Re: HOMESTEAD: Ray Carey's Democratic Capitalism

[John Médaille <john@medaille.com>]

At 07:22 PM 7/26/2005 -0400, Keith Wilde wrote:
Keith,

A very interesting review. I shall certainly read Carey's book. A couple of 
points.

On binary economics, despite my own disagreements with that "science," I 
think there is a point to speaking of economics as *binary*, even if not as 
Kelso used the term. A proper study of economics involves both production 
and distribution of the things produced. You might say that this is so 
self-evident as to be trivial. Alas, it is not so among economists. I offer 
as evidence the very popular economics textbook, "The Economic Way of 
Thinking," now in its 10th or 11th edition. The book does indeed have a 
chapter on distribution, but only to show that distributions are automatic 
and beyond the reach of any human intentionality. Or as the authors put it, 
“Because income isn't really distributed by anyone, it can't actually be 
redistributed. No one is in a position to apportion shares of the social 
product.” (285) Wages, unlike profit, are the automatic result of supply 
and demand curves, beyond the ken or control of any human. Only production 
is interesting to the authors of this text, and I think they are not alone 
among economists in thinking this way. But in truth, both "supply-side" or 
"demand-side" economics are rather silly. By definition, these economists, 
whether supply or demand side, treat of half the science, like a doctor who 
will only treat the left side of the body. This is a tradition that goes 
back to J. S. Mill, who said that while the laws of production “Partake of 
the character of physical truth,” the laws of distribution are “of human 
institution solely” and could be made “different, if mankind so chose” 
Mill's position only apparently contradicts Heyne's; both concentrate the 
useful part of the "science" of economics on production, while leaving 
distribution either to social decisions (Mill) or an automatic effect of 
the production process needing no separate study.

My point is that whether or not one thinks economics are Kelsonian, one 
ought to think of them as binary.

The title of Carey's book echoes Michael Novak's "The Spirit of Democratic 
Capitalism." As chance would have it, I have just written a critique of 
that tome for my own book. Carey and Novak mean opposite things by 
"Democratic Capitalism." Carey means (I suspect) that capitalist firms 
ought to be democratic, while Novak means that they ought NOT to be 
democratic. In Novak's words, "“To organize industry democratically would 
be a grave and costly error, since democratic procedures are not designed 
for productivity and efficiency." (128)

The odd thing about "independent productiveness" is that, were it true, it 
would make employee ownership well-nigh impossible; the price of a share, 
assuming somebody would be willing to part with something so valuable, 
would be a thousand times what a worker earns. But then the whole problem 
of ESOPs is that they can only work as a re-distributive tool if the 
current owners are willing or compelled to dilute their ownership, that is, 
sell them below below market rates. If sold at market rates, than nothing 
is redistributed, only the form of ownership changes. The market is Pareto 
optimal, which is Italian for "nothing really changes."

And a final point. Could it be that everyone must talk about  financial 
parasites because no one is willing to talk about usury?


John C. Médaille

"A dead thing can go with the stream...
but only a living thing can go against it."
         -G. K. Chesterton
http://www.medaille.com/distributivism.htm
john@medaille.com

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