From: jwh@citi.umich.edu (Jim Howe)
Subject: Re: Clinton on Economics (transcript of speech)
Date: Thu, 27 Aug 92 09:36:57 EDT
Organization: IFS Project, University of Michigan
Reply-To: jwh@citi.umich.edu

In article <1992Aug26.210433.11128@news.ysu.edu>, ae547@yfn.ysu.edu (Ronda Hauben) writes:
|> 
|> In a previous article, jwh@citi.umich.edu (Jim Howe) says:
|> 
|> >In article <seavn2i00WBKQ3vZ1H@andrew.cmu.edu>, ss9o+@andrew.cmu.edu (Stephen Sorensen) writes:
|> >|> Excerpts from netnews.sci.econ: 26-Aug-92 Re: Clinton on Economics (t..
|> >|> by Jim Howe@citi.umich.edu 
|> >|> > How about a self-service ice machine? [...]
|> >|> 
|> >|> And where did the machine come from ? 
|> >
|> >Who cares?  The point being made is that new wealth is produced
|> >from a capital investment, i.e. the purchase of an ice machine.
|> 
|> It is not that CAPITAL INVESTMENT produced the machine.
|> 

I suppose its all in how you look at it.  If noone was willing to
purchase the machine, it wouldn't have been built.  Capital
investment may not have produced the machine itself, but it
*caused* the machine to be produced.

|> 
|> A machine is producing ice - the machine is a machine not a 
|> CAPITAL INVESTMENT. 

Perhaps you would like to give us your creative definition of
CAPITAL INVESTMENT?  Here's mine, you have a business, you
purchase some machine, tools, etc. which help your business
produce a product.  The things you purchase represent a
CAPITAL INVESTMENT.  If my business is vending machines, an
investment in those machines is a CAPITAL INVESTMENT.  The
ice machine described above is clearly a CAPITAL INVESTMENT.

|> 
|> >The ice machine itself represents wealth produced by some other
|> >entity.  The fact that A produced B and C uses B to produce D
|> >does not mean that A is producing D.
|> >
|> 
|> It's not a question of something represening wealth, but producing wealth.
|> 

You missed the point.

|> The ice machine was made by labor and takes labor to service and keep
|> it operating. It requires nature - i.e. WATER - to operate on.

None of which is in dispute.  However, the machine is a capital
investment made by the owner.  This investment produces wealth.
The laborers who built the machine are not producing wealth, the
laborer who services the machine is not producing wealth, the
machine, the CAPITAL INVESTMENT, is producing the wealth.

|> 
|> But its also not a typical example of how new wealth is created.
|> 
|> Take the auto factory for example.
|> 
|> Workers are hired to operate the various machines.
|> 

machines == capital investment

|> They are hired and paid a wage for the week.
|> 
|> The employer tries to work them as many hours as he can at as high
|> an intensity of labor as he can.
|> 
|> The result is that new cars are produced.
|> 
|> The labor acting on the materials of nature have resulted in 
|> automobiles.

Labor, acting on the materials and using capital (machines and tools)
has resulted in automobiles.

|> 
|> Something new has been produced.
|> 
|> The worker is only paid enough to eat and to come back the next day,
|> to have a place to live, i.e. barely enough for the necessaries and
|> conveniences of life.

The worker is paid what the market determines he should be paid.  I
hardly think autoworkers are poorly paid.  When jobs are lost in
the auto industry, workers, politicians, etc. all complain that
'good, high paying jobs' have been lost.

|> 
|> But the result of his labor is that the auto company ends up with
|> more than they paid the worker - wealth was created by the workers's
|> labor.
|> 
|> Yet the worker gets no part of that new wealth. 

He gets a pay check, which comes out of the proceeds derived from
his labor.  He is compensated for his contribution.  Your statement
is completely false.

|> 
|> I agree that it is desirable for the society to have the process as automated
|> as possible - but also for the worker to work as few hours as possible.
|> It is not socially advantageous to have labor saving machines that 
|> make it possible to do more work with fewer workers if the workers who
|> are left working have to work 55 to 60 hours or more aweek.
|> 

And I don't believe that is the case.  Introduction of technology
reduces the need to do back breaking labor for long hours.  In
addition, if the government would stop siphoning off 1/3 or more
of a workers compensation, the worker would not have to work
as many hours to live a decent life.  A business has to find
workers willing (grudgingly or otherwise) to work long hours,
it can't force them to.  Businesses are in competition for labor.
If workers value free time, businesses will have to accomodate
that desire.  Of course when the government takes a big hunk
of your paycheck you have to give up some free time in order
to make a living.


James W. Howe                  internet: jwh@citi.umich.edu
University of Michigan             uucp: uunet!mailrus!citi.umich.edu!jwh
Ann Arbor, MI   48103-4943