From: jwh@citi.umich.edu (Jim Howe)
Subject: Re: Clinton on Economics (transcript of speech)
Date: Wed, 26 Aug 92 09:54:45 EDT
Organization: IFS Project, University of Michigan
Reply-To: jwh@citi.umich.edu

In article <1992Aug26.120340.15722@usenet.ins.cwru.edu>, au329@cleveland.Freenet.Edu (Ronda Hauben) writes:
|> 
|> In a previous article, jwh@citi.umich.edu (Jim Howe) says:
|> 
|> >In article <1992Aug21.165652.3018@news.ysu.edu>, ae547@yfn.ysu.edu (Ronda Hauben) writes:
|> >|> But who is the important party in the production of WEALTH is 
|> >|> where we have the difference. One can produce wealth WITHOUT
|> >|> capital or the capitalist. One CANNOT produce WEALTH witout
|> >|> the WORKER. 
|> >|> 
|> >|> Any strike shows that this is true.
|> >|> 
|> >
|> >Actually this is a false claim.  It would be feasible to invest
|> >in a machine which produced a product that could be sold, i.e
|> >create wealth.  Take a worker and put him in a desert and how
|> >much wealth will he produce?  In general this is not an either
|> >or situation.  You need *BOTH* labor *AND* capital to produce
|> >wealth.  The application of capital will cause wealth to increase
|> >at a faster rate than simple labor alone.
|> >
|> 
|> NOT IT IS NO FEASIBLE TO INVEST IN A MACHINE THAT PRODUCED A PRODUCT
|> THAT COULD BE SOLD, I.E. CREATE WEALTH.
|> 

How about a self-service ice machine?  It is a machine that takes
water and produces ice.  Customers put money in the machine and
get ice in return.  The 'labor' to produce the product (ice) was
performed by the machine, not a person.  Wealth was created because
a desireable commodity was produced which did not previously exist.

|> It is NOT that MACHINES create WEALTH.
|> 
|> It is that wealth is created by LABOR.
|> 

True, but labor need not be performed by a human.

|> 
|> WEALTH is created when LABOR transforms NATURE and creates somethng
|> new as a result of the effort and time that labor has put into the
|> product. 
|> 

Agreed, however as I said above, labor need not be performed by
a human.  Labor is an activity not an entity.

|> 
|> A worker acting on the desert will create wealth. It is NOT that 
|> capital creates wealth. 

I never said that capital creates wealth.  Capital facilitates the
creation of wealth.  It creates an environment where greater wealth
can be created.  While it is true that capital by itself generally
can't create wealth (see ice machine description above) it is
a fundamental component in the creation of wealth.

|> Capital is a legal relationship of ownership,
|> not an essential part of the production process. Change the legal
|> relationship and laws and those who currently OWN Capital will no
|> longer OWN it. 

Capital is not a legal relationship of ownership.  It is a physical
thing which can be used to produce things.  Capital is capital,
regardless of who owns it (or doesn't own it).

|> 
|> Labor and Nature exist regardless of the current state of the laws.
|> 
|> Who is entitled to own the product of labor may change depending on
|> the laws, but the fact that Labor and Nature are the essential 
|> elements in the process doesn't change.
|> 

I never disagreed with this.  However, *capital* is an important
third element which allows for a greater production of wealth.
If you were stranded on a desert island, one of the first things
you would probably do is create some tools to make your life
easier and more productive.  The tools don't satisfy your needs
but they make it easier to satisfy your needs.  The tools you
build (using labor and nature) represent your capital.


James W. Howe                  internet: jwh@citi.umich.edu
University of Michigan             uucp: uunet!mailrus!citi.umich.edu!jwh
Ann Arbor, MI   48103-4943         
Xref: sparky sci.econ:7336 misc.invest:11182