Comment by PaulHoule | Hacker News Reader

Comment by PaulHoule | Hacker News Reader

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At first order in macroeconomics, "capital" as an abstract thing, the money itself, exploits everybody. With perfect competition it is impossible for a business to make a profit because if I can make something for $1 and sell it for $2 another business can enter and sell it for $1.99.

That same force would make it impossible for employees to get ahead, investors to make money, etc.

Profit, surplus for workers, investment return are all dependent on there being some kind of "friction" -- which abounds in the real economy.

For instance you want a "moat" for your business such a patent, trade secrets, being at the center of a two-sided market, etc. The labor union quite literally extracts "dues" from workers to sustain the value it helps get for them. Numerous practical problems, such as agency problems, turn up in employing people and it is really not in your best interest to try too hard at paying people as little as possible.

The original Marxian eschatology (before Lenin and the Bolsheviks) was that capitalism was going to eliminate all the friction, there would be no surplus for workers, no profits for business owners, capitalists would be unable to continue the game even if they wanted to.

I think the orthodox Marxist position is that prices gravitate around labor values in a competitive market. The main reason for profit is that people can produce more value than is necessary to sustain themselves, so capitalists don't need to pay them for the all the value they produce. Some of the value produced becomes profit. It is true that the rate of profit falls over time, but I think this is because of increasing automation in the economy, increasing the proportion of dead labor to living labor. Capitalists have less and less living labor to profit from relative to their costs of production.

That's what

https://en.wikipedia.org/wiki/Chris_Harman

would say. Harman wrote a number of great books on the subject and was buried next to Marx in London.

Harman himself would admit, though, the the problem of "the tendency of the rate of profit to decline" isn't completely understood or even established (e.g. the basic 'science of civilization' answer is that 'everything fluctuates'.)

I don't buy the idea of "dead" labor though in that capital investment does wear out. You could get a certain bit of infrastructure with 100 person-years or 10 person-years of effort with more or less bungling and the value is the same. You can't just add up the inputs, at the very least you have to apply a discount rate.

I don't think that changes the thesis, because the problem that capitalist has is that he has to put more capital in over time to be competitive and to scale.

Just like a worker would resent working harder and longer to get paid the same, the capitalist resents having to make larger capital investments to get the same return.

The increasing prevalence of "dead labor" (maybe another term for it is "fixed capital"?) depends on the changing processes of production. An example of the process is the switch from human-powered hoeing to animal-powered ploughing in agriculture (animals count as dead in this case, I guess.) Ploughing is more efficient, but requires more investment.

"Total Factor Productivity" is one way economists struggle with it. To maximize prosperity we need to be efficient with social capital, financial capital, labor and other factors of production: it is now a multiple-objective optimization problem for which there is no longer an equilibrium solution and thus it evades assigning a specific number to "Total Factor Productivity".

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