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In other words, my short question is this. Can we already see differentially improved profits and capitalisations accruing to a sub-set of corporations (mainly but not only pharma and medical) as most of the economy worsens from the chronic and ever-widening economic and human damage of the COVID-19 pandemic?
see here: https://capitalaspower.com/casp-forum/topic/costly-efficiencies-working-paper-critical-feedback/
Henrich seems to assume the people doing the murdering are the same people who are doing the borrowing, but see this article.
Using the article as a starting point for finding additional information, you will quickly find the reality is most murderers in England (and elsewhere in Europe) during the Middle Ages were rural peasants who had no access to (or need for) credit markets. My guess is the “civilizing” influence was forcing people to work to live eliminated a lot of idle hands, reducing access to the devil’s workshop.
FYI – I could have wrote this the day you posted, but I was expecting a lot of responses to your post because I found it very interesting (enough to start digging!) and assumed others would, too. Thanks for sharing this and the follow-up review on your own blog.
One major insight from this passage, which is also clear in the work of Nitzan and Bichler, is that the moral question of who gets what is ultimately determined by the distribution of power. This poses a severe challenge for egalitarians, since returns to power are recursive and self-reinforcing. The more wealth and income accrues to the powerful, the more power they have to further augment their gains. And unfortunately this dynamic of escalating inequality only appears to be halted by mass warfare and other life-shattering disruptions. But putting this issue aside, as Hale astutely point out, even if we were to develop a more egalitarian and democratic community to arbitrate on matters of distribution, delimiting its exact boundaries, controlling its internal dynamics, and determining the principles of justice that govern it, would be fraught with complexity. In the face of these challenges, all we can do – following Nitzan and Bichler – is make explicit how the qualitative workings of power and authority shape quantitative patterns of income and wealth. Mobilizing the concept of rent may help us push back against the increasing returns to power, but it also threatens to reinforce the view that there exists a domain in which income can be generated independent of control and restriction.
I think you are misreading Hale, particularly if you consider the broader context of his work in legal realism. He had no confusion regarding who gets to determine the distribution of power: it is the state. See, e.g., “Rate Making and the Revision of the Property Concept” (1922) 22 Columbia Law Review 209.
The purpose of much of Hale’s work, including “Coercion and Distribution in a Supposedly Non-Coercive State,” was to undermine the arguments of laissez-faire proponents against state interference in markets. Even before “Coercion and Distribution,” Hale recognized that the state not only interfered in the market but defined it and, thus, laissez-faire was self-serving nonsense.
“Coercion and Distribution” was Hale’s response to a laissez-faire proponent, Thomas Nixon Carver, a kind of review of Carver’s recent treatise on economics. The passage you quote above concludes with the following two sentences:
All such problems of democracy, representative government, international economic conflicts and their adjustments, fall properly within the scope of a treatise on The Principles of National Economy. They are not discussed by Mr. Carver.
In context, Hale was not shrugging his shoulders and suggesting we we walk away from the complexity he just cut through like a laser. He was arguing that Carver should have addressed that complexity in The Principles of National Economy, and his failure to do so rendered the treatise useless.
Hale also ended his 1922 “Rate Making” by questioning the ability of judges, administrative commissions and legislatures to comprehend and address the complexity of the issues, but he also made clear that such complexity was no excuse for refusing to address the reality of the issues they were required to decide:
Whether the ultimate determination of this important policy question ought to rest in the hands of small bodies of men not chosen primarily because of their views of policy, is another question. It raises the whole problem of representative government and involves international complications at times. It might be better for some official or un- official body to draft a detailed report on the revision of the entire institution of property. Meantime the fact remains that the immediate, if not the ultimate, determination of this policy is in the hands of courts and commissions. Nothing is to be gained by their failing to make a candid re-examination of the functions of ownership. The man at the steering wheel, regardless of his personal qualifications, has to use his own best judgment where to steer, pending definite instructions from the “boss.”
Yuri,
I think it would be a lot easier to find examples of companies using affective data to sabotage the mental health of their customers than it would be to find examples of them using such data to increase the mental health of their workers.
Consider, for example, the role the “algorithm” of platforms such as Facebook plays in radicalizing people to join any number of different fringe groups/movements, e.g., QAnon. There should be traffic data that can be analyzed to determine whether content-based sabotage increases capitalization of companies that use such algorithms in their business. Can it be shown that Facebook profits from trafficking in disinformation that fractures society?
It is also worth recognizing that even the ancients were aware (and took advantage) of the dopaminergic system of the masses, even though they did not know what to call it (think of Plato’s Noble Lie). Edward Bernays, author of the 1928 book Propaganda, was a pioneer in modern public relations (including targeted marketing/advertising), which is still the foundation of advertising, whether or not affective data is used for targeting purposes. Whether using affective data to target advertising is more effective than prior techniques (e.g., mass mailing) in driving revenue growth is something that should be capable of quantitative analysis.
Some links related to the Facebook whistleblower:
https://www.npr.org/2021/10/05/1043377310/facebook-whistleblower-frances-haugen-congress
https://www.nbcnews.com/tech/tech-news/facebook-health-misinformation
In addition to this, it might be useful to note the neoclassical, liberal, and neoliberal tendency to view Happiness as synonymous with Utility (in the economic sense) and that by maximizing Happiness (Utility) all parties are supposed to profit. This is clearly untrue, and I think CasP provides a solid understanding of WHY it is untrue.
The utilitarianism of Bentham, Mill et al. is certainly the dominant strain of liberalism (and neoliberalism) and drove development of neoclassical economics. My understanding, however, is that utilitarianism focuses on the happiness/utility of society as a whole, not individually. The Benthams of the world could care less about the distribution of happiness/utility, all that matters is maximizing utility in the aggregate.
We can see this attitude reflected in many econometrics, especially GDP, as well as in the famous “Coase Theorem,” which animates the Law and Economics movement. If increasing the wealth of society as a whole means you lose your property, so be it. The irony is that the Coase Theorem vitiates the regime of private property rights on which liberalism/capitalism rests as it would always assign ownership of a property to the person who could maximize the economic value of that property.
I finally started reading The End of the Megamachine. It begins with an interesting discussion of power, generally, that lends itself to CasP analysis. Specifically, it introduces (at least to me) the idea of “structural violence” (or structural coercive power) as a mechanism for creating/enforcing order. To me, the “market” exists to enforce structural violence in the capitalist mode of power.
The assumption is that the firm can maintain the same rate of profitability as it grows, so increasing the size of a firm should lead to increasing the accumulated profits (and increased market share). If the firm increases its size faster than average, then it will achieve positive differential accumulation.
To be precise: 1. For an increase in differential breadth to raise differential profit, the only condition is that differential depth does not decline (% wise) by more than the % increase in differential breadth. 2. Changes in market share (% of aggregate universe sales) do not have a one-to-one mapping with differential profit.
Sometimes, it helps people to sacrifice precision for clarity.
In any event. true precision would require adding a third axis to the differential accumulation model that accounts for corporate debt, which is another way to affect the expected effective annualized return (aka discount rate) of a firm, something that becomes very clear when doing a discounted cash flow to the firm analysis, which is based in part of the Weighted Average Cost of Capital (WACC). “Capitalization” embraces both debt and equity.
Maybe a simplistic question but I wanted to make sure I understand why “(1) The large firms could augment their differential breadrh of accumulation by raising their employment per firm faster than the average” (Inflation as Restructuring p.366)
Is this the case because raising employment leads to increased production and market share?
Thanks
The assumption is that the firm can maintain the same rate of profitability as it grows, so increasing the size of a firm should lead to increasing the accumulated profits (and increased market share). If the firm increases its size faster than average, then it will achieve positive differential accumulation.
The other day I revisited Joseph Baines’ “Wal-Mart’s Power Trajector,” which may be found here https://bnarchives.yorku.ca/394/
His article has a good distillation of the breadth-depth theory embedded in Figure 1: The Axes of Corporate Power, which makes everything easy to visualize (which I find helpful).
Thanks for the response, Scot. I agree with much of what you said. But one thing caught my attention. What is the ‘intrinsic value of money’? Does this not require some absolute standard for judging value? Since this is about Colin’s thesis, perhaps he has more to add.
In this case, the “intrinsic value of money” is the market value of the precious metal contained in the coin. It requires only an objective standard for measuring value, not an absolute one. What matters is the spread, i.e., the difference, between the “inside” value (the nominal value of the coin in the domestic market as currency set by the sovereign) and the “outside” value (the market value in foreign markets of the precious metal contained in the coin). Different sovereigns had different standards for equating weight with currency, creating these differentials or “spreads” in the value of coins that could be exploited by hoarders.
What matters is every coin has two nominal values, not one. The first is set by the sovereign in units of currency. The second is set by the market in terms of the value assigned by weight of a precious metal (silver and gold). It is not clear to me from Colin’s thesis whether this “optionality” (the ability to arbitrage) would arise in a coinage system based on a single metal (i.e., either silver or gold) because he discusses the idea of “breaking”points” solely within in bi-metallic systems. As he says at page 336 of his dissertation, “The [silver breaking point] and [the gold breaking point] represent the thresholds at which the foreign ask for gold in silver terms falls low enough (the silver point), or the foreign bid for gold in silver terms rises high enough (the gold point), to make it possible to arbitrage the standard.”
Interesting questions and ideas, Scot. I haven’t read Drumm’s dissertation, so I can’t comment on his ideas. But I do have some questions for you. First, if we’re going to talk about the ‘nature of power’, how do you define power?
Blair,
I apologize for not responding earlier. For some reason, I did not see you had replied.
I know that CasP theory typically defines “power” as “confidence in obedience;” however, I find this definition assumes too much about the awareness of both ruler and ruled regarding their respective status. Accordingly, I prefer defining the term a bit closer to how proto-liberals (e.g., Locke, Jefferson, and Paine) defined it, which is the antonym of how they understood freedom (from the power of others). The power we are concerned with is the arbitrary, coercive power of an individual to subjugate the agency/will of another. Thus, to me, power is necessarily coercive, and I don’t care if coercion is applied directly through violence or the threat of violence, or indirectly through the denial of access to resources necessary to exist.
If your choices are controlled by another, you are not free. You are, effectively, a slave.
Second, what is the ‘nature of money’?
Historically, money has been identified as having three major functions: (1) acting as a unit of account; (2) acting as a medium of exchange; and (3) acting as store of value.
One of my key takeaways from Colin’s book (as he likes to call his dissertation) is modern money transplanted the “store of value” function from money (bimetallic coins with intrinsic wealth value based on the amount of the particular metal the coins contained) to capital (tallies of wealth value maintained in accounting books). Severing wealth from money allowed wealth to be “hoarded” without hoarding money, a problem that prevented capitalist economies from manifesting in the first place due to the counter-intuitively negative effects of peace (preparing for the next war required hoarding the wealth required to fund it and/or the crown taxing the hoarded wealth of the elites). This hoarding/taxing dynamic led to distrust between the king and his elites, which ultimately led to the solution of modern money as first instituted by the Bank of England.
Modern money capitalizes the future labor of the debtor. Hence, all modern money begins as indentured servitude. Ancient money and wealth, on the other hand, was grounded in existing metal, which is why hoarding wealth withdrew money from circulation, depressing the economy, at least as we measure it today with GDP. Ancient money enforced a zero-sum game because it had to. Modern money enforces exponential growth because it has to.
My own take is that focusing on money itself is a bit of a distraction. My view is that money is nothing but a quantification of property rights. Part of the development of capitalism involved making the unit of quantification progressively more abstract. But really, the abstraction has been there all along. There is nothing in gold that makes it valuable. But it is convenient (for the human mind) to give a unit a physical dimension.
I disagree. As Colin says, money makes a difference. Market exchanges occurred before there was “money,” but the the commensurating commodity itself, e.g., a particular weight of silver or wheat, did all the work. For some reason, forever lost to the sands of time, somebody introduced money as a substitute for the underlying commensurating commodity. (Note: Colin will insist that it was Lydian kings who introduced money, but, like most ancient historians, he is far too credulous of ancient historians, who are famous liars). In hindsight, it is easy to see that the “spread” between the nominal value (Colin’s “inside option”) and the intrinsic value (Colin’s “outside option”) of coined money created a tax that accrued to the king and his cronies, but I don’t believe that’s how ancient money began because the outside option always existed. It was the inside option that was new, and the king could have just as easily taxed the bullion as the money. Thus, ancient money, like modern money, solved a problem. What was that problem? I don’t know, but I think it most likely relates to securing the loyalty of a standing army (specifically, the Neo-Assyrian army). By paying soldiers in a way that gave them more wealth in the state they served then could be gained by the intrinsic metal value of the means of payment, it made it less likely for the soldiers to switch sides.
The more interesting element of money, at least for me, is the progressive expansion of property rights — the ability to own and therefore quantify anything.
Credit money is the primary mechanism for transferring power from the ruled to the rulers. The ruled need money to live. The rulers condition the availability of money on a debtor’s servitude, and whether the debtor is among the rulers or the ruled, the ruled ultimately pay. Money is not at all based on the expansion of property rights because no property is exchanged, only credit for a promise of servitude (among CasPers, Di Muzio gets this best, I think). Capital is based on the expansion of the money supply (debt) and the expansion of property rights (equity). CasP metrics focus on equity, which creates a blindspot regarding debt. CasP needs to understand money, debt and equity (and the relationship between all three) to be a comprehensive theory.
To get back to the question of power, I agree that power is essentially the same everywhere, in that it is simply the ability to influence others. But what is not constant is the ideology that motivates the followers.
Ideologies are, always and everywhere, created by, and for the benefit of, the rulers. What is particularly insidious about the liberal/capitalist ideology is the ruled have been duped into believing they are free. The reality is that you are not free in a liberal society unless you are free from the Market.
I, like Marx and Locke, believe in the promise of what today is known as liberal ideology– freedom from coercive power. That is what I would like to see, more than anything else, but even what that means is subject to interpretation. For example, Nitzan believes in the idea of an autonomous democracy, but I believe that such a democracy imposes too much work from the vast majority of people, who just want to vibrate in their happy place, which ought to be okay. As long as those who care about ruling are not allowed to exploit (impose arbitrary, coercive power over) those who don’t, then everything should work out.
I am no expert, but my understanding has always been that business between parties with a long-term relationship (neighbors, relatives, friends, trading partners) was largely conducted with credit (credit preceded coinage by millennia). Coin, when available, would be used for periodic settling of accounts.
Consider reading Casualties of Credit by Carl Wennerlind.
On the one hand, Wennerlind confirms your understanding of how credit was employed in England prior to the creation of the Bank of England in 1694:
Despite attracting much needed specie from abroad, England was still suffering from a palpable lack of an adequate currency. Historian C. G. A. Clay describes how “demand was affected as it became increasingly difficult for most people either to buy or to sell, and for employers to pay Part of the problem, Clay notes, was that there “was no alternative to the silver coinage for everyday purposes: certainly the lack of confidence in any possible issuing authority made paper money inconceivable.” While it is certainly true that there was no widely circulating credit currency in England at the time, credit was far from absent. As historians Eric Kerridge and Craig Muldrew have respectively shown, merchants, tradesmen, shopkeepers, farmers, and laborers developed a number of credit mechanisms to alleviate the effects of the scarcity of money. Indeed, Muldrew claims that credit was so pervasive in early modern England that “almost all buying and selling involved credit of one form or another.” Although silver coins were still necessary for certain transactions, such as exchanges between strangers, for payments of rent, tithes, and taxes, as well as for certain overseas exchanges, nearly all people engaged in credit transactions on a regular, if not daily, In fact, Muldrew concludes that the deficiency of coin was so extreme that credit came to serve as the primary means of exchange, while the coinage system operated as the unit of account and final means of settlement.
England, like the rest of Europe, employed a wide array of credit instruments by the seventeenth century. Internationally, the long-serving serving bill of exchange facilitated both commercial transactions and loans, while personal sales credit was the most ubiquitous form of domestic credit.
On the other hand, Wennerlind explains the primary reason credit was used that way was because of the scarcity of the money supply due to hoarding and trade imbalances.
The aforementioned credit instruments provided much needed relief to the overburdened coinage system. Yet the London money market was still comparatively primitive, with bills, bonds, and pledges enjoying only limited negotiability. Legal obstacles, awkward denominations, and the lack of an impersonal exchange prevented the development of a widely circulating credit currency. If credit were to provide the solution to the scarcity of money problem, an altogether different type of credit instrument had to be developed.
The state also tried to improve its financial flexibility through the use of credit, but experienced only limited success. The amount of loanable funds available in the London money market was too small to satisfy the government’s needs and the term structure offered was too short to be of much use to the state.” The primary reason, however, why lenders were hesitant to extend loans to monarchs was the latter’s immunity from legal redress. The Tudors had therefore been forced to rely on loans from foreign merchants in Antwerp, at least up until the 1570s, after which the English Crown essentially stopped borrowing from abroad, focusing instead on the imposition of forced loans at home. While Elizabeth used this source of revenue sparingly, for example, to finance the war on the Spanish Armada, James and Charles exploited it more extensively. When the early Stuarts managed to borrow in the domestic tic money market, it was often through some measure of coercion or promises of favors. They targeted noblemen, well-connected individuals at court, and prominent government officials, such as Sir William Russell, Treasurer of the Navy, and Lionel Cranfield, Lord High Treasurer. The state also called on wealthy individuals, like the merchant-financier financier and unofficial paymaster Philip Burlamachi, syndicates of prominent merchants, and corporations, like the Merchant Adventurers and the Corporation of London, to extend large sums of money. Yet, despite the best efforts of the early Stuarts to raise money, they often fell short of their aspirations. And, even when they did manage to raise some money through credit, the instruments issued were not transferable and thus did not serve to augment the currency. Despite England’s relative success in attracting silver from abroad and developing credit mechanisms, the nation was still searching for a way to once and for all put an end to the troubles caused by its inadequate currency.
So, credit did not expand the domestic money supply, it just delayed final settlement. By contrast, debasing the currency did, although with potential consequences internationally.
The Bank of England solved the problem with the invention of fiat money in the form of credit-money, i.e., money that is created through the extension of credit.
Drumm writes: “monetary interventions such as debasements are intended to draw hoarded coins out of hoards and to the mint.” This doesn’t make sense. Why on Earth would debasement of the circulating coin encourage one to exchange good coin for bad? During medieval times point with bulk silver could have to minted into coins for a fee. But if you already have coin there is no need to remint it.
There’s a link to the dissertation above. Chapters 2 and 3 are the most relevant to your question.
My take is very simple. Not all subjects of a kingdom have an “outside option,” i.e., they don’t have the option to travel to another state and melt the coins down for a better price. So, they have only the “inside option,” the ability to spend the coins as currency within the state. For them, having more currency to exchange is better. Indeed, if money is hoarded instead of being circulated, the economy suffers.
And that’s the heart of it: money as store of value competed with money as a means of exchange, and as commercial interests and domestic trade rose to prominence while feudalism waned and capitalism awaited birth, finding a solution to a lack of sound money supply (as opposed to sound money) became of paramount importance. Modern money, i.e., fiat money, was the solution the English invented in 1694 with the establishment of the Bank of England.
XenForo seems confused.
Within the liberal tradition, which informed Marx and, therefore, informs Marxism and Marxists, arbitrary, coercive power is anathema to the human condition. By identifying capital as precisely such power, CasP theory is not neutral: it has made a value judgment that any dissident informed by the liberal tradition can use, quite effectively, to dissent and resist.
That said, CasP theory, unlike other schools of political economy, does not (yet) attempt to be normative. And I think that is xenForo’s real objection: how can he know what to think unless someone tells him what to think?
Yes, xenForo, we all get that labor (whether performed by humans or machines) is what creates “value,” but that really doesn’t matter in setting prices. If labor sat down with capitalists and agreed to the objective value of labor, capitalists will see that as a cost to which they add markup, not a value that scales with price. Why? Because they have to power to set prices, and labor adds NOTHING to that power.
And this is one of the reasons why I prefer to view CasP as not having a theory of value at all. Once you realize that labor’s value is the capitalists’ cost, and profit is the markup that capitalists have the power to add to that cost in creating the price, you can start focusing on the arbitrary, coercive nature of that power instead of demanding labor’s “fair share” of something labor has no hand in creating (markup).
Regardless, there’s nothing “post-modern” or Foucaltian about CasP (I even recall some virulent anti “postist” rants in some papers). CasP theory clearly has its own grand narrative that can be tested historically and empirically. It just doesn’t have its own politics (although its adherents all seem to abhor– or at least are concerned about– arbitrary, coercive power and the inequality it perpetuates).
Hi Scot! really delighted that you are reading my work and picking up on what matters about it. i just want to point out one small correction: as I show in chapter 3, the negative economic effects of a scarcity of money is not just borne by the “commoners” as in proletariat, but also by the “commons” as in the non-landed mercantile interests in the city of london. perhaps in the revised version i should telegraph this more explicitly in chapter 2. cheers! C
Thanks. If I had thought things through, I would have realized that you were referring to the commercial interests, as well.
I am not sure how you get from “capital is power” to “stock market crash good.” Seeking to understand capital as a mode of power does not require animosity towards power. Indeed, one of the knocks on CasP is that CasP doesn’t attempt to suggest to us what can/should be done with its conclusions; i.e., CasP lacks praxis. See, Theory and Praxis, Theory and Practice, Practical Theory: https://bnarchives.yorku.ca/539/
Scot’s interpretation differ from Shimshon’s and mine. We oppose modes of power in general and the capitalist mode of power in particular. The purpose of our research is to understand the capitalist mode of power in order to change it and, if possible, move away from it. I think other CasP researchers share a similar sentiment. Shimshon and I support autonomous, direct democracy, even though this type of society seems far-fetched at the moment and difficult to achieve. The last section of our article ‘Theory and Praxis, Theory and Practice, Practical Theory’ outlines one possible way to resist and begin to move away the capitalist mode of power — though this type of systemic change is probably impossible to plan more than one or two steps ahead of time.
Do you see any contradiction in claiming, within the same breath, that (1) you’ve outlined “one possible way to resist” and (2) your “possible” way “is probably impossible to plan”?
A way forward that is impossible to plan is no way forward at all, hence the continuing validity of Debailleul’s criticism that CasP lacks praxis (a way to translate theory into practical and concrete action) at the present time.
The fact of your personal animosity (or mine) towards the capitalist mode of power does not affect the objectivity, neutrality or validity of CasP itself, but CasP’s lack of praxis obviates the conclusion that, according to CasP theory, “stock market crash good.”
