Coercion-free Economics

[lemur]

To the extent that economics involves interdependencies between various resources and forms of labor, inputs are required for processes to be completed. As such, economic actors have power to facilitate or obstruct economic processes by contributing or withholding resources and/or labor they control. This is, of course, the basis for a free market - in that everyone is an owner of their own labor and/or resources, and may thus freely choose whether to engage in exchanges or not, and at what price. It is also the basis for economies of control and various levels of centralization and corporatization, in that power is used to withhold resources from those who fail to comply with mandates of controllers.

 

The question is whether it is possible for economy to function and for everyone to have opportunities to prosper without some form(s) of coercion? Is it possible for people to be independent enough of each other that if some individual(s) choose to withhold their resources and/or labor, that others could continue to function and prosper without their input? Likewise, could it ever be possible for an individual to choose not to submit to the authority of a corporation, government, or other economic system and still be able to prosper economically? Will economic freedom ever be truly possible and, if not, how should economics be regulated in a way that makes economic coercion as fair and ethical as possible?

[Marat]

Marx initially stated the problem of coercion in economic relations as follows: If we both have only our labor to sell or produce items to exchange with each other, then we will always be in a position of rough equality, given the similar capacities of humans for work. But as soon as one of us acquires ownership of sufficient capital to own the means of production, then that person commands the resources of workplace which others cannot afford to buy and which can employ others. But since those employed there cannot afford to own their own means of production, but have only their labor to sell, their negotiating position is extremely weak, especially given the surplus of laborers available. This then forces them to work for the person who owns the means of production under exploitative terms of employment, in which they must produce a higher value of goods and services than the value of their wage, and the capitalist just sits back and skims off the difference between the value of what is produced and way he pays his workers for it, which is his profit. He then invests this profit in buying more and more of the means of production, and the exploitation of labor becomes continually worse.

 

A way to correct for this problem is to pool the resources of all humans together regardless of what they individually have to sell under the single umbrella of a government owner of the means of production. Then the use of the means of production, as long as the government is democratically representative, is for the equal benefit of all people, so that exploitation is eliminated. Wages can then also be set not according to what the profit of the capitalist requires, but according to what the democratic will determines is fair, so it would compensate the amount of time and effort invested under the assumption that all people are equal, and absurdities like Michael Eisner getting $300,000,000 a year for running Disney Enterprises while coal miners risk their health and lives in the mines for $40,000 a year would be eliminated.

 

But the economist and philosopher Friedrich von Hayek noted that the problem this solution creates is that there is then no freedom to labor or not to labor, or to choose one's form of labor freely, since the utilitarian efficiency of the democratic whole will compel everyone to labor for the greatest net social benefit. While Hayek's criticism is true, the freedom not to labor is meaningless in a capitalist world, since it effectively means starvation, so there is no great loss if we have to surrender this. Also, even under capitalism we are never free to work exactly where and how we want, so the loss of this largely theoretical freedom does not amount to much.

[lemur]

Marx initially stated the problem of coercion in economic relations as follows: If we both have only our labor to sell or produce items to exchange with each other, then we will always be in a position of rough equality, given the similar capacities of humans for work. But as soon as one of us acquires ownership of sufficient capital to own the means of production, then that person commands the resources of workplace which others cannot afford to buy and which can employ others. But since those employed there cannot afford to own their own means of production, but have only their labor to sell, their negotiating position is extremely weak, especially given the surplus of laborers available. This then forces them to work for the person who owns the means of production under exploitative terms of employment, in which they must produce a higher value of goods and services than the value of their wage, and the capitalist just sits back and skims off the difference between the value of what is produced and way he pays his workers for it, which is his profit. He then invests this profit in buying more and more of the means of production, and the exploitation of labor becomes continually worse.

I think Marx would view unions and social-economic governments as corporations that usurp ownership of labor from the individual laborers in order to control (collective) labor as a means of production. As I recall, Marx strongly criticized state-socialism as an obstacle to the realization of true communism. Idk if I'm for "true communism" but I do see a major difference between a system of organized re-distribution of money within a capitalist economy and communism in which the commitment of all to the greater good would make money meaningless, as everyone would simply voluntarily contribute their labor and resource-conservation to the goal of maximizing economic access to the greatest number of people.

 

A way to correct for this problem is to pool the resources of all humans together regardless of what they individually have to sell under the single umbrella of a government owner of the means of production. Then the use of the means of production, as long as the government is democratically representative, is for the equal benefit of all people, so that exploitation is eliminated. Wages can then also be set not according to what the profit of the capitalist requires, but according to what the democratic will determines is fair, so it would compensate the amount of time and effort invested under the assumption that all people are equal, and absurdities like Michael Eisner getting $300,000,000 a year for running Disney Enterprises while coal miners risk their health and lives in the mines for $40,000 a year would be eliminated.

But the question is whether Michael Eisner would take his share of coal-mining shifts, and whether the coal-miners would minimize their coal-usage voluntarily to conserve the resource and minimize the need for coal-mining labor. The problem in capitalism is that people like to work hard to have more - and they expect others to do the same regardless of how ecologically or socially detrimental the consequences. Nevertheless, capitalism is the only system, as far as I know, that rewards individuals for conservation by allowing them to save more money while those who spend more lose it.

 

But the economist and philosopher Friedrich von Hayek noted that the problem this solution creates is that there is then no freedom to labor or not to labor, or to choose one's form of labor freely, since the utilitarian efficiency of the democratic whole will compel everyone to labor for the greatest net social benefit. While Hayek's criticism is true, the freedom not to labor is meaningless in a capitalist world, since it effectively means starvation, so there is no great loss if we have to surrender this. Also, even under capitalism we are never free to work exactly where and how we want, so the loss of this largely theoretical freedom does not amount to much.

I think capitalism tends to evolve in the direction of greater efficiency, which leads to increasing unemployment, which would lead to increasing free time to choose what activities to pursue with one's time. The obstacle to this is that corporate resistance to price-competition allows certain wages and profit-margins to be maintained, which prevents deflation and further layoffs. I think that in a truly free market, prices and wages would continue to drop until the point where free people would have access to the means of production to produce for themselves. This doesn't occur because of class-formation where certain people control the means of production in a way that maintains a relative monopoly/oligopoly and thus prevents total free-market competition. It's ironic that Marx's criticism of capitalism actually strawmanned it by treating its socialized version as the natural result of its ideals, which I don't think is the case.

 

 

[Marat]

In a system of state ownership of the means of production, we could enforce conservation, hours of work, reward for efficient, long, or high-quality work, etc., all just by assigning rational inducements or disinducements for whatever outcomes we wanted the economic system to yield. This could be done by variable monetary awards (limited by our fundamental respect for genuine human need and the equality of all humans), by fines or compulsory labor to discourage non-conservation, etc.

 

Economists often note that our recent historical era is the only period which has not experienced an increase in leisure as a result of improvements in productivity, as were experienced throughout the world ever since the late 19th century, when people used to work 12 hours a day, 6 days a week. But why, with all the improvements in productivity since 1946, do we still have the same work week as was usual then, 8 hours a day and 5 days a week? The reason is that capitalists demand ever increasing profits, so the leisure which should be produced as a side effect of the rise in productivity instead goes to inflate profit, with the work year being held constant.

[lemur]

In a system of state ownership of the means of production, we could enforce conservation, hours of work, reward for efficient, long, or high-quality work, etc., all just by assigning rational inducements or disinducements for whatever outcomes we wanted the economic system to yield. This could be done by variable monetary awards (limited by our fundamental respect for genuine human need and the equality of all humans), by fines or compulsory labor to discourage non-conservation, etc.

The problem is you can't control how people spend money once you reward them with it. So how can you reward people for installing solar panels with money and then discourage them from spending that money on buying more gasoline, running the a/c cooler, etc.? Free markets are actually supposed to do what you say by lowering the price of more efficient products and raising prices for less efficient ones. The problem is that capitalism has evolved social-control mechanisms like corporations and redistributive government that provides people with such bountiful budgets that they can afford to splurge on things they like and drive up the prices of such things to levels that stimulate greater production of them. In a truly free market, aristocracy would evaporate as a result of price-competition driving down revenues and eventually most people would be either poor or very thrifty (think of Dickens' the Christmas Carol).

 

Economists often note that our recent historical era is the only period which has not experienced an increase in leisure as a result of improvements in productivity, as were experienced throughout the world ever since the late 19th century, when people used to work 12 hours a day, 6 days a week. But why, with all the improvements in productivity since 1946, do we still have the same work week as was usual then, 8 hours a day and 5 days a week? The reason is that capitalists demand ever increasing profits, so the leisure which should be produced as a side effect of the rise in productivity instead goes to inflate profit, with the work year being held constant.

In capitalism, no one can "demand ever increasing profits." If they could, the market wouldn't be free. They make ever-increasing profits because people aren't content to spend their leisure time engaged in non-consumptive activities. This means that leisure generates revenue/profit and stimulates more job creation, which eliminates the possibility of free time. If people wouldn't eat out during their free time, there wouldn't be so many restaurant jobs to fill, and if the people who weren't working in restaurants would take on some of the hours of the people not eating in restaurants, everyone would have more leisure time. It's just that people can't comprehend leisure-time without consumerism. If they could, capitalism would work fine as a means of maximizing efficiency of labor and therefore leisure time.

 

 

[Marat]

In part some of my answer to your comments on this thread could be derived from my reply to your similar topic in the thread below.

 

Capitalism doesn't just exist in a vacuum, but rather, it conditions the society in which it thrives to promote its own interests by exercising an ideological hold on that society. Part of that ideological grip is sustained through advertising, which creates a strong consumer-culture to convince people that the meaning of their lives is measured not in terms of their ideas, their friendships, their morality, or their personal creativity, but in terms of the amount of trinkets they own. This induces people to live to consume and work longer and harder to generate more income to consume more, and capitalism needs to reduce people to these sorts of human-guinea-pigs who just turn the exercise wheel of capitalism in their meaningless "getting and spending, late and soon" (Wordsworth)

 

State control of the economy could get people to buy the right things by setting the prices for goods not according to market forces and the profit motive, which have no necessary link to what is truly good for human society, but according to what is most beneficial for people according to an objective measure. Thus solar panels could be sold below cost, since they could include a discount for their positive externalities in reducing demand for materials in short supply, such as oil, while cars with poor mileage could be made nearly prohibitively expensive.

[lemur]

In part some of my answer to your comments on this thread could be derived from my reply to your similar topic in the thread below.

 

Capitalism doesn't just exist in a vacuum, but rather, it conditions the society in which it thrives to promote its own interests by exercising an ideological hold on that society. Part of that ideological grip is sustained through advertising, which creates a strong consumer-culture to convince people that the meaning of their lives is measured not in terms of their ideas, their friendships, their morality, or their personal creativity, but in terms of the amount of trinkets they own. This induces people to live to consume and work longer and harder to generate more income to consume more, and capitalism needs to reduce people to these sorts of human-guinea-pigs who just turn the exercise wheel of capitalism in their meaningless "getting and spending, late and soon" (Wordsworth)

Imo, social economic analysts don't do enough to distinguish between free market capitalism and control capitalism, which tends to emerge within and despite free markets and their ideology. So marketing, for example, and its corresponding response in consumer psychology/behavior is really an attempt to exercise market control despite and by means of consumer freedom of choice. It's like suppliers decide that if they can't control their market niches by formal regulatory institutions, they will attempt to create the same niches by convincing consumers to make choices on non-rational bases. The effect is the same as governmental market control, only it's achieved through manipulation of consumer freedom. Imo, a pro free-market government would focus on deconstructing marketing psychology and promoting rational consumption as well as productivity. It's not enough to leave people unregulated in their choices of how to work and shop because they will use their freedom to network and manipulate relative positions of monopoly/oligopoly instead of exercising faith that atomic rationality will lead to the optimization of economic good, which is the premise of free market theory.

 

State control of the economy could get people to buy the right things by setting the prices for goods not according to market forces and the profit motive, which have no necessary link to what is truly good for human society, but according to what is most beneficial for people according to an objective measure. Thus solar panels could be sold below cost, since they could include a discount for their positive externalities in reducing demand for materials in short supply, such as oil, while cars with poor mileage could be made nearly prohibitively expensive.

But what happens when government subsidies are injected into a market like solar panels. You have to realize that the investors and workers engaged in producing the solar panels are living with means of production/consumption that are organized to produce profits and wages for workers who are buying fossil fuels and nuclear power. So when government puts money into alternatives like solar panels, that money ends up funding existing industries and making them more competitive against the solar panels and other alternatives. Then, once the subsidies are reduces or eliminated, the produces and consumers of the alternatives (solar panels, etc.) go back to investing, working, and consuming the old technologies/fuels, which have maintained a strong market position due to the fiscal stimulus of the economy generally by subsidizing alternative ventures.

 

A true free market would allow the economy to recede, which puts pressure on existing industries to cut their budgets. Then, as wages and profits are decreasing, this stimulates investment, labor, and consumption to seek alternatives because the old methods are failing. E.g. as electricity and fuel costs rise and wages/profits drop, people gain more free time to invest/work on developing solar systems and enhancing their conservation to levels that are sufficient to power with solar and other renewable energy sources. This comes down to engineers and investors shutting off their air-conditioning systems and cutting their driving, etc. Given subsidies, they will simply maintain their current lifestyles and convince themselves that one day they'll be able to use 1000kwh/month and drive as much as they feel like by using renewable energy sources, which is naive imo.

 

This is a deviation from the thread topic, though, actually. The point was really whether anyone who didn't want to work or invest in existing institutions and enterprises could pull out their inputs (strike) without others engaging in coercive stimulus activities that push them to continue supporting and re-invigorating failing enterprises and governmental institutions. Theoretically, in a free market of ideas like that of the internet, proposals would come forward that people would voluntarily support and desire to work toward. The problem is that instead of this happening, there's a lot of manipulative discourse designed to convince people to accept and support existing regulatory institutions that effectively prevent change from occurring. People succumb to this, I think, because there are numerous creature comforts and other economic institutions that give them stability that they might not have in a radically evolving economic situation. So, for example, people and organizations keep borrowing money and spending it on everyday consumption, which funds the status quo of existing consumption-driven industries in their old work habits. They even think that their financial success as a result of stimulus through government-spending and private-lending/financing is proof that their old systems are the best way to do things.

 

 

[Marat]

Your problem of the money from the socialist industries (subsidized production of solar panels) winding up servicing the profits and fueling the further productive efforts and power of the non-socialist industries (people use the solar power energy savings to invest in buying gas-guzzling cars) could be avoided just by having more socialism. If all major industry was owned by the government, all prices, wages, advertising, energy economies, goods produced, and industrial methods could be designed to be as rational for the good of the people, the planet, and the society as possible, without the clumsiness of having to achieve these desired results approximately by nudging prices, taxes, environmental fines, etc., this way or that.

 

Looking again at the inital premise of this thread, i.e., how would a coercion-free economic system be possible, you might say that if people can agree to be bound by the majority will by their acceptance of democracy (which is usually taken for granted by our system of democratic government), then as long as the democratic will of the majority of people freely determines the way the economy is run, it can be regarded as coercion-free. Granted, some elements of the system will always have a coercive effect on some consumer interests, but since people in a democracy theoretically regard themselves as free by being the authors, in the general sense, of their government, they don't mind accepting the occasional speed limit or zoning law that they find unreasonably coercive. By extension, if the economy were also under general democratic control, no one could complain that any elements of it were coercive, since he would suppose that the system overall was designed for the good of the public, of which he was a voting member.

[lemur]

Your problem of the money from the socialist industries (subsidized production of solar panels) winding up servicing the profits and fueling the further productive efforts and power of the non-socialist industries (people use the solar power energy savings to invest in buying gas-guzzling cars) could be avoided just by having more socialism. If all major industry was owned by the government, all prices, wages, advertising, energy economies, goods produced, and industrial methods could be designed to be as rational for the good of the people, the planet, and the society as possible, without the clumsiness of having to achieve these desired results approximately by nudging prices, taxes, environmental fines, etc., this way or that.

True, but that would cause dissidents to think that their preferred economic choices/culture would thrive if allowed by government, which would be avoided by simply allowing people to pursue their economic goals and realize for themselves that they don't work. In a mixed system, which is typical in social-democracies, subsidies for alternative cultures end up supporting the status quo as well so you end up with both cultures. That's fine when it's about something relatively immaterial like which art to display, but when it's something like energy-usage, allowing people to spend money made building subsidized solar-panels on fossil-fuel electricity promotes a culture that isn't ultimately sustainable by means of solar energy. In a free market, a growing poor class would not be able to afford power-dense consumption activities, so they would have to conserve and then solar panels could emerge as an affordable way to get some electricity.

 

Looking again at the inital premise of this thread, i.e., how would a coercion-free economic system be possible, you might say that if people can agree to be bound by the majority will by their acceptance of democracy (which is usually taken for granted by our system of democratic government), then as long as the democratic will of the majority of people freely determines the way the economy is run, it can be regarded as coercion-free.

Why would anyone disagreeing with a majority want to be coerced to go along with it? If majoritarian socialism flourished at this moment in consumerism, people would insist on oil being pumped until gas was $1/gallon and they would create loads of jobs in retail sectors that pay people wages high enough to buy and throw away all they want. They would also coerce loads of people into doing the cleanup and other auxiliary services. People who are legitimately green and conservative spenders/consumers as a result would be driven to work to sustain high-waste consumerism for the majority. Supporters would claim it was socialist because the poor were getting stimulated to middle-class levels of consumption, but in reality it would be majoritarian cultural tyrrany.

 

Granted, some elements of the system will always have a coercive effect on some consumer interests, but since people in a democracy theoretically regard themselves as free by being the authors, in the general sense, of their government, they don't mind accepting the occasional speed limit or zoning law that they find unreasonably coercive. By extension, if the economy were also under general democratic control, no one could complain that any elements of it were coercive, since he would suppose that the system overall was designed for the good of the public, of which he was a voting member.

The issue of the thread isn't when people regard themselves as being reasonably or unreasonably coerced. It is about the possibility of economics without any coercion, whether it is possible and if not, why not? Why can't people act voluntarily on the basis of independent reason and have this result in an effectively productive economy?

Edited May 1, 2011 by lemur

[Edtharan]

The solution is the Post Scarcity Economy.

 

In such an economy, the market is not driven by supply and demand, as supply is as close to infinite as possible (or at least exactly equals demand). This kind of economy is a staple of many sci-fi stories (see Star Trek as the most famous example).

 

However, what they all seem to get wrong is that even in a Post Scarcity Economy money is important (and thus will still exist). This is because Money is only representative of value, not value itself (and an economy works of value not money) and even in post scarcity economies, things can still have value (and thus need something to represent that value). Also, in a Post Scarcity Economy, not everything will be post scarcity. There will still be some things that are not subject to elimination of scarcity (and note, that even in a scarcity economy, there exists post scarcity element too).

 

Currently, we value labour as the source of wealth. You get paid for the amount of time you work (whether it is fair compensation for your labour or not is debatable). In post scarcity, whether you work or not, you still have access to good and services. However, there still will exist people that have a higher value than others, because they contribute in various ways (creativity, status, number of facebook friends , etc). The exact things that are valued and what those values are is highly subjective so it is hard to give specific examples of what they would be, and it would change over time anyway.

 

Because of this, you couldn't easily control someone by restricting their access to resources as these resources would be non-scarce and easily available.

 

The other thing they get wrong is they paint post scarcity societies as utopian, but they would be no more capable of utopia then our current systems (but that is another discussion)