If the mechanism of private property tends to allocate capital to its most productive uses, then incentives are being aligned to put many people to work for common benefit
Much of your later arguments depend on this statement, but I donât think the conclusions follow from the premises. I make a long argument here that an optimal market as described by neoclassical economics does not utilize available resources in a utility-maximizing way, and that it is nearly always possible to improve the âcommon benefitâ by allocating resources AWAY from their most productive uses. This is because from the marketâs perspective, the most productive use of a resource is the use that will command the highest price on the market. If a starving man has 1 dollar, but a rich man has 100 dollars to buy a sandwich to bury in the ground for his amusement, the more productive use of two slices of bread, a slab of teriyaki tofu, kale, tomato, and a spoonful of vegan mayo is to use it to make a sandwich for the rich man.
This would in fact be ESPECIALLY true if all inequality resulted from differences in the productive capacities of different individualsâ property. Because there are people who do not own anything productive (labor-power or otherwise), then those people would never benefit a cent from the most productive allocations of capital.
You say:
From a global utilitarian perspective, having much more than others is not on its own a reason to transfer wealth to them. Instead, you should expect the return you can get on reinvesting your wealth into profit-yielding enterprises to frequently be higher than the return they can get, so you might be able to make a more important gift to the future than to the present.
I disagree. A hundred dollars to the poor is worth more than a thousand dollars to the rich. Higher returns in terms of money does not entail higher returns in terms of utility.
Even when there is a large enough market failure to justify philanthropy, some amount of paternalism is warranted, because your wealth advantage corresponds to a way in which you know better than them.
Again, market failures are not necessary for the marketâs distribution of resources to be suboptimal. And the latter statement doesnât seem to logically follow from anything. Just because your labor/âcapital is more productive, why should that mean you understand other peopleâs preferences better than they do?
Then, you say:
Under the means of production hypothesis, the answer was straightforward: when I buy a good, I am sending a price signal which causes some combination of reallocation of resources to produce more of that good, and the reallocation of that good and its inputs away from those with the least productive use for them. On balance I should expect such price signals to enrich those alleviating scarcity by improving the efficiency with which scarce goods are produced
Creating price signals by buying goods does enrich people, but only because it enriches yourself. If you consume more, youâre redistributing productive resources away from other âless productiveâ uses, and towards your own uses. This is net-positive according to the economistic utility function, but thereâs no reason to believe itâs net-positive from a utilitarian perspective, and itâs pretty easy to think of situations where the reverse is true. For example, letâs say that youâre a billionaire and you want to spend your entire fortune on a pet project of yours: paying one million people a hundred thousand dollars each to build the worldâs largest pyramid in your honor, without being allowed to use any technology or sunblock. Not even one other soul in the world cares a single bit about this pyramid, but they want that hundred thousand dollars, so they agree to build it for you. This may intuitively strike you as magnanimous, maybe even altruistic. Everybody involved benefits, right? Thanks to your generous consumption, everyone is a whole lot richer! But this is an example of the broken window fallacy. The analysis ignores opportunity costs. If one million people are now spending their time carrying blocks of sandstone in the desert, thatâs one million fewer people free to practice medicine, or make smoothies, or grow mushrooms, or wash dishes, or make cartoons, or umbrellas, or fleshlights. The amount of labor available to produce all those things has gone down, and so their price will go up, and real consumption will go down. Resources have been redirected away from their âless productiveâ use (medicine, food, sex toys) and towards their âmore productiveâ use (the vanity of one obscenely rich asshole). 100 billion dollars worth of consumer goods have been lost to produce a 100 billion dollar pyramid. They are both equal in monetary price, but the former has vastly more utility than the latter. If the billionaire had burned his money instead of building pyramids, everyone except him would be better off. This is something that I think is often missed in criticisms of âzero-sumâ thinking. Itâs true that the economy is not zero-sum, but this does not imply that there are no tradeoffs.
It follows analytically that under the oppression hypothesis, since the enrichment of producers doesnât happen, any price signals I send do not reallocate resources to produce more in-demand goods on net
Letâs examine a historical society whose inequality everyone agrees to be the result of an oppressive, extractive class: the antebellum south. In that society, the producers of goods were the slaves, but they didnât own their own labor, so the product of their labor went to their owners, minus the bit that was necessary for their subsistence. I donât think it was the case that price signals in the antebellum south allocated resources any differently than they did in any other society, and I donât fully understand why they would. If a slaveowner can make more money by redirecting the activity of his slaves away from cotton production and towards tobacco production, than he will do so, and spending a lot of money on tobacco will still send a price signal that resources should be allocated towards tobacco production. This is because although the slaveowner is not a âproducerâ, he still has an incentive to utilize his property (in this case human beings) in the most profitable way. This is no different from owners of land, or companies, who have the same incentives to maximize the productivity of their property, despite merely owning productive goods, and not personally producing goods with their own labor. I donât think the price mechanism works differently between the two hypotheses.
I donât think these hypotheses of inequality contradict each other. Going back to the slave society example, inequality between the slaveowners and the slaves could be explained entirely due to differences in âproductive capacityâ. The slaveowners owned lots of means of production (including the labor-power of the slaves themselves) and the slaves owned no means of production (not even their own labor-power). This is consistent with the hypothesis that wealth corresponds to productive capacity, because the slaveowners owned far more productive capacity, and it is also consistent with the hypothesis that wealth is the result of one class exerting force on another to maintain a claim on their property, because the slaveownersâ rights over the products of their slavesâ labor was enforced by violence.
Itâs odd to see a post that uses the phrase âmeans of productionâ this often without mentioning Marx, who explicitly believed and repeatedly said that oppression was caused by, and equivalent to, distinctions in ownership of the means of production, rather than the two concepts being competing hypotheses.
My thoughts:
Much of your later arguments depend on this statement, but I donât think the conclusions follow from the premises. I make a long argument here that an optimal market as described by neoclassical economics does not utilize available resources in a utility-maximizing way, and that it is nearly always possible to improve the âcommon benefitâ by allocating resources AWAY from their most productive uses. This is because from the marketâs perspective, the most productive use of a resource is the use that will command the highest price on the market. If a starving man has 1 dollar, but a rich man has 100 dollars to buy a sandwich to bury in the ground for his amusement, the more productive use of two slices of bread, a slab of teriyaki tofu, kale, tomato, and a spoonful of vegan mayo is to use it to make a sandwich for the rich man.
This would in fact be ESPECIALLY true if all inequality resulted from differences in the productive capacities of different individualsâ property. Because there are people who do not own anything productive (labor-power or otherwise), then those people would never benefit a cent from the most productive allocations of capital.
You say:
I disagree. A hundred dollars to the poor is worth more than a thousand dollars to the rich. Higher returns in terms of money does not entail higher returns in terms of utility.
Again, market failures are not necessary for the marketâs distribution of resources to be suboptimal. And the latter statement doesnât seem to logically follow from anything. Just because your labor/âcapital is more productive, why should that mean you understand other peopleâs preferences better than they do?
Then, you say:
Creating price signals by buying goods does enrich people, but only because it enriches yourself. If you consume more, youâre redistributing productive resources away from other âless productiveâ uses, and towards your own uses. This is net-positive according to the economistic utility function, but thereâs no reason to believe itâs net-positive from a utilitarian perspective, and itâs pretty easy to think of situations where the reverse is true. For example, letâs say that youâre a billionaire and you want to spend your entire fortune on a pet project of yours: paying one million people a hundred thousand dollars each to build the worldâs largest pyramid in your honor, without being allowed to use any technology or sunblock. Not even one other soul in the world cares a single bit about this pyramid, but they want that hundred thousand dollars, so they agree to build it for you. This may intuitively strike you as magnanimous, maybe even altruistic. Everybody involved benefits, right? Thanks to your generous consumption, everyone is a whole lot richer! But this is an example of the broken window fallacy. The analysis ignores opportunity costs. If one million people are now spending their time carrying blocks of sandstone in the desert, thatâs one million fewer people free to practice medicine, or make smoothies, or grow mushrooms, or wash dishes, or make cartoons, or umbrellas, or fleshlights. The amount of labor available to produce all those things has gone down, and so their price will go up, and real consumption will go down. Resources have been redirected away from their âless productiveâ use (medicine, food, sex toys) and towards their âmore productiveâ use (the vanity of one obscenely rich asshole). 100 billion dollars worth of consumer goods have been lost to produce a 100 billion dollar pyramid. They are both equal in monetary price, but the former has vastly more utility than the latter. If the billionaire had burned his money instead of building pyramids, everyone except him would be better off. This is something that I think is often missed in criticisms of âzero-sumâ thinking. Itâs true that the economy is not zero-sum, but this does not imply that there are no tradeoffs.
Letâs examine a historical society whose inequality everyone agrees to be the result of an oppressive, extractive class: the antebellum south. In that society, the producers of goods were the slaves, but they didnât own their own labor, so the product of their labor went to their owners, minus the bit that was necessary for their subsistence. I donât think it was the case that price signals in the antebellum south allocated resources any differently than they did in any other society, and I donât fully understand why they would. If a slaveowner can make more money by redirecting the activity of his slaves away from cotton production and towards tobacco production, than he will do so, and spending a lot of money on tobacco will still send a price signal that resources should be allocated towards tobacco production. This is because although the slaveowner is not a âproducerâ, he still has an incentive to utilize his property (in this case human beings) in the most profitable way. This is no different from owners of land, or companies, who have the same incentives to maximize the productivity of their property, despite merely owning productive goods, and not personally producing goods with their own labor. I donât think the price mechanism works differently between the two hypotheses.
I donât think these hypotheses of inequality contradict each other. Going back to the slave society example, inequality between the slaveowners and the slaves could be explained entirely due to differences in âproductive capacityâ. The slaveowners owned lots of means of production (including the labor-power of the slaves themselves) and the slaves owned no means of production (not even their own labor-power). This is consistent with the hypothesis that wealth corresponds to productive capacity, because the slaveowners owned far more productive capacity, and it is also consistent with the hypothesis that wealth is the result of one class exerting force on another to maintain a claim on their property, because the slaveownersâ rights over the products of their slavesâ labor was enforced by violence.
Itâs odd to see a post that uses the phrase âmeans of productionâ this often without mentioning Marx, who explicitly believed and repeatedly said that oppression was caused by, and equivalent to, distinctions in ownership of the means of production, rather than the two concepts being competing hypotheses.