That encourage sloppy thinking and the degradation of what works in the name of what doesn’t work. Profit is income from successful discovery, coordination and risk management, not capital.
I've tried to speak to quite a few people about the issue of anthropomorphizing capitalism into a bogey-man to hate, to not much effect. My usual argument goes:
Capitalism is just a resource allocation methodology. People pool resources and direct them to wherever they expect profit to come from. Then get to keep the profits. That's it at a base level. Of course what the socialists ultimately hate is the lopsided outcomes between the accruers of wealth and the wage-earners, not the mechanism itself.
I've come to believe people who advocate socialism are fundamentally misunderstanding the rules of economics - they believe these rules are prescriptive, therefore when they produce lopsided outcomes they can be changed into fairer ones. The rules are actually descriptive, and will always reassert themselves in some way eg the way black markets emerge when regulation of natural supply & demand is performed.
People will seek gains from trade. The reality of gains from trade is why market activities re-assert themselves. There is also a lot of misapprehension about how “planned” economies actually work on the ground.
In which vein, folk underestimate how much China’s turn to commerce was bottom up and over-credit Deng, whose most important decision was not to stand in its way. And even that, in part, was due to paralysis at the top of the CCP from tensions between Deng and Chen Yun.
just a quick overview response. Yep I agree that "Profit is income from successful discovery, coordination and risk management, not capital.". Capital is just one of the tools to facilitate discovery, coordination and risk management. But I would argue that 'labour' is now just that, discovery, coordination and risk management.
'Labour' in its industrial/antiquated sense is arguably a person standing by a machine and servicing the machine. That still exists to an extent today. But certainly in advanced economies the greater number of people who 'work' are involved in discovery, coordination and risk management. The concept of labour as now applied, particularly in industrial relations law and so on is really quite useless. Its a case of policy and law trying to force square pegs into round holes.
I am curious if you have ever read any of Rob Axtel’s work on agent based modeling of economies. He really influenced me a great deal, and his work demonstrates how important the structure of agents (people) are to the system that emerges from their behavior.
Thanks. I have not read Rob Axtel’s work, but I have read J. Doyne Farmer, ‘Making Sense of Chaos: A Better Economics for a Better World’, which I probably should have put in the references and is also about agent-based modellng.
I've been concerned by this shift in the general public to seeing economics as a battle between 'capitalists' and 'communists' fighting over the 'modes of production' as well.
It makes it impossible to explain to an organisation why it is failing in the real world. When one refers to forces or concepts such as equilibrium, probability, and uncertainty, then one is labeled a 'capitalist' because Critical Theory has taught everyone that 'economics' is a capitalist idea.
I wonder if the solution is to integrate game theory more broadly into childhood education? If people had a realistic understanding of game theory, I don't think they would keep falling for this 'capitalist' vs 'communist' duality.
I've tried to speak to quite a few people about the issue of anthropomorphizing capitalism into a bogey-man to hate, to not much effect. My usual argument goes:
Capitalism is just a resource allocation methodology. People pool resources and direct them to wherever they expect profit to come from. Then get to keep the profits. That's it at a base level. Of course what the socialists ultimately hate is the lopsided outcomes between the accruers of wealth and the wage-earners, not the mechanism itself.
I've come to believe people who advocate socialism are fundamentally misunderstanding the rules of economics - they believe these rules are prescriptive, therefore when they produce lopsided outcomes they can be changed into fairer ones. The rules are actually descriptive, and will always reassert themselves in some way eg the way black markets emerge when regulation of natural supply & demand is performed.
People will seek gains from trade. The reality of gains from trade is why market activities re-assert themselves. There is also a lot of misapprehension about how “planned” economies actually work on the ground.
In which vein, folk underestimate how much China’s turn to commerce was bottom up and over-credit Deng, whose most important decision was not to stand in its way. And even that, in part, was due to paralysis at the top of the CCP from tensions between Deng and Chen Yun.
just a quick overview response. Yep I agree that "Profit is income from successful discovery, coordination and risk management, not capital.". Capital is just one of the tools to facilitate discovery, coordination and risk management. But I would argue that 'labour' is now just that, discovery, coordination and risk management.
'Labour' in its industrial/antiquated sense is arguably a person standing by a machine and servicing the machine. That still exists to an extent today. But certainly in advanced economies the greater number of people who 'work' are involved in discovery, coordination and risk management. The concept of labour as now applied, particularly in industrial relations law and so on is really quite useless. Its a case of policy and law trying to force square pegs into round holes.
This is a great essay, thank you!
I am curious if you have ever read any of Rob Axtel’s work on agent based modeling of economies. He really influenced me a great deal, and his work demonstrates how important the structure of agents (people) are to the system that emerges from their behavior.
Thanks. I have not read Rob Axtel’s work, but I have read J. Doyne Farmer, ‘Making Sense of Chaos: A Better Economics for a Better World’, which I probably should have put in the references and is also about agent-based modellng.
I've been concerned by this shift in the general public to seeing economics as a battle between 'capitalists' and 'communists' fighting over the 'modes of production' as well.
It makes it impossible to explain to an organisation why it is failing in the real world. When one refers to forces or concepts such as equilibrium, probability, and uncertainty, then one is labeled a 'capitalist' because Critical Theory has taught everyone that 'economics' is a capitalist idea.
I wonder if the solution is to integrate game theory more broadly into childhood education? If people had a realistic understanding of game theory, I don't think they would keep falling for this 'capitalist' vs 'communist' duality.
Fascinating thought.
At last someone else has read Arthashastra .
Now consider “De Administrado Imperio” ! Which as Foreign policy cannot be improved upon.
Had never heard of it. But now I am aware.
https://en.wikipedia.org/wiki/De_Administrando_Imperio
Which reminds me, I need to find my hardcover copy, I hope it’s not in the garage 🙀
"Information is what is conveyed or represented by a particular arrangement or sequence of things."
No. Information is what is CONVEYING our particular arrangement and sequence of things. And that is my Marxist contribution for today!