This post echos another quotation from somebody who understands something about how rewards are distributed under capitalism.
"In every other country capitalism, competitive and monopolistic, displays the same defects and applies similar political and economic remedies in order to save its life from the new revolutionary attacks of socialism and communism. Regarded more narrowly from my own standpoint of criticism, what has occurred is a display and condemnation of the unequal and unfair character of all markets. For nowhere are the bargaining powers of supply and demand on an equal footing, and everywhere the individual buyers and sellers, whether of goods or services, are so unequal in their 'need' to sell and buy that the advantage accruing from sales at any given price give widely different advantages to those who participate. In other words, whether under monopoly or so-called competitive conditions, markets are intrinsically unfair modes of distribution.
This is my most destructive heresy, and therefore the one for which I have least succeeded in gaining attention, even in the form of hostile criticism, from the orthodox economists. The defence of capitalism consists mainly in ignoring positive attacks and in concentrating upon the errors, follies, and divided counsels of its assailants. Among the business and professional classes and their economic supporters the conviction holds that any property or income legally acquired represents the productive services rendered by its recipient, either in the way of skilled brain or hand work, thrift, risks, or enterprise, or as inheritance from one who has thus earned it. The notion that any such property or income can contain any payment which is excessive, or the product of superior bargaining power, never enters their minds. Writers to The Times, protesting against a rise in the Income Tax, always speak of their 'right' to the income they have 'made,' and regard any tax as a grudging concession to the needs of an outsider, the State.
So long as this belief prevails all serious attempts by a democracy to set the production and distribution of income upon an equitable footing will continue to be met by the organized resistance of the owning classes, which, if they lose control of the political machinery, will not hesitate to turn to other methods of protecting their 'rights.'" -- J. A. Hobson, Confessions of an Economic Heretic
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«For nowhere are the bargaining powers of supply and demand on an equal footing, and everywhere the individual buyers and sellers, whether of goods or services, are so unequal in their 'need' to sell and buy that the advantage accruing from sales at any given price give widely different advantages to those who participate. [...] The notion that any such property or income can contain any payment which is excessive, or the product of superior bargaining power»
That argument is a bit otherworldly:
* "Mainstream Economics" does not question demand and supply curves, it takes them as given. If they are the result of asymmetric advantage, that is a different topic. Pricing according to scarcity rather than cost, and the resulting "windfalls", are considered entirely fine. That's what the markets do. Even if in the formal neoclassical models it is assumed that all seller and buyers have no pricing power, and there are infinite markets in infinite commodities with infinite sellers and buyers in each. The underlying idea is that scarcity is a fact, and the consequences are legitimate.
* Perhaps because of ideological propaganda most people in the USA regard pricing according to scarcity as quite legitimate too, and so are windfall profits from scarcity. Surely most property owners agree with that, and most shareholders in oligopolies. What a larger category of people seem to object to is *intentional* scarcity, but *lucky* scarcity. But many property owners would not admit that housing scarcity where it happens is usually the result of government policy because of property owners voting into government politicians that reward their property owning voters by ensuring they get large scarcity windfalls.
There are some categories of commodities that behave differently from the usual "the markets" pricing logic and are widely underappreciated:
* "collectibles" like gold, tulip roots, property deeds, treasury bills, etc. which have nugatory material "value".
* "necessities" like housing, medicines, etc. which have essential material value.
As to the latter consider a medicine that can save the life of 10 dying people, but there are only 9 doses available: its "market" price is the entirety of the wealth of the 9 richest people among the 10, and the poorest among the 10 dies, even if with his wealth intact. Is the windfall extracted by the vendor unfair? What would then be a fair allocation of that scarce resource, if not based on the ability to pay the highest possible price?
Part of the poverty of neoclassical Economics post JB Clark etc. is the loss of well established concepts, here that political economy studies are mostly about "economic" commodities, that is those with substantially large and not too different in amount supply and demand (that is neither supply nor demand has freaky or too different elasticities).
Note: another lost concept is the difference between sectoral and general gluts or shortages.
«pricing according to scarcity as quite legitimate too, and so are windfall profits from scarcity. Surely most property owners agree with that»
But of course they agree most enthusiastically when there is scarcity of supply of housing, when there is scarcity of demand that benefits the bargaining power of buyers I suspect most are bitterly opposed to the windfall profits from scarcity of demand.
«their 'right' to the income they have 'made,'»
My impression is that most are well aware that is just propaganda, as many of them are well versed in extracting the maximum profit from the weakest counterpart they can find. Then there are those who are explicit "social darwinist" and argue that is as should be and that predatory behaviour is legitimate and a human right.
«and regard any tax as a grudging concession to the needs of an outsider, the State.»
The framing of the tax/spend debate in terms of "State" is typical of right-wing ideology, because the same people are very happy when a big spending State spends on them instead of others.
The basic issue most right-wingers have with tax is very simply explained:
* 10% of income tax payers pay 70% of income tax.
* This means that most income tax paid by that 10% benefits someone else.
* This means that the same State services are charged at very different prices to different people which is discrimination.
Consider military spending at around 4% of GDP; assuming non-progressive rate taxation, for exactly the same "defense" service someone on 10,000 a year pays 400, someone on 50,000 a year pays 2,000 and someone on 250,000 a year pays 10,000, when the real cost may be 2,000 for each of them.
The typical "leftoid" argument is that tax is based on ability to pay, so too bad for the rich, but there is a much better argument:
* Tax does not include just the cost of a State service, but also lifetime insurance against being too poor to pay for that service.
* In effect a citizen is given a lifetime State services "account", which is paid for with a lifetime mortgage, which is repaid in instalments called "tax" according to income, because no other sensible basis is possible.
Then the arguments of some people can become
* I will be always rich, so I don't need implied insurance against being unable to pay for State service.
* The mortgage terms are too skewed in favour of low income people, so the value of the implied insurance is very different.
«those who are explicit "social darwinist" and argue that is as should be and that predatory behaviour is legitimate and a human right.»
Oops I miswrote: social darwinists usually argue that predatory behaviour is a human *duty*, and that those who shirk that duty are harming the long term well being of humanity.
“For nowhere are the bargaining powers of supply and demand on an equal footing, and everywhere the individual buyers and sellers, whether of goods or services, are so unequal in their 'need' to sell and buy that the advantage accruing from sales at any given price give widely different advantages to those who participate.”
«most people in the USA regard pricing according to scarcity as quite legitimate too, and so are windfall profits from scarcity. [...] consider a medicine that can save the life of 10 dying people, but there are only 9 doses available: its "market" price is the entirety of the wealth of the 9 richest people among the 10, and the poorest among the 10 dies, even if with his wealth intact. Is the windfall extracted by the vendor unfair?»
To be even more explicit consider that case an explicit or implicit auction, there are two main different possible sources of unfairness of the medicine that can save only 9 out of 10:
#1 That the auction is run in a biased way.
#2 That the action is run in an unbiased way, the issue is that the seller has literally power of life or death on the 10 potential customers, thus “individual buyers and sellers [...] are so unequal in their 'need' to sell and buy” and therefore can extract the maximum price from 9 out of 10.
My impression is that a lot of people will be far more concerned with case #1 than case #2 ("that is just how life works"). For example many people will complain if the 1 left out is of different skin color or sex or sexual orientation than the 9 auction winners, and some will complain that an auction is inherently biased in favour of rich people.
Note: you can replace replace "save the life of 10 dying people, but there are only 9 doses available" with with "admission to Oxford or Harvard to get into high-paying careers", for example, or other scarce and cherished commodities, especially of positional goods.
Note: "positional" commodities are another example of non-"economic" commodities, along with "collectibles" and "necessities", even if some "positional" commodities are also "collectibles" (and it is the very positionality that makes them items to collect).
Oh well, I cannot hold back another "contribution" :-)
The issues discussed in the quote posted by our blogger and in my comments are nothing new, they have been debated by philosophers and theologians for some thousands of years. I think often that *anthropologists* have or should have much to say on them.
Bonus quotes, first the original that was preached by "sponsored" priests, second the modern version being preached by "sponsored" Economists:
“All things bright and beautiful, / All creatures great and small, / All things wise and wonderful, / God made them all.
The rich man in his castle, / The poor man at his gate, / God made them high and lowly, / And ordered their estate.”
“All things bright and beautiful, / All creatures great and small, / All things wise and wonderful, / The Markets made them all.
The rich man in his castle, / The poor man at his gate, / The Markets made them high and lowly, / And ordered their estate.”
«in the formal neoclassical models it is assumed that all seller and buyers have no pricing power, and there are infinite markets in infinite commodities with infinite sellers and buyers in each»
Another underappreciated assumption is that demand is unlimited in every market, constrained only by availability of funds by the buyers. That's one interesting way to ensure that ("in this model") unemployment of labour is always voluntary (there is never a sectoral glut of labor).
One aspect of Keynes is to deny that there is unlimited demand for productive investment, because there are cases where investors all want to switch from illiquid productive investments to more liquid unproductive ones (in particular "collectibles" like "money") that don't require inputs of labor or nugatory amounts of labor, therefore the so-called "Say's Law" against general gluts does not work.
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