Friday, July 11, 2008

A Different World

Suppose that all equipment used in production were privately owned by individuals. Being fairly well-off, I might have a house with some sort of blast furnace in the back yard. Production in this imaginary world would be performed entirely by self-employed artisans.

One can allow some people in this world to perform no work. Some of these artisans would be lending or borrowing specific equipment from others. So any specific piece of capital equipment would have a rental price. If I happened to own equipment that could command high enough rents, I would be able to lend all my equipment out and live off these rents.

It seems to me that inasmuch as a neoclassical theory of value exists that is logically consistent in its assumptions, it is a map of the above sort of society. It is not even an attempt to describe a society in which one can loan out money at interest or buy and sell shares in firms that themselves own capital equipment. Given the lack of a stock market in this imaginary world, I do not see the point of introducing wage labor into the model either. One would still not end up with a model of a capitalist economy.

  • Joan Robinson (1962) Essays in the Theory of Economic Growth, Macmillan
  • Joan Robinson (1973) Economic Heresies: Some Old-Fashioned Questions in Economic Theory, Basic Books


Anonymous said...

Capitalist ideologues have long utilised the self-employed economy, i.e., the pre-capitalist economy, when defending capitalism. Milton Friedman made that basic error in Capitalism and Freedom, as have many others...

I would say it makes sense, as it means you can ignore the awkward fact that under capitalism most people sell their labour (i.e., liberty) to capitalists who get to not only keep the product of their labour but get to boss them around (as Rousseau recognised long, long ago).

I should note that socialist thinkers pointed out this basic difference between self-employment and capitalism (wage labour) and contrasted different kinds of market system.

Proudhon, of course, made this the core of his What is Property?, as did Marx (his famously account of primitive accumulation in America is based on this insight). Proudhon also argued for co-operatives to replace capitalist firms (I discuss this aspect of his ideas in an essay on the Paris Commune. Interestingly, Marx also supported co-operatives and the market, at least in the short-term. He also wrote this:

"Let us suppose the workers are themselves in possession of their respective means of production and exchange their commodities with one another. These commodities would not be products of capital." (Marx, Capital, vol. 3, p. 276)

Which is Proudhon's argument as well. Of course, all this discussion of social relationships and freedom in production can be ignored if you equate "the market" with "capitalism" (which both defenders of capitalism do, as well as the social-democratic and Leninist forms of Marxism).

Which is why we should always remember the difference, in my opinion.

An Anarchist FAQ

Ian Wright said...

Dear "anonymous" -- great post, thank you! I'd be grateful if you could contact me at "wrighti AT acm DOT org". I'd like to ask for some book recommendations.

You might find the work of the economist David Ellerman of interest, especially his work on the democratic firm:

Robert's neoclassical parable also elides the contractual basis of the capitalist firm, in which the owners of capital hire-in labor at a predefined wage but enjoy the status of residual claimants on firm income. But economic production of course need not be organized in this manner. For example, in a democratic firm the contractual relationship is reversed: the workers hire-in capital at a predefined rental price but enjoy the status of residual claimants on firm income. The key political question is who "owns the firm"? That is, who gets the status of residual claimant? The capitalist firm supports equity-capital, in which absentee owners enjoy a claim on the revenue generated by the labor of others in-perpetuity, whereas the socialist firm makes this kind of property impossible, since the renting of people has been abolished.

Robert Vienneau said...

Iain, by the way, do you have available a PDF version of Kropotkin's "Mutual Aid", preferably with your introduction?

I agree, Ian, that who is residual claimant is important, especially in disequilibrium - that is, always.

Anonymous said...

I'm not aware of a pdf of Mutual Aid, but it is available in html and as text

I'll ask around, though, maybe someone knows of a version somewhere. Maybe I should make one...

An Anarchist FAQ