Fw: A question for those with fingers on figures

["Keith Wilde" <kwilde@magi.com>]

-----Original Message-----
From: Keith Wilde <kwilde@magi.com>
To: ownership@cog.kent.edu <ownership@cog.kent.edu>
Date: Wednesday, October 20, 1999 11:11 PM
Subject: Re: A question for those with fingers on figures


>A partial response to David Spitzley:
>
>-----Original Message-----
>From: David Spitzley <dspitzle@gw.wash.k12.mi.us>
>To: < <ownership@cog.kent.edu>
>Date: Wednesday, October 20, 1999 3:43 PM
>Subject: A question for those with fingers on figures
>
>
>>...... my memory of statements made in my labor economics course a few
>years ago was that labor >receives roughly 75% of aggregate income and only
>25% is paid out to owners of capital.
>
>
>This ratio fits with my recollection from several years ago.  I spent part
>of this afternoon with the manager of my unit, who was once a director in
>the Economic Council of Canada, looking through National Income data from
>Statistics Canada.  We didn't find the information aggregated in this way,
>which we found a bit surprising, but it may mean that it is a the result of
>occasional bouts of economic research which are not regularly repeated by
>official statistical agencies.  He agreed, however, with my memory and
>David's.  I will keep looking, for it seems that my location in a
government
>office puts the finger on me for this one.  (David Ellerman doubtless has
>convenient access to similar data sources on a more general level.)
>
>>So, my main questions are
>>a) what are the current figures accepted in mainstream economics for the
>relative proportion of >economic output paid to labor as opposed to
capital?
>THIS ONE IS FOR THE PROFESSORS.
>
>> and b) assuming they are similar to the 75%/25% figures above, how would
>one square that with the >apparently disproportionate impact of
>technological progress on economic growth, which would >presumably result
in
>increased payments to capital?
>
>
>NOT NECESSARILY.  Improved technology, embedded in capital, increases the
>productivity of the human actors ("labor" if you will).  Remember that
>productivity in micro-economics is a phenomenon primarily of factor
>proportions.  For a fixed quantity of labor, an increase in capital reduces
>the productivity of the marginal unit.  Consider Ashford/Shakekspeare's
>thought experiment of the man and the donkey.  Give a man a donkey and he
>suddenly can do much more work than before.  "But is it the man or the
>donkey that is doing most of the work ?" they ask.  Point granted.  But
what
>happens if you give the man a second donkey, then a third and a fourth and
a
>fifth?  How many added donkeys does  it take to reduce the collective
output
>to nothing but a wild menagery?  The lesson: diminishing marginal product
of
>capital--a phenomenon in this case purely of proportions, with static
>technology.  Then consider their other example, of the automated elevator.
>As technology progressed, the elevator operator gradually became totally
>redundant.  Now, they say, capital is doing all the work.  Ergo, capital
>should receive all of the reward for work done.  Tragic for the operators
>union, but that is why people must have a capital endowment if we are to
>avoid mass starvation--say A&S.  But are there truly no elevator operators?
>I find that every now and then I have to push a red button in the elevator,
>to ring an alarm, call for help and bring a service man to the site.  He
>takes manual control and saves me from an emergency trip to the lavatory.
>So, is the elevator a complete automaton, or is some human actor now vastly
>more productive in conducting people up and down office towers than the
>department store operator of former times?  Do you think the service man
>requires more skill, does more lifting work and "deserves" more pay than
the
>operator who used to sit there calling out floors, pushing a lever, and
>opening doors?  And what about all the operators' jobs that have
>disappeared?  By the logic of capitalism  they are off punching computers
>and driving trucks for the mobile, just-in-time warehouses of Wal-Mart,
>bringing us abundant merchandise at rock-bottom prices (in the global race
>to the bottom).  At an even more personal level, I'm not getting any
smarter
>as I get older, but every time my employer provides a new and improved
>computer my productivity goes up noticeably.  Can I take credit for the
>improvement?  Not really, by the Kelsonian logic, but unless I were there
to
>turn on the machine and ask it to perform erstwhile herculean tasks, it
>would just sit there dumbly.  And what about the engineers and programmers
>who superintend the machine and make it do what I want it to?  Half my age
>and twice my pay.  Are they productive?  Exactly twice as productive?  That
>one is tough to measure, but if you believe in market allocation as a guide
>to value, no question at all.
>
>These are the kinds of considerations which make it plausible for the
shares
>of income to capital and "labor" to remain roughly constant (the empirical
>question remaining open for the moment).  There is another important
element
>which seems to get overlooked sometimes.  It is analogous to Kelso's
>discovery of what I think of as the "magic" of money and finance which
makes
>it possible to bring together physical resources and make something happen
>even though no one has "saved up" the money to purchase all the inputs and
>pay the initial salaries.  I mean "management", the contribution of Peter
>Drucker and others like him who focus on the human problems of making an
>organization effective.  As human action becomes more and more remote from
>physical labor, as machines do more and more of the "actual" work,
>organization and administration become more critical to assuring a complete
>and abundant output. It may be hard to gauge their precise contribution to
>physical output, but managers and administrative staff certainly get an
>important share of the resulting income.
>
>I suggest that the main reason we find ourselves together in this activity
>(speaking of the COG progoram generally) is that the meaning of
>"productivity" has been lost in the disorienting flood of cheap "goods" and
>the disconnection of individuals from any concrete product that they can
>identify as the fruit of their own effort.  This loss of coherence is one
of
>the conditions making it possible for a relative few aggressive individuals
>to grab a disproportionate share of the collective wealth for themselves,
as
>documented assiduously by Jeff Gates, for example.
>
>
>
Keith Wilde
Ottawa, Canada
kwilde@magi.com
613 990-8125
613 747-6847