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The Capitalist Mode of Power: Critical Engagements with the Power Theory of Value, (2014), edited by Tim Di Muzio, contains several essays addressing CasP and discussing its “power theory of value.” According to Di Muzio:
This new theory of value suggests that the value of capitalized financial assets is determined not by the productivity of capital goods or the exploitation of surplus labour power, but by the power of capitalists to create and recreate the landscape of social reproduction writ large in an effort to garner differential earnings.
The power theory of value similarly encompasses the notion that the prices of commodities and services are determined by the power of capitalists to add mark-up to their underlying costs.
Some authors (e.g., Sandy Brian Hager) differentiate CasP’s power theory of value from prior value theories (classical, Marxist and neoclassical) by identifying it as a “qualitative” instead of “quantitative” theory.
From my perspective, CasP’s theory of value– and I think it is a stretch to call it that– is “there is no such thing as value.” All prices, regardless of the type of market, are arbitrary and determined by differential power. Thus, profit is just a form of tribute paid by the weak to the powerful (relatively).
Why bother labeling the outright rejection of objective value as a theory of value? I can understand the perceived need for CasP to contain constituent components as counterparts for head-to-head comparisons with other theories of political economy, but I think that perception is incorrect and only opens up CasP to criticism that is easily side-stepped by openly rejecting the notion of value itself.
Historically, economic theories of value have been used to justify either the inequality of the status quo (e.g., classical and neoclassical) or to advocate for radical egalitarian change (e.g., Marxist). To date, CasP theorists, while often informed by egalitarian beliefs, have focused on understanding capitalism through the lens of CasP theory, eschewing engaging in apologetics or polemics for or against capitalism. Since CasP theory does not seek to establish what’s “fair,” I don’t see why it needs to claim to have a theory of value.
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The following is just my interpretation. As I see it, CasP has a theory of value in the following sense(s):
(1) Values can be subjective or objective.
(2) Objective values must be quantities measured in real dimensions, specifically the real dimensions of the SI (International System of Units).
(3) It is only valid to aggregate in these real dimensions. For example, we can add up the mass of objects.
(4) The money dimension (the numeraire) is not real but “social-fictive” (the term I use) and its unit (the dollar say) has no objective value definition. We can never reliably say that x money measures, precisely and always, y quantity of anything.
(5) Aggregating in a fictional dimension is an invalid procedure.
Once we reject the notion that money measures value in any objective sense including rejecting the notions that utils, snalts or RDEU (sorting via markets) measure values in any objective sense, then we must reassess what money and finance are. They are quantities which instantiate social power in our political economy system, as it is constructed. The quantities of money people obtain bear no relation to any value (objective or subjective) they may have added to society or the political economy. The quantities of money people have and use bear a direct relation to the power they have to “create formations against resistance” (Ulf Martin’s phrase) in our society, political economy and indeed the physical world.
My further interpolation is that values which are not objective (in the strict scientific sense as in the weight of a given apple being 200 grams) are all values in moral philosophy: ethics, morals. Thus, the fact that we create and maintain the current rules of political economy and permit monied people to create the formations of our society is purely a moral choice, at least where we have a choice. Where we do not have choice then choice has already been removed by the very system we co-create and accede to. Insofar as human agency reaches, only mental revolutions followed by physical revolutions can change facts on the ground. Revolutions need not be endogenously violent. Indeed, the escalation to violence is usually initiated by those who defend and extend the inequalities of the status quo. They become reactionarily violent when threatened by any movement to fairness and equality.
“The rich have become richer, and the poor have become poorer; and the vessel of the state is driven between the Scylla and Charybdis of anarchy and despotism.” – Percy Bysshe Shelley.
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As a natural scientist, I come at this from a very different perspective. Below is a plot of per capita GDP (GDPpc) in England over six centuries. There was an initial rise in GDPpc around 1350 due to the Black Death, which reduced the number of people without reducing the amount of other factors of production (Land and Capital) resulting in a boost in labor productivity. There was a subsequent rise after 1370 due to the rise in real wages, which incented employers to optimize their use of increasingly expensive labor, resulting in a further rise of labor productivity. By 1400 these adjustments were complete and for 250 years GDPpc rose no further. This limit can be related to what is known as the Malthusian limits to growth which I will not go into here. What matters is how the profile was flat for a long time after 1400, but then started to rise in the last third of the 17th century, a trend that has continued to this day.
What happened? I define capitalism, in a phenomenological sense, as that which caused this trend change. I also note that the power a ruler could draw from the territory he ruled was directly dependent on GDPpc and on population, which also began to rise as agricultural productivity rose along with GDPpc. The result of this was the rulers of a small island in 1650 had, two centuries later, become the masters a globe-girdling empire encompassing a fourth of humanity. Clearly, this “capitalism” was a powerful “scale up tech” for rulers.
It was also clear that capitalism involved economic activity by private enterprise operating in a market milieu. But such activity had been going for millennia, in ancient Rome, medieval Islam and China, and elsewhere. Why didn’t this “capitalism” thing show up then? And what the hell was it? More on this later.
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As a natural scientist, I come at this from a very different perspective. Below is a plot of per capita GDP (GDPpc) in England over six centuries. There was an initial rise in GDPpc around 1350 due to the Black Death, which reduced the number of people without reducing the amount of other factors of production (Land and Capital) resulting in a boost in labor productivity. There was a subsequent rise after 1370 due to the rise in real wages, which incented employers to optimize their use of increasingly expensive labor, resulting in a further rise of labor productivity. By 1400 these adjustments were complete and for 250 years GDPpc rose no further. This limit can be related to what is known as the Malthusian limits to growth which I will not go into here. What matters is how the profile was flat for a long time after 1400, but then started to rise in the last third of the 17th century, a trend that has continued to this day. What happened? I define capitalism, in a phenomenological sense, as that which caused this trend change. I also note that the power a ruler could draw from the territory he ruled was directly dependent on GDPpc and on population, which also began to rise as agricultural productivity rose along with GDPpc. The result of this was the rulers of a small island in 1650 had, two centuries later, become the masters a globe-girdling empire encompassing a fourth of humanity. Clearly, this “capitalism” was a powerful “scale up tech” for rulers. It was also clear that capitalism involved economic activity by private enterprise operating in a market milieu. But such activity had been going for millennia, in ancient Rome, medieval Islam and China, and elsewhere. Why didn’t this “capitalism” thing show up then? And what the hell was it? More on this later.
Michael,
I am not an economist (or political economist), either. My undergraduate degree was in Electrical Engineering, and I have practiced law (primarily intellectual property law) for almost thirty years.
That said, I feel compelled to embrace economic concepts/constructs such as theories of value on their own terms. Allow me to offer a shoot-from-the-hip summary of the major historical economic theories of value (I have not thought through all of this before, so I reserve the right to amend it).
The first economic theory of value, the classical theory of value, flowed from the natural law of Locke, etc., which claimed that all value derived from man’s labor, i.e., the work necessary to transform nature’s resources into something mankind could use and exchange. The classical theory of value and its natural law underpinnings were used to justify slavery, colonialism and imperialism more broadly. Natural resources should belong to those will “improve” them most, so stealing land from others who won’t/can’t improve the land as much as you is not actually stealing, it’s doing God’s work.
The second economic theory of value, the Marxist theory of value, sought to systematize the classical theory of value around an objective unit of measure, the SNALT, as part of a larger effort to explain how and why capitalists claimed such an outsized portion of society’s output when they did not labor themselves. Where the classical theory of value was used to justify inequality between conqueror and conquered, i.e., between a society and outsiders, the Marxist theory of value was used to lay bare the inequality within capitalist society and to advocate for a more (ideally, perfectly) equitable distribution of the fruits of society’s labor.
The third economic theory of value, the neoclassical theory of value, took Marx’s concept of an objective unit of measure and recast it to put “capital” on an equal footing with labor. Thus, the “util” was born. Like the classical theory of value, the neoclassical theory of value seeks to justify economic inequality as natural and inevitable.
Ironically, there is currently another economic theory of value that increasingly dominates economic/legal discourse, but it is not recognized as such. I am referring to the so-called Coase Theorem, which somehow manages to marry classical value theory to neoclassical theory to justify private takings (theft) within a capitalist society: whoever’s actions will maximize the utility of a property should the proper owner of that property.
GDP is not a theory of value. It is an econometric first developed and introduced by Simon Kuznets of the National Bureau of Economic Research in 1934 to measure the output of a society (not its citizens’ well-being) by its consumption. GDP was tailor-made to measure what a capitalist society does (while studiously ignoring debt and finance). Because GDP was never measured prior to 1934, the ability to accurately estimate GDP becomes more difficult (if not impossible) the farther back you go in time from 1934. Accordingly, I find historical GDP data to be of little value. (Also, one has to ask how capitalist societies would measure up using a metric that ignores what GDP measures.)
CasP’s “power theory of value” does not seek to justify or advocate the allocation of income, wealth and resources, which is why I argue it really isn’t a theory of value (other than “there is no such thing as value”).
Obviously, CasP’s “power theory of value” is not an econometric, either.
P.S. Consider picking up a copy of William Goetzmann’s Money Changes Everything. It may make you question whether modern capitalism is as historically unique as you seem to think it is, and to what extent it actually is, if it is. HINT: the primary difference between capitalism and prior finance-driven societies is that the only duties owed by individuals of a capitalist society as between one another are contractual and nominally, at least, entered into freely and without duress. Of course, how free are you when you need money before you can access “the market” (i.e., before you can participate in the society into which you were born)?
P.P.S. I have a working theory that major shifts in Western societies (I include the Middle East here) have all been accompanied by a major shift in attitude towards usury/finance. The Greek diaspora led by Alexander was due, in part, to debts accumulated from decades of war. Rome “collapsed” (really, its elites became the Catholic church) because debts grew faster than tribute from conquered lands could service those debts. The Catholic Church secured its own political power, in part, by outlawing usury, and protestant reformers quickly gained equal footing by “legalizing” usury. And the history of capitalism itself has been marked by pitched battles over the proper roll of finance within society.
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A couple of observations. These first two theories of values do not strike me as theories at all. Theories are validated hypotheses, which cannot be done before measurement was possible. Some sort of econometrics or prediction power is necessary to convert hypothesis into theory. Also, in both the case of Locke and Marx economic and moral value concepts seem entrained. How can a theory of economic value (which since economic exchange happened was a real phenomenon) be used to provide a moral justification? It can’t be logically. But it can be asserted as an act of power. Assertions of power is what these theories seem to be when I look at them.
As such I don’t see what there is to embrace. I don’t think slavery is justified so what is there to embrace from the first theory? As for the Marxist ToV, I am more sympathetic with the embedded moral value, but I find the technology/practice aspects of Marxism wanting (i.e. Marxism had a poor track record before Marx and the record afterward wasn’t any better). In the end it is a political project.
As for the third, I am not that familiar with how utils are used; I am not an economist. My understanding it was used for the development of a more mathematical theory of economics that would make economics appear to be more scientific than other disciplines, but I could easily be wrong here.
As for why I see capitalism (as I define it) as a major shift is because of the consequences it had for state power as measure by army size. The Roman Empire had been able to mobilize about 0.8% of the population in the military accord to this article:
https://historyanswers.com/what-percentage-of-romans-were-soldiers/I took some Great Power army size data I happened to have and calculated army size as a percent of population for the great powers as a whole.
Cent Army (% of pop)
16-1 0.3
16-2 0.4
17-1 0.8
17-2 0.7
18-1 0.9
18-2 1.5
19-1 1.9
19-2 2.3
20-1 11.6The 17th century great powers collectively had matched the Roman record. They then went beyond them in the 18th and subsequent centuries. The upwards shift happened before industrialization had taken place in most of the Great Powers and so cannot be attributed to that. The most logical explanation is something affecting economic output per capita like what happened in Britain in the late 17th century started happening to the other great powers in the 18th and 19th centuries. I call that capitalism, and see it as a different animal as the sorts of economic organizing common before it showed up.
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A couple of observations. These first two theories of values do not strike me as theories at all. Theories are validated hypotheses, which cannot be done before measurement was possible.
The neoclassical theory of value is likewise unfalsifiable and, therefore, according to Popper, not a scientific theory. See, e.g., Sraffa, Bichler & Nitzan, etc.
So what? Does anybody think economics is really a science? Neoclassical economics is just classical economics dressed up as physics and sugar-coated by liberal rhetoric to make the bitter fact that capitalism (a system premised on indentured servitude) is antithetical to liberalism (a system based on individual dignity and liberty) easier to swallow/ignore.
The fact is classical economics, Marxist economics and neoclassical economics all have theories of value. Yes, in actuality all these theories are really normative, ethical judgments, but I didn’t label them theories. Economists did.
Also, who said all theories must be scientific? Sure, all scientific theories ought to be scientific, i.e., falsifiable, but other “theories”? Take secular cycle theory, for example. Such theories are not scientific at all. They are just another example of historicism (which Popper criticized as unscientific), the hindsight projection of “perceived” patterns on the past with hopes of predicting the future. Are secular cycles a theory, though? Sure.
This is what I mean by embracing disciplines outside of your own on their own terms. I didn’t invent economic terminology, but I am compelled to use that terminology as I find it in order to communicate with political economists about their discipline. For example, there are many terms that CasP theory insists on using in a way contrary to my experience as a capitalist and investor. What CasP calls “capitalization” I know as “valuation.” What CasP refers to as “the discount rate,” I know as the “annualized rate of return on equity” (the discount rate used in DCFF valuation models is a firm’s weighted average cost of capital or WACC, which considers the annualized cost of debt as well as the annualized rate of return on equity). While I prefer my common understanding to CasP’s usage, when communicating on this forum, I conform with CasP’s usage of the terminology.
I call that capitalism, and see it as a different animal as the sorts of economic organizing common before it showed up.
How do you define capitalism, e.g., what are the basic requirements/elements that a society must have for you to consider it as capitalist?
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You have a point on secular cycles.
You write “Yes, in actuality all these theories are really normative, ethical judgments, but I didn’t label them theories. Economists did.”
Point taken. I guess the issue I have is I cannot wrap my head around these ideas, since they are so amphorous. What do you use them for, other than establishing social norms? That would make economics sociology, to which most economists would object, I should think.
For me, capitalism has to do with growth in output per person, whether measured in terms of GDP units, military power, QUADs of power generated or what have you. It also economic in nature and has to do with economic actors–businesspersons. I think you get capitalism when businesspersons develop a “growth ethic”. Here’s a biological analogy: phages. A phage is a virus that infects bacteria, taking over their metabolic machinery and putting it work replicating phases. Capital infects businesspersons, turning them into capitalists, who now devote their lives to replicating capital.
Now this is just as analogy, just as the concept of infectious memes or social contagion are analogies. But I do think it is a cultural construct, or social technology that spread in the same way other cultural constructs do. Previously, in pre- or noncapitalist situations, successful businesspersons would spend surplus profits on land/titles of nobility, patronage of the arts (the Renaissance happened where it did because that’s was where the surplus profits were at the time), or (in China) education for their children to gain entrance to the elite mandarin class, etc. Merchants tended to have low prestige and all these things boosted one’s prestige.
Once rulers made the connection between more taxable enterprise –> more income streams–>military power–>achieving career success, they accelerate this chain of events by conferring prestige onto individuals who continued to be businesspersons. That is, elevating merchants who operated in ways that augmented the ruler’s ability to achieve success relative to their peers. Such merchants gained the growth ethic and became capitalists.
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For me, capitalism has to do with growth in output per person, whether measured in terms of GDP units, military power, QUADs of power generated or what have you. It also economic in nature and has to do with economic actors–businesspersons. I think you get capitalism when businesspersons develop a “growth ethic”. Here’s a biological analogy: phages. A phage is a virus that infects bacteria, taking over their metabolic machinery and putting it work replicating phases. Capital infects businesspersons, turning them into capitalists, who now devote their lives to replicating capital. Now this is just as analogy, just as the concept of infectious memes or social contagion are analogies. But I do think it is a cultural construct, or social technology that spread in the same way other cultural constructs do. Previously, in pre- or noncapitalist situations, successful businesspersons would spend surplus profits on land/titles of nobility, patronage of the arts (the Renaissance happened where it did because that’s was where the surplus profits were at the time), or (in China) education for their children to gain entrance to the elite mandarin class, etc. Merchants tended to have low prestige and all these things boosted one’s prestige. Once rulers made the connection between more taxable enterprise –> more income streams–>military power–>achieving career success, they accelerate this chain of events by conferring prestige onto individuals who continued to be businesspersons. That is, elevating merchants who operated in ways that augmented the ruler’s ability to achieve success relative to their peers. Such merchants gained the growth ethic and became capitalists.
I have seen the exponential growth in GDP and human population since the dawn of capitalism, too. I’ve also seen the exponential growth in greenhouse gas emissions. The growth is amazing, but is consumption-driven (read “waste-driven”) growth really a good thing?
You clearly have spent a lot of time studying history and society, all with an eye towards understanding exactly what makes capitalism unique. I have engaged in similar pursuits, although I think may have had different motivations (I cared more about understanding the origins of liberalism, capitalism’s fraternal twin). Our individual understanding of capitalism is even informed by some of the same people, e.g. Steve Keen.
Have you reached any conclusions as to WHY capitalism results in output growth? And have you considered why you think output growth is important, especially when you acknowledge the costs of that growth in terms of global warming? I suppose some of my answers in your book, but I was hoping you could summarize.
This is not a test. I don’t claim to have, or believe I have, the “right” answers to the questions I’m asking you, and I am happy to share my own answers to the same questions before engaging in any kind of “debate” because I think this kind of dialogue can lead us both to a broader understanding of what we both seem to care about: humanity.
Best regards,
Scot
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I see economic production as a process by which people transform resources into output that is product inhibited. Accumulation of product shuts down its production. Capital acts like catalyst, binding with people to carry out a more rapid transformation of resources into product.
Because of product inhibition economic activity is self-limiting, unless product is cleared away. For example, an autarkic farming community will stop producing once it has enough. Once integrated with other communities in a trading system, there is a division of labor among the system members: excess product is removed from the community and traded for other products the community does not produce. In this case the community produces more output than what they need. Creating more output requires more capital to boost productivity. Division of labor goes hand in hand with application of capital.
Capitalism is an economic system in which division of labor and application of capital happens spontaneously through the action of entrepreneurial individuals, whose existence is only possible because of restraint on the part of political elites. Normally one would expect individuals who pioneer some new money-making activity and get rich would have that wealth stripped from them by some political elite. Think of the Jews in 12th and 13th century England. Foreigners were also a juicy target. The newcomer would not have the connections to defend himself. Capitalism happens when elites tolerate these newcomers sufficiently so they reach a critical mass where their collective action can affect aggregate economic output as measured in real things that matter to rulers–like army size.
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In the beginning, capitalism resulted in output growth because the would-be capitalist needed to exploit some market that had not yet been fully exploited. This results in new or expanded products or services, resulting in more division of labor. For example the voyages of exploration were partly about finding products to sell at home. At first, Columbus and de Gama seeking a source of pepper, a product for which unmet demand existed. Over time, a number of recreation drugs: sugar, tobacco, rum, tea, coffee, were developed, all of which were new products to be produced alongside the existing industries.
Besides traveling overseas in search of new markets to exploit, entrepreneurs also sought to develop new products, or ways to produce existing things more efficiently, to produce industry that when harnessed to a business, generated profit. Entrepreneurs could acquire patents granting them monopoly rights over this created industry. Queen Elizabeth issued 55 patents over her reign, showing that some of this sort of activity was happening already in the 16th century, although there was significant cronyism and corrupt practices involved as well. Things became more regularized after 1623 and the rate of useful inventions creating new economic activities accelerated: eyeballing a list in wikipedia and counting what seem to be commercial (as opposed to scientific) inventions I see
1 invention in 16th cent 2nd half
2 inventions in 17th C 1st half
3 inventions in 17th C 2nd half
5 inventions in 18th C 1st half
11 inventions in 18th C 2nd half … and so on.This quickening of invention/entrepreneurship is the beginning of capitalism. The merger of natural philosophy and technology created modern science. Thus the emergence of capitalist is intertwined with the scientific revolution. The industrial revolution is the child of this early entreprenarial/scientific activity.
Not all kinds of capitalism result in expanded output. The forms of capitalism that see capital as something real do this. Among these are early capitalism and what is sometimes called stakeholder capitalism (SC). The shareholder primacy (SP) form of capitalism sees capital as purely financial. I suspect that the CasP view of capital as power reflects SP capitalism, which is largely what we have now. How SC and SP evolving into each other is described in chapter 3 of my book. With SP capitalist, output is uncoupled from the operation of capitalism. I never really thought of what the operation of SP capitalism entails, but capitalism as a mode of power (or mind-fuckery for that matter) kinda hits the nail in the head.
Marx conceived of capital the way he did because his initial take as a young man in the 1840’s was still during the early period of capitalism when it did involve output increases. Since humans provided the “life force” of economic production all output came from labor, as magnified by accumulated previous labor (i.e. capital), it was labor all the way down according to Marx. OTOH, CasP was developed at a time when capitalism was mostly SP, which would be defined in financial terms (see chapter 4 for the link between business culture and finance).
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In the beginning, capitalism resulted in output growth because the would-be capitalist needed to exploit some market that had not yet been fully exploited. This results in new or expanded products or services, resulting in more division of labor. For example the voyages of exploration were partly about finding products to sell at home. At first, Columbus and de Gama seeking a source of pepper, a product for which unmet demand existed. Over time, a number of recreation drugs: sugar, tobacco, rum, tea, coffee, were developed, all of which were new products to be produced alongside the existing industries. Besides traveling overseas in search of new markets to exploit, entrepreneurs also sought to develop new products, or ways to produce existing things more efficiently, to produce industry that when harnessed to a business, generated profit. Entrepreneurs could acquire patents granting them monopoly rights over this created industry. Queen Elizabeth issued 55 patents over her reign, showing that some of this sort of activity was happening already in the 16th century, although there was significant cronyism and corrupt practices involved as well. Things became more regularized after 1623 and the rate of useful inventions creating new economic activities accelerated: eyeballing a list in wikipedia and counting what seem to be commercial (as opposed to scientific) inventions I see 1 invention in 16th cent 2nd half 2 inventions in 17th C 1st half 3 inventions in 17th C 2nd half 5 inventions in 18th C 1st half 11 inventions in 18th C 2nd half … and so on. This quickening of invention/entrepreneurship is the beginning of capitalism. The merger of natural philosophy and technology created modern science. Thus the emergence of capitalist is intertwined with the scientific revolution. The industrial revolution is the child of this early entreprenarial/scientific activity. Not all kinds of capitalism result in expanded output. The forms of capitalism that see capital as something real do this. Among these are early capitalism and what is sometimes called stakeholder capitalism (SC). The shareholder primacy (SP) form of capitalism sees capital as purely financial. I suspect that the CasP view of capital as power reflects SP capitalism, which is largely what we have now. How SC and SP evolving into each other is described in chapter 3 of my book. With SP capitalist, output is uncoupled from the operation of capitalism. I never really thought of what the operation of SP capitalism entails, but capitalism as a mode of power (or mind-fuckery for that matter) kinda hits the nail in the head. Marx conceived of capital the way he did because his initial take as a young man in the 1840’s was still during the early period of capitalism when it did involve output increases. Since humans provided the “life force” of economic production all output came from labor, as magnified by accumulated previous labor (i.e. capital), it was labor all the way down according to Marx. OTOH, CasP was developed at a time when capitalism was mostly SP, which would be defined in financial terms (see chapter 4 for the link between business culture and finance). https://mikebert.neocities.org/America-in-crisis.pdf
Capitalism existed at least a century before the Industrial Revolution, and some (not I) would argue that it dates back at least two centuries earlier than that in the agrarian English economy. Capitalism did not complete its conquest of the Western world until at least the late 19th century with the rise of the limited liability corporation (and in the US, a little later). Stakeholder capitalism (SC) seems mythical to me, fed by Horatio Alger stories and the like. Certainly, SC’s reign, if it ever existed, was very short-lived.
Regardless, your vision and understanding of capitalism are very romantic. Mine, which I expect to share later this week, are not. As a preview, I come to the question of “what is capitalism” from the point of view of a (former) true believer in the promises of liberalism, i.e., human rights, equal dignity, the absence of coercive power, the unfettered ability to improve one’s self, etc. Although I have achieved success as a capitalist, I cannot but conclude that capitalism is the antithesis of the liberal creed (and that the liberal creed is, in fact, a fig leaf to hide the true nature of capitalism).
–Scot
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SC’s reign was short, just 40 years (ca. 1945-1985). SC has nothing to do with Alger. SC and SP are hypothetical types of business culture is a very simply cultural evolution model intended to explain how inequality (measured as top 1% income share) varies over time. Inequality is seen as a proxy for the relative amount of SP vs SC culture present at any time. Since 1916 the business economic environment has changed dramatic as shown by things like top income tax rate, which has varied between 24% and 91% since 1916. There were long stretches of time when stock buybacks with illegal and times when it was perfectly acceptable. There were times with low real interest rates and times with high rates. There were times of strong labor power (measured by strike frequency) and times with weak labor power. These environmental changes affect which type of business strategies are more likely to lead to success, and how success is translated into symbolic markers of prestige, thus leading to their emulation by other businesspersons. Emulation means the spread of the meme being emulated, which is akin to “fitness” in conventional biological evolution.
I cannot really cover ten pages of material in a post. The model development is covered in sections 3.3 through 3.6. Introductory remarks about the concept of cultural evolution are given in sections 3.1-3.2. An alternate model for inequality, that proposed by Piketty is presented and compared to the cultural evolution model in section 3.7.
I do not see how or why capitalism and the liberal creed would have any connection. It seems to me that it is perfectly possible to have one without the other. China, Vietnam, and if one accepts the idea that the USSR was actually state capitalism, are examples of capitalism w/o liberalism. True socialism is presented as a system with liberalism but w/o capitalism.
As for romanticism, I agree. The document is written to project a very friendly view of our American capitalism. But the underlying message is not all happy-clappy. You mention you were once a believer in the liberal creed. I was once a believer in elite competence.
I do not believe that there is some elite conspiracy where they are oppressing everyone. They are as clueless as our foreign and economic elites, but since they wield great power, they can (and actually do) cause much harm. Also, they are steering the country to a bad outcome. I think many people sense this. In my book I try to present an explanation for how we have come to where we are, how we successfully navigated this sort of crisis last time, and provide some ideas on who we might be able to do it a second time.
People sense America is in decline, our civilization is falling. Civilizations fall because their leaders engage in folly. Folly is when decision makers operate in what they perceive as their short term self-interest, that ends up producing a very different outcome.
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Things became more regularized after 1623 and the rate of useful inventions creating new economic activities accelerated: eyeballing a list in wikipedia and counting what seem to be commercial (as opposed to scientific) inventions I see 1 invention in 16th cent 2nd half 2 inventions in 17th C 1st half 3 inventions in 17th C 2nd half 5 inventions in 18th C 1st half 11 inventions in 18th C 2nd half … and so on. This quickening of invention/entrepreneurship is the beginning of capitalism.
I’m not sure I understand you correctly, but you seem to equate capitalism with a positive rate of growth of invention / enterprise. I wonder how one actually determines such things. For example, should we include language, mathematics, the alphabet, ownership, writing, the wheel, medicine, kingship, marriage, etc. as “inventions” and “enterprise”? If we do include them as such, then we should say that capitalism existed whenever these entities emerged and changed — i.e. from the very beginning of humanity. And if don’t include them, then your definition of capitalism must be made more restrictive.
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SC’s reign was short, just 40 years (ca. 1945-1985). SC has nothing to do with Alger. SC and SP are hypothetical types of business culture is a very simply cultural evolution model intended to explain how inequality (measured as top 1% income share) varies over time. Inequality is seen as a proxy for the relative amount of SP vs SC culture present at any time. Since 1916 the business economic environment has changed dramatic as shown by things like top income tax rate, which has varied between 24% and 91% since 1916. There were long stretches of time when stock buybacks with illegal and times when it was perfectly acceptable. There were times with low real interest rates and times with high rates. There were times of strong labor power (measured by strike frequency) and times with weak labor power. These environmental changes affect which type of business strategies are more likely to lead to success, and how success is translated into symbolic markers of prestige, thus leading to their emulation by other businesspersons. Emulation means the spread of the meme being emulated, which is akin to “fitness” in conventional biological evolution.
I assumed your “SC” referred to the first two-thirds of the 19th century, before the rise of trusts and monopoly capitalism. Now that I understand you place SC in an era that was the direct product of the New Deal, I view SC itself as a product of the New Deal, i.e., SC was the product of government-imposed restrictions on the rapacious nature of capitalism. As history shows us, capitalists rebelled against these restrictions and ultimately threw them off. Thus, SC is an aberration.
I do not see how or why capitalism and the liberal creed would have any connection. It seems to me that it is perfectly possible to have one without the other. China, Vietnam, and if one accepts the idea that the USSR was actually state capitalism, are examples of capitalism w/o liberalism. True socialism is presented as a system with liberalism but w/o capitalism.
Capitalism and liberalism were fraternal twins that gestated together in 17th and 18th century England and emerged fully grown around the same time in the 19th century Europe more broadly (before that you had mercantilism and a much more radical, revolutionary version of proto-liberalism). Classical and neoclassical economics are all about equating capitalism with liberalism, which is why these economic theories talk about free markets and use counter-factual constructs such as the “laws of supply and demand” to “demonstrate” the absence of coercive power in the market. Similarly, Locke’s philosophy is also used to equate capitalism and liberalism.
I do not believe that there is some elite conspiracy where they are oppressing everyone. They are as clueless as our foreign and economic elites, but since they wield great power, they can (and actually do) cause much harm.
I do not believe that there is an elite conspiracy, either. But when Congress passes a law that helps a handful of people and harms millions, we don’t call that a conspiracy, do we? No, we call it legislating. Capitalism as we have it today was the result of a struggle among elites who decided upon a solution that requires the masses to pay for it.
As to whether the elites are “clueless,” how do you judge that? Perhaps they operate using a different set of metrics than you do because their goals are not the same as yours. Do we have any basis for believing our elites care about anybody but themselves, that there is an ounce of altruism in any of them?
In my book I try to present an explanation for how we have come to where we are, how we successfully navigated this sort of crisis last time, and provide some ideas on who we might be able to do it a second time. People sense America is in decline, our civilization is falling. Civilizations fall because their leaders engage in folly. Folly is when decision makers operate in what they perceive as their short term self-interest, that ends up producing a very different outcome.
Over the last decade, we have seen an increase in anti-liberal (e.g., alt-right) and “post-liberal” rhetoric and action, which has given rise to leaders like Orban and Trump. To me, capitalism is the cause of everything these “post-liberals” complain about, but they claim to embrace capitalism while rejecting liberalism (i.e., individual rights, personal liberty, equal justice, etc.). FDR and the New Deal navigated this “sort of crisis” by constraining capitalism so that capitalism could survive. Today’s solutions require reinventing capitalism so liberalism can survive, which requires entirely new thinking.
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