mck@ratex.UUCP (Daniel Kian Mc Kiernan) (01/26/85)
Mr Carnes wants to refrain from involved, specialized economic debate on
netnews, and I think rightly so. But when I direct the reader to where s/he
can further pursue the subject, Mr Carnes accuses me of arguing from authority;
obviously Sevener is not the only net-user to build straw-men. If this were
net.math, and I asserted this-or-that theorem, and told the reader than the
proof could be found in such-and-such a work by Vygodsky, would I be arguing
from authority? Perhaps Mr Carnes's argument would have some merit if I were
merely to declare that the consensus of opinion was so-and-so (in fact, it is
Mr Carnes who apparently seeks proof by consensus) or to declare something
proved by Professor Doe; but, in point of fact, I direct the reader to a
specific work and try to lessen his/her difficulty in procuring a copy.
Mr Carnes thesis that a doctorate in economics is achieved by acknowledging
that nothing is known is interesting. Since he already knows that nothing is
known, it is a wonder that he does not acquire his.
Marxists have indeed been long aware of Bohm Bawerk; that fact notwithstanding,
only the Austro-Marxists have made an honest attempt to confront his work. The
theory of surplus-value does indeed have its subscribers; so does the theory
that the Earth is flat. Perhaps if I tell the reader that proofs that the
Earth is round can be found in *Astronomy* by Protheroe et alii, Mr Carnes will
again accuse me of arguing from authority. Mr Carnes subsequent comments about
interest indicate that he is not familiar with the work of Bohm Bawerk.
Libertarians do indeed believe that labor can be a source of value; they
recognize that nature is not the only other source of value. The phenomena of
interest and profit primarily from two causes:
1) Greater productivity can be achieved by more roundabout methods of
production.
2) Wants which can be satisfied by consumer goods recur.
Adding to this is:
3) Present wants receive somewhat greater valuation than future wants.
Consider a two-dimensional productions possibilites frontier. Let the x-axis
represent production of G available immediately, and let the y-axis represent
production of G available at some future time. If, like the over-whelming
majority of goods, G is storable, then all techniques that can be used for
immediate production can be used to make G available at the future date. The
same is not true of all methods which make G available at some future time;
some techniques which make G available in the future do not work immediately.
Thus, the frontier will touch the future-axis at a point of greater magnitude
than the present-axis, and the slope of the frontier will everywhere be less
than -1. Now consider the relationship between the marginal utility of present
consumption and that of future consumption. As present consumption is traded-
off for future consumption, the marginal value of the remaining present
consumption increases, and vice versa. This can be represented as a series of
indifference curves, bulging towards the origin. Utility is maximized at the
point of tangency between the frontier and an indifference curve. If we assume
that future consumption is valued equal to present consumption, in other words
that the indifference curves are tangent along the 45-degree line to lines of
slope equal to -1, then the phenomenon of interest is already explained. The
point of tangency between the frontier and an indifference curve will lie such
that the ratio of value (the marginal rate of substitution) is greater than
unity (the slope of the indifference curve, at the point of tangency, must
equal the slope of the frontier, which is everywhere less than -1). For a
number of reasons, rational and irrational, people tend to value present
consumption over future consumption. This can be represented by indifference
curves which are tangent along the 45-degree line to lines of slope less than
-1. With such curves, the point of tangency with the frontier is shifted
further to the right, where the slope of the frontier is even lower, and thus
the ratio of value is even greater. The preceeding discussion is based on the
work of Eugen Ritter von Bohm Bawerk (*Capital and Interest*), Hans Meyer
(sorry, I don't have the title of the article), and Irving Fisher (*Theory of
Interest*). Bohm Bawerk generated equivalents of the preceeding discussion
without using mathematical modelling (which the Austrians abhor); Meyer and
Fisher restated Bohm Bawerk's work in mathematical terms. This work is
further developed in 'The Austrian Theory of Marginal Use and of Ordinal
Marginal Utility' (*Zeitschrift fur Nationalokonomie* Dec 77) by J Huston
McCulloch. Probably no one out there could follow what I said, and probably no
one out there gives a damn, which is why I generally just refer the reader to
the relevant work. To Mr Carnes' question (Why do 'libertarians say that people
are entitled to appropriate wealth even though they haven't performed any labor
to produce any new wealth'?): people can contribute to production without
contributing labor. Mr Carnes' question can be salvaged, by producing examples
where an individual contributes nothing to production, yet still reaps its
benefits. The answer is that Libertarians do not see it as ethically
imperative than benefits be rationed out according to MVP. For that matter,
neither did Marx, who declared that benefits should be distributed according to
need rather than to contribution to production. If I were to get it into my
head to send Mr Carnes $100, I do not expect that he would regard this as
unjust.
Waiting for it to roll back down,
Daniel Kian Mc Kiernan
PS: I almost skipped by your article; the title did not indicate that it was
in part directed at me.josh@topaz.ARPA (J Storrs Hall) (01/29/85)
> ... Probably no one out there could follow what I said, and probably no > one out there gives a damn ... > Daniel Kian Mc Kiernan For the first time, DKMcK is wrong, and twice in one breath at that! --JoSH