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