From: danny@athena.mit.edu (Daniel A Lagattuta)
Subject: Re: Exploitation
Organization: Massachusetts Institute of Technology
Date: Tue, 10 Nov 1992 15:39:47 GMT

In article <1992Nov9.162302.10017@vax.oxford.ac.uk>, denning@vax.oxford.ac.uk (Iain Morrison) writes:
|> In article <1992Nov6.164633.2328@athena.mit.edu>, danny@athena.mit.edu (Daniel A Lagattuta) writes:
|> > In article <MAD.92Nov3110345@spirit.clearpoint.com>, mad@spirit.clearpoint.com (Michael Davis) write
|> > |> Dale,
|> > |> 
|> > |> You do not address the fundamental issues.  As I see them they are:
|> > |> (1) In a historical sense, all capital comes from an expropriation of
|> > |> unowned or communal resources, and (2) in a modern sense, labor is a
|> > |> cheap commodity which is not rewarded in proportion to the value it
|> > |> produces.  That a small minority should be rewarded for ancestral
|> > |> theft does not make sense to me.  Capital `primes the pump' of
|> > |> productivity;  it should get a fair reward for that, but perpetual
|> > |> ownership of the majority of the value produced stretches the
|> > |> definition of fair reward beyond the breaking point.
|> > |> 
|> > 	I had a summer job.  I was paid money for it.  I put the money in a bank.
|> >  The bank loans it to help start a business.  Where is the expropriation of
|> > communal resources to supply that business with its capital?
|> > 
|> > 	If my parents work hard so that I can be better off, is it right to stop
|> > them and confiscate their accumulated capital?  Is that fair?  
|> > 
|> > |> Your statement that "Capital must produce *something*" is not even
|> > |> always true.  What is produced by the capital invested by arbirageurs
|> > |> who make bags of money investing on the spread between the buy and
|> > |> sell prices of pork bellies on the commodities market?  By LBO mania
|> > |> which has lessened but not stopped in the 90's?  "Efficiency of the
|> > |> market" as an answer here is merely a tautology, so answer with some
|> > |> other good...
|> > 
|> > 	In the language of economists, investing in financial assets such as 
|> > buying stocks from someone else should be called a transfer of assets rather than 
|> > investment.  In economics, investment means purchasing capital, such as machine
|> > tools or constructing a building.  Investing in financial markets is only
|> > investment in economic terms when the money is going directly into new capital.  
|> > 
|> > 
|> > 	This is not to say that trading is a valueless activity.  Somebody has to
|> > figure out at what price the supply of commodities and assets equals the demands.
|> > Someone also has to help protect people against risk in the market and to help
|> > the uninformed make better decisions about which assets to hold.  These are
|> > highly valuable services (in $ terms) and that is why these people are paid lot
|> > of money.
|> > 
|> > |> 
|> > |> I support the right of people to get rich (hope to do so myself :^),
|> > |> but hard work, or clever work, are the ways to do it, not by paying
|> > |> others $4.25 an hour for services that are worth $10.
|> > |> 
|> > |> -mad
|> > |> 
|> > 	If they were worth $10 then the Marginal Revenue Product of that unit of
|> > labor is worth $10.  Marginal Cost is $4.25.  Marginal Profit is $5.75.  One will
|> > increase labor employed until the Marginal Profit of each unit of labor is driven
|> > down to zero.  Wage will then equal the Marginal Value of Work.  This is basic
|> > microeconomics and explains why people who are being paid $4.25 are doing $4.25
|> > worth of service, not $10.
|> > 
|> 
|> Of course. The low paid get whats coming to them. And here was me thinking 
|> that they were being exploited by virtue of their sex, status, education or
|> financial situation.
|>
	I never said that the low paid get what they deserve. I am just saying
that they get money equivalent to the market value of their labor. 
Discrimination has some effect on wages but not a lot of effect.  Market forces
are more powerful than discrimination.  Of course, what is wrong about
discrimination on the basis of education.  I would like someone with the proper
training for a job before they are hired to do it.
	

|> I do wish people wouldnt spout economics as if it were akin to mathematics or
|> science. Your exposition above is content-free.
|>  

	And I wish you would tell me what is wrong with my economic argument. 
It is a fairly non-controversial microeconomic theory.  And it is content
free.  I find it important to have an understanding of how a market actually
works before I criticize it.  

					Daniel A. LaGattuta