Wednesday, November 27, 2013

'I think we tend to have an aesthetic response to these issues that leads us astray.'

The HSIB Academy announces a Master of Understatement nominee, in the category Goose...Golden Eggs to Kevin Erdmann, for his summation (which has been borrowed for the title of this blog post) of;
I tend to have a queasy feeling about the implied moral notions that discussions about these things tend to carry.  There is usually a sense that declining labor share is a problem to be solved.  But, who is to say that labor share hasn't been too high?
I am going to eat some sugar plums tonight, then go to bed and dream of a world where the social convention is to wonder how we can increase capital's share of GDI.  Does that make me a bad person?  If you think so, then I encourage you to visit a place where 100% of compensation goes to labor.  They exist.  Floors tend to be made of dirt there.  You might find that you want to take the first available flight back home from there...except they won't have planes, because planes require capital.  Many places like that are now seeing vast improvements in the conditions of the typical household.  The places that are doing that are doing it by encouraging the profitable allocation of private capital.
My point is that it is very hard to determine the optimal proportion of income that should go to labor.  A mental model that induces concern for decreasing Labor Share but never induces concern for decreasing Capital Share is not a coherent model.  It's a very effective, and widely utilized, model for social posturing, but it would be practically useless as an informational tool.
Bold in the above by HSIB.

Is there a better example afoot than that of the newest member of the Seattle City Council (and North Carolina State Phd in economics!);
[Kshama] Sawant is calling for machinists to literally take-possession of the Everett airplane-building factory, if Boeing moves out. She calls that "democratic ownership."
“The only response we can have if Boeing executives do not agree to keep the plant here is for the machinists to say the machines are here, the workers are here, we will do the job, we don't need the executives. The executives don’t do the work, the machinists do,” she said.


  1. The totalitarian economist Keynes (1883–1946) proposed that capital can be made non-scarce, that is, there could be enough capital (machines) to produce goods for all human wants within say 20 years, under proper government management.

    Karl Marx (1818-1883) proposed the same thing. The capitalists had built wonderful machines. The proletariat (common man) could take over the machines (the means of production) and live great lives by pushing the buttons. The capitalists had made themselves superfluous, and there was no need to deliver profits (incomes) to them.

    Karl Marx was wrong about the industrial production of 1860, but has been shown to be correct about our current society. If we adopt the policies of Marx and Keynes, we will certainly achieve the 1860's standard of living without much effort and under the administration of fair and thoughtful government bureaucracies.