----- Original Message -----
Sent: Wednesday, July 27, 2005 1:33
PM
Subject: Re: HOMESTEAD: Ray Carey's
Democratic Capitalism
Very interesting comments, John. I
hope that comments in a difference font will transmit.
Keith
----- Original Message -----
Sent: Tuesday, July 26, 2005 10:02
PM
Subject: Re: HOMESTEAD: Ray Carey's Democratic
Capitalism
> 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.
I agree with your principle, but as you
seem to acknowledge, that isn't what Kelso meant by "binary" as I understand
him--and his current expositors. There must be other ways to emphasize
the importance of distribution than mixing it up with a word that has become
associated with the productive process (two
factors).
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.
This is a stunner, and shows how out of touch
I have become with contemporary economic fads. Is this really a standard
text? My latest edition of Samuelson's was the 8th, and I am pretty sure
that it retained his comment that the neoclassical interpretation of factor
compensation (distribution) as put together by John Bates Clark was, like Adam
Smith's invisible hand a "purple passage", meaning that is too perfect
in its internal logic to be fully representative of reality. I wonder if the
last sentence above is from the book, or is it your own exaggeration?
The last time I looked, one of the currently "most e-mailed articles" from the
NYT electronic edition is about the success of Costco, which is challenging
Wal-Mart with a policy of much higher compensation to 'associates'.
Carey directly disagrees with your statement, of course, in asserting that
there are many American companies that focus first on the contentment of
employees as the most important element in their productivity and
profitability. This is the management perspective as
contrasted to the exploitive financial power. Note that Carey is very
aware that it is extremely difficult for enlightened management to pursue this
policy due to the ascendent power of the financial sector in having banished
the regulatory safeguards that are essential to the vaunted blessings of the
"free market". The authors of your text appear to have consigned a
century's worth of political economic rationale to the dustbin.
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"
I really do wonder about the
orthodoxy of your text. Insufficiency of consumer demand is a venerable
understanding in economics literature, going back to Marx and Mill at
least, and much emphasized since the basic principles course has
incorporated both a micro and a macro side.
> 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.
I don't know Heyne. Did you possibly mean
to write Keynes? If so, your comment seems wrong. Keynes' focus was
on idle capacity and insufficient demand. His solution was income from
employment, but that doesn't make it an emphasis on
production.
> My point is that whether or not one thinks economics are
Kelsonian, one
> ought to think of them as binary.
But that is a twist of Kelso's meaning and associates
economics with his term, thereby contributing confusion.
>
> 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)
A useful distinction. Carey does categorically
disagree with Novak as quoted. The nature of contemporary industry means that
it cannot be productive and efficiency unless it is democratic in his
sense.
>
> 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?
There is more to "ultra-capitalism" than simple
usury. Also, I think that "finanicial parasites" (possibly my term rather
than Carey's) is more immediately descriptive to contemporary ears than
usury, which has a medieval religious flavor. I'm pretty sure you are
going to enjoy the book.> >
> 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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