote:
>
>
>>>>>>>>Capital, and capital equiment are productive
>>>>>>>>so the people owning that capial and equipment deserve
>>>>>>>>their share of the pie.
>
>
>>>>>>>Non sequitur. Ownership of capital is not productive.
>
>
>>>>>>The discussion appears to have been conducted
>>>>>>within the context of ownership of factor inputs
>>>>>>and the claim to some reward based on the output
>>>>>>made available due to the presense of that input.
>
>
>>>>>The discussion is confused. There's a distinction between explaining
>>>>>why, in a given institutional setup, owners of capital receive a
>>>>>return and arguing that such a return is just or unjust. The fact
>>>>>is that mainstream economists have found themselves unable to
>>>>>explain why such a return exists. Until "libertarians"
>>>>>recognize the confused state of many of the traditional
>>>>>answers, they are going to have nothing to say to those of
>>>>>us who are aware of that confusion.
>
>
>>>>They cannot explain why preferences exist either but
>>>>that doesn't prevent them from having some explaination
>>>>of prices. The view that both risk preferences (generally
>>>>one thinks in terms of negative preferences so it's
>>>>call risk aversion) and time preference are clearly
>>>>explanations of why such return exists.
>
>
>>>I am afraid you are not familiar with capital theory. Mainstream
>>>capital theory is a mess, and no such explanation has been
>>>convincing. The reaction of most mainstream economists to the
>>>last period of heavy dispute on the topic was to drop the
>>>subject, but to continue to teach theories shown to be nonsense.
>>>The teaching is various curious.
>
>
> Notice "jmh" has nothing to say about my assertion that his
> clear explanation of why returns to capital exist is
> confused.
There was no reason to comment as the issues you are
undoubtedly referring to having nothing to do with
the discussin I was involved in. Three is certainly
nothing confused or confusing about explanation that
people who one something want to be compensated for
letting others use it on other being willing to
allow that compensation for having access to the
item(s) in question. This has no dependancy on
ecnonomic capital theory even if closely related.
>
>>>>>>Ownship of Labor is also nonproductive so on
>>>>>>what basis does the worker applying that Labor
>>>>>>claim any part--much less ALL of it--of the output.
>
>
>>>>>I posted the following some time ago.
>
>
>>>>Which seems to be a circular argument: assumes
>>>>owners do not add anything to production but still
>>>>get a share in the output and then claim something
>>>>has been proven about owner not contibuting and
>>>>still getting a share.
>
>
>>>Wrong. It was a stylized description of empirical
>>>reality in the United States, for instance.
>
>
>>>>It simply assums that capital
>>>>is not productive--just as those who I responded to
>>>>were doing. Run the same exercise again where the
>>>>workers produce without the tools (capital) and the
>>>>owners truely contribute nothing and then then with
>>>>a combination of labor and capital and tell me how
>>>>much of the change in output the owners get--preferably
>>>>with a example that draws from some real world data.
>
>
>>>I'm afraid you ignored the argument. The story clearly
>>>had labor working with equipment. The fact is very few
>>>households own blast furnaces that they then sell to
>>>businesses.
>
>
>>Which then would be what the owners of captial contributed
>>making the claim that owners contributed nothing a
>>false assumpion or a conclusion violating one
>>of the starting assumptions--take you pick.
>
>
> I'm afraid you are not reading the posts to which you are
> pretending to reply. The following is an empirical
> observation: households do not have blast furnaces in
> their basements which they then sell or rent to
> businesses.
>
> Anyway, I'll pretend that jmh had something substantive
> to say in his last post.
>
> The supposedly "clear" explanation jmh put forward two posts
> ago doesn't stand up to analytical or empirical examination.
>
> Risk is an explanation of why some investments make more than
> others, but it is not an explanation of the basic rate of
> return ("interest") to capital. So I'll put that aside.
>
> What about time preference? The (false) theory here goes
> like so: suppose households are more willing to defer
> consumption to the future. This is an increase in the
> supply of capital. This increase in supply drives the
> price (interest) down. The interest rate is to be found
> by a supply and demand framework.
>
> Nobody has ever been able to tell this story coherently,
> to specify necessary assumptions that will get the desired
> conclusions.
I don't believe I offered the version of
> It can very well be that in a comparison of steady states,
> the state in which households are more willing to defer
> consumption, holding all other parameters (e.g., technology)
> of neoclassical theory the same, has a higher interest
> rate, not lower. That is, more capital per worker is
> associated with a higher interest rate.
>
> Or consider a transition between steady states. Suppose at
> one point in time, households are more willing to defer
> consumption from that point on. To get more "capital",
> they give up some current consumption. This can be
> manifested in such a transition by a path in which, as
> the quantity of "capital" increases, the interest rate
> must increase as well.
>
> Obviously the theory that interest is explained by time
> preference isn't well thought out.
I would simply note that I never claimed I was explaining
interest--merely the propostion that a) capital is
productive just as labor is and that owners of capital,
just as owners of labor, want compensation for
the contribution of their property committed to
productive acts.
You are address argument I have not made. My response to
you regarding preferences (risk or time or consumption)
was merely to point out that the failure to explain
preferences within any price theroy is hardle a
criticism as preferences are given and not explained.
If economic theory is to be damned for not explaining
preferences then I suspect the neo-Riccardians are in
just as much trouble as any mainstream economist.
jmh
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