Fred Foldvary wrote:
>It is not clear how "equity" is linked to equilibrium.
It most tellings of the Capitalist Myth, it is.
For example, in J. B. Clark's "The Distribution of Wealth" we read:
"Where natural laws have their way, the share of
income that attaches to any productive function
is gauged by the actual product of [that
function]. In other words, free competition tends
to give labor what labor creates, to capitalists
what capitalists create, and to entrepreneurs
what the coordinating function creates. (5)"
Clark believed that the forces of free
competition would force prices to equal the cost
of production,(16)driving the rate of profit to
zero, so that the entrepreneur would earn little more than the worker.(111-12)
Of course, Clark's real target was Henry George's
moral account of economics. Clark argued that
since wages are a "differential gain" they were
the same as ground rent. From this stunning
non-sequitur, Clark concludes that: "It is one of
the most striking of economic facts that the
income of all labor, on the one hand, and that of
all capital, on the other, should be thus
entirely akin to ground rent. (191)"
Nevertheless, Clark's formulation of equilibrium
is consistent with other major thinkers (many of
whom were also took George as a target) on the
subject (although not with Mises.) Clark claims
that "Normal prices are no-profit prices. They
afford wages for all the labor that is involved
in producing the goods, including the labor of
superintending the mills, managing the
finances--and doing all the work of directing the
policy of the business. Beyond this, there is no
return, if prices stand at their normal rate; and
the reason for this is that entrepreneurs compete
with each other in selling their goods, and so
reduce prices to the no-net-profit level. (111)"
In other words, under conditions of competitive
equilibrium, wages and profits would be
normalized to each other and their would be
neither excessive wealth nor poverty. Without
profit, there could be no economic rents and
hence no possibility of exploitation. The fact
that this never happens is considered a mere
theoretical quibble, and likely the fault of the government.
> > what rationale remains for the system?
>
>Do you mean a moral rationale?
The flip answer would be to ask if you think
human systems should rest on an immoral
rationale. But I suspect you may regard economics
as an amoral system, with timeless laws
unchangeable from culture to culture and stable
through time and eternity, per omnia secula
seculorum, and therefore needing no rationale at
all, any more than the orbit of Venus needs a
rationale. But this is simply not true of human
systems. If an economy can, even in principle
produce neither equilibrium (economic peace) nor
equity (economic justice), than what good is it.
And if it cannot in principle produce these, then
it must produce the opposites, instability and
injustice. In which case, who needs it or who
wants, save for the few who benefit from
injustice and depend for their wealth on
instability. But of course, this is the recipe for revolution and anarchy.
>How can an economic system "promise" anything?
>Only individual persons can promise.
That's okay; economic systems are the product of
persons; they are not immutable and pre-existing entities.
> > to reach any semblance of equilibrium,
> > distributional issues will have to be taken into
> > account, and distribution not merely of incomes
> > but of wealth-producing assets, such as land,
> > tools and education.
>
>In my judgment, equity is orthogonal to equilibrium.
>Equity is a moral concept, and any meaningful
>judgments about the equity of distribution presumes an
>ethic that is universal to humanity, thus independent
>of culture, thus eternal and unchanging.
>This universal ethic applies to economic dyanamics as
>well as to equilibrium concepts.
Ah, since the specifics of justice vary from
culture to culture, we should just do away with the whole idea?
John C. Medaille
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