Economist Tyler Cowen, in a piece at The American Interest, argued that — despite growing differences in nominal income — inequality in “personal well-being” has declined drastically over the past century (“The Inequality That Matters,” Jan.-Feb. 2011).
“Bill Gates is much, much richer than I am, yet it is not obvious that he is much happier if, indeed, he is happier at all. I have access to penicillin, air travel, good cheap food, the Internet and virtually all of the technical innovations that Gates does. Like the vast majority of Americans, I have access to some important new pharmaceuticals, such as statins to protect against heart disease….
“Compare these circumstances to those of 1911, a century ago. Even in the wealthier countries, the average person had little formal education, worked six days a week or more, often at hard physical labor, never took vacations, and could not access most of the world’s culture. The living standards of Carnegie and Rockefeller towered above those of typical Americans, not just in terms of money but also in terms of comfort.”
I suppose I would say Cowen’s is a valid argument, in a very backhanded kind of way — or perhaps that it simply proves too much.
We’ve seen a stagnation in nominal, dollar-denominated, inflation-adjusted purchasing power, and the shift of virtually every penny increased GDP from productivity increases upward to the plutocracy and corporate management, as the result of all kinds of
subsidies, protections, and monopolies.
What Cowen is really pointing out, when you get right down to it, is that all these monopolies were still unable to prevent the average worker’s standard of living because — despite all the larceny in the plutocrats’ and bosses’ piggy little hearts — the technologies of abundance have developed so fast that they’ve increasingly broken the link between nominal purchasing power and resource distribution, on the one hand, and quality of life on the other. In other words, it’s becoming more and more feasible to live comfortably on what you’ve got left after you’ve been robbed by the plutocracy, despite their best efforts.
I’m surprised the WSJ hasn’t run a “Lucky Duckies” editorial on this.
Nevertheless, the fact remains that this trend undermines the basic logic the system was set up to serve, and the robber barons at the commanding heights of state capitalism are fighting tooth and nail to prevent it. Just what do you think the Digital Millennium Copyright Act was about, for example? Or the assorted recurring examples of “safety” legislation to impose overhead costs on small garage manufacturers and truck farmers and make them less competitive against mass-production industry and factory farming?
These people have been doing their dead level best to maximize the amount of rent they’re able to extract from each unit of comfort, to maximize the number of hours we work to produce profit from them in addition to supporting ourselves, by imposing all sorts of inefficiency burdens on production with efficient new technologies. It’s the moral equivalent of those laws the funeral industry used to have in a lot of states mandating the purchase of a casket even by people who wanted to cremate a body.
These people want to “enclose” the technologies of abundance and extract rents from them, in order to force us to work to support them in addition to ourselves. The fact that the productivity of abundance technologies is growing faster than their ability to raise the rents on artificial scarcity is — despite Cowen’s rosy picture of the world — a bug for them rather than a feature.
The propertied classes, the robber barons, have since the beginning tried to extract tribute by closing off and regulating access to the means of subsistence and production — much like a medieval lord forcing the peasant to work two days on the lord’s demesne in return for the right to support his family on his own plot the rest of the week. And throughout history, the ruling classes have responded to increased productivity of the peasantry’s labor by increasing the size of their own demesne so they could appropriate the surplus for themselves. What’s been happening technologically over the past decades is that the peasant’s labor is growing in productivity faster than the lords can enclose land to compensate for it. It’s more feasible than ever before, in the words of the Wobbly song, to “throw the bosses off our backs.”
And they hate it.
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Hmm. Okay. I’m as opposed to corporatism as the next guy and, I don’t like the current version of statist capitalism at all, but… Carson seems to be saying that there is a deliberate conspiracy to prevent the general standard of living rising by the corporatists. Does that make sense?
Who do they sell their products to? Us, that’s who. If we don’t get any wealthier, they can’t sell us the products and extract the rents he talks about. So, not a great plan there.
People talk about the huge proportion of “wealth” in the hands of the few, but what they mean is money. And it’s not real money; it’s M3 money, the imaginary stuff that, if you try to turn it into M0 liquidity, you find you can’t. From a libertarian perspective, wealth is goods and services. What proportion of human production of goods and services is consumed by the super-rich. That, I would argue, is the measure of their real wealth.
I would also argue, though there don’t appear to be statistiscs on it, that the answer would be, “not that much”. The overwhelming majority of food is eaten by the masses. Most oil powers ordinary peoples’ cars and jumbo jets, not Rolls Royces and Lear Jets. Most building is of ordinary homes, not mansions.
Humanity, at least in the West, is pretty much producing as much as it can at the moment (with some loss, maybe, ooh, 30%(?) for government imposed inefficiencies). Under a free market, we’d probably be more productive, and certain costs (esp. housing) would drop significantly. But
I see no conspiracy to impoverish us, not by corporations anyway. We’re already getting most of their produce, and that’s pretty much all there is that we can have. We could take away their M3 M4 whatever funny money, but it wouldn’t make us that much richer; we’d barely notice the difference, though the economy would probably be more stable.
Ian: It’s true that we have to benefit from an exchange compared to its absence in order for them to be able to sell stuff. But then that’s true even in the case of an absolute monopolist. But the position of monopolist is defined, among other things, to the ability to target administered prices to the level at which the consumer just barely benefits from the exchange, rather than the market-clearing prices that would prevail under unfettered competition. And the additional portion of the price that’s enabled by monopoly power is an absolute burden of additional labor the consumer must undertake per unit of consumption.
I don’t know if I’d call it a “conspiracy” to impoverish us, because it would assume a subjective state of mind. But functionally, things work out pretty much the same as if there were a conspiracy. The functional effect of most regulations is to impose artificial capital outlays and other overhead costs as entry barriers to production, and thereby to protect incumbent producers from full-blown competition from new, low-cost entrants — and that, in turn, enables them to collect scarcity rents from consumers. In effect, the consumer is compelled by law to work extra to support the rentier in addition to himself.
Laws raising the cost of subsistence and independent household production, like zoning laws against household enterprises and housing codes that prohibit cheap vernacular building technology, also increase the total amount of labor we must undertake for a given level of consumption, and thus artificially inflate the number of wage labor-hours people are competing for compared to the number of employers. That means employers are able to extract a rent from unequal bargaining power.
Kevin(?)
But the position of monopolist is defined, among other things, to the ability to target administered prices to the level at which the consumer just barely benefits from the exchange, rather than the market-clearing prices that would prevail under unfettered competition.
I disagree strongly with the economic model implied by this sentence. In particular, it presumes that all consumers judge the value of the good at the same level; they would have to do so in order for our hypothetical “monopolist” to “target administered prices to the level at which the consumer just barely benefits from the exchange”.
The whole basis of free market economics is the fundamental understanding that every individual has a unique scale of values. A tin of beans may be on offer at 30p. You think they’re worth 40p, so you buy one; I think they’re only worth 20p, so I don’t. Menger showed a very long time ago that this is why even an absolute monopolist cannot control the market. He can set the price, or he can set the quantity sold, but he cannot do both. It is utterly impossible for the monopolist to set a price “at which the consumer just barely benefits” because that price is different for every consumer.
You’re making the (common) class error of presuming that values are collective attributes and thus a “just price” can be asserted, I think.