Summations Only

Hi Straggler,You're working so hard to find disagreements that you apparently have to make up things to disagree with: But I agree with your statement about average incomes and productivity and don't think it's communistic at all. I'm not trying to brand you as a communist, though I could make a good case that you're a confirmed misconstrualist. What I actually said was, this time including the portion you left out: How do you misconstrue this as being about your position on average incomes and productivity, which again I happen to agree with? But I never said this either. What I said was precisely the opposite. In the example I posed for you where we have a 50/50 split of ownership in a new company where I contribute the capital and you contribute the labor (again, reverse the roles if you like), that was to illustrate that both capital and labor are ways to create wealth. Given what I said, both in the previous message and throughout the rest of my messages, and plus given that it makes no sense, it's difficult to conceive of the mental effort you must have exerted convincing yourself I said the opposite.You seem to be trying to focus on everything except the important point, which is that profits belong to the owners of businesses who risk their capital. When governments remove the risk to business owner's capital then it is no longer capitalism. That this is becoming increasingly prevalent in western economies does not change the definition of capitalism. You seem to want to redefine capitalism in terms of the worst abuses. So in terms of our company, when you negotiate a deal for lower fuel prices for the next year, to whom do the increased profits belong? To us, or to our employees?Here's your chart again: The productivity gains on that chart are summed from the financial statements of businesses. Productivity changes, both positive and negative, belong to the owners of the businesses, not the workers, because the owners are the ones risking their capital.The productivity gains on that chart (US GDP per capita) do not include any productivity gains on the part of research scientists in the public sector because there are no financial balance sheets for government agencies in terms of profit and loss. You claim the wealthy are unfairly appropriating these gains to themselves, but you have no idea what these gains are, or even if they are indeed gains, and given the inefficiency of government I wouldn't bet on gains if I were you. And how, precisely, do you imagine the wealthy are grabbing these gains?I suggest you try to answer your own question about the public sector research scientist and the McDonald's investor. I'm particularly interested in the means you use to assign a value to the scientist's wealth creation. And when making the comparison, don't forget to include how many shares were owned and whether McDonald's had an up or down year. Then repeat the comparison but make the company Morgan Stanley and the year 2008.--Percy

I will happily answer my own question once we have explicitly established what your position is on wealth creation and ownership.

Do you think that simply owning an asset that has increased in monetary value qualifies as an act of 'wealth creation'?

​

Or do you think the activities and innovations which caused that asset to increase in monetary value can be more accurately described as 'wealth creation'?

​

In the example of the publicly funded, productivity transforming research scientist Vs McDonalds share owner is it even possible, in your view, for the lower income, non-share owning, non-property-owning research scientist to be considered a 'wealth creator'? Or is wealth creation the exclusive preserve of those who own appreciating assets?

​

I just want to know if your position involves completely denying that anyone who doesn't own assets can be a 'wealth creator'.

​

Until we establish that baseline I don't see anything can progress here.

Hi Straggler,Your inability to understand what I say is making this discussion much longer than necessary. It's a simple point: profit gains/losses that result from productivity gains/losses belong to the owners of businesses, not the employees. Given that you're replying to a message where I said this: I can't imagine how any ambiguity can remain. Clearly I don't believe that "anyone who doesn't own assets" can't be a wealth creator because I just said that (and I quote) "both capital and labor are ways to create wealth." Did you even read that paragraph in the previous message?Let me ask you again: So in terms of our company, when you negotiate a deal for lower fuel prices for the next year, to whom do the increased profits belong? To us, or to our employees?Also let me ask you again: In your example, how are you determining the amount of wealth creation of the public sector research scientist, and by what means are the wealthy unfairly appropriating the proceeds to themselves?--PercyEdited by Percy, : Grammar.

OK. So with these two statements we can clearly see that 'wealth creation' through increased productivity cannot be wholly attributed to share owners. But it is share owners who receive the proceeds of increased productivity despite this. Thus, inevitably and indisputably, those who own the most receive more wealth than they are creating.Now whether this is a good thing, a bad thing or even a necessary thing in a capitalist economy is beside the point at this stage. I am simply asking you to accept the fact that the wealthiest in society are receiving more wealth than they are creating and that it is thus very difficult to meaningfully argue that wealth is trickling down rather than up.Do you accept this or not? The post tax profits belong to us. I don't think you can quantify it in the way you are demanding but nor do I think this means you can simply ignore it as a factor if it blatantly is a factor in increased productivity. If we want to create wealth we need to understand how that happens and act accordingly. Not simply define things in terms of a balancesheet and then deny the role of anything that doesn't meet that definition. That really is self-defeating isn't it?In terms of how the wealthy are appropriating if for themselves - I think they have successfully hoodwinked many into believing that, rather than they benefiting from a publicly funded environment that is business enabling and conducive to wealth creation (educated healthy workforce, communications infrastructure, travel infrastructure, justice system, rule of law etc. etc.) it is instead everyone else who benefits from their "wealth creating" talents. On the back of this they have further convinced many that taxing them is some form of self-defeating theft and that their increasing wealth and political power is simply the result of their unchallengeable market worth. of which we should all be grateful.In short I think they have rather self-servingly arrived at the sort of definitions you are advocating here.

I think you're making an orthogonal statement that doesn't derive from anything I said. My statement was about who the gains/losses from productivity gains/losses belong to. You seem to be making a statement about who performed the labor related to productivity gains/losses.For example, for our company you contract a study of efficient delivery routes. You provide this information to your drivers and it results in a productivity gain. The drivers performed the labor related to the productivity gain, but the proceeds from that gain belong to us.--Percy

The answer of how to distribute the profits from wealth creation is somewhere in between, not 100% to the owners, not 100% to the workers.It's negotiating the somewhere in between that is the issue.Each company is different, so the percentage settled on is different. If the company is an all-employee owned company, like Avis rental cars or SAIC, then this issue is less of an issue, I suppose.

Hi Straggler,Sorry for two replies to the same message, but I wanted to reply to the latter portion separately because I didn't want it confused with the first part of your message where it seemed you may have misinterpreted what I said. You can't quantify it, and you don't even know if any associated productivity gains are positive or negative. You just want to assert that it is positive and claim the wealthy are unfairly appropriating to themselves. You haven't got a single concrete digit to stand on.There's a simple answer to the wealth creation contributed by the public sector research scientist: it is equal to his total compensation, which is decided by the market for such services. Any process that assigns value to his work based on other considerations is not capitalism. The only figures we have for productivity come from balance sheets. Again, you don't even know if this public sector productivity figure is positive or negative. And given that here in the US the private sector is 4 times the size of the public sector, even if the rich appropriated all of these supposed productivity gains could it really account for their gain in income and wealth? I'm not interested in quibbling or putting too fine a point on things. Though I wouldn't have expressed things this way, since it doesn't include the claim about productivity gains I largely agree with this. The basic definition of capitalism, which is all I'm talking about, hasn't changed since the days of Adam Smith.--PercyEdited by Percy, : Grammar.

I think this is the part where people are getting hung up. Why would "the market" assign, as compensation, the total value of the research scientist's wealth creation? Why wouldn't it be, in fact, quite a bit less? Why wouldn't it be, in fact, the bare minimum you could pay such a scientist before he stops creating any wealth at all?Your contention, I think, is that a worker's wealth creation and a worker's compensation have to be identities, but you've not made an argument that that is the case. Those are very obviously two separate things, just as the value of something and its price are not identities, as proven by the fact that things don't become valueless simply because they're stolen (i.e. "purchased" for a zero price.)A worker's compensation is not an identity with his wealth creation. In a perfect free market economy with an infinite number of employers and a scarcity of workers, they approach identity. In our economy, they do not, and this is answer to your earlier question: that's how the rich have appropriated all the gains.

Yes, they do. That's what ownership means; the problem is that you're equating owning the wealth created with actually creating it.

It's simple economics. As the first sentence of the Wikipedia article on Value (economics) says: The article continues: The employer and the employee are buyer and seller. An employer who felt that his wealth was diminished by purchasing the services of a particular employee would be wise to dismiss him. If the employee does not contribute in services a value equal to his salary then there would be little point in retaining him.Let's use piece work as an example, it's simpler. If the employee makes a widget that the company pays him $10 for, and then the company sells the widget for $25, how much wealth has the employee created, and how much wealth has the company created?Simplistically one could say that the employee has created $10 in wealth and the company $15 in wealth, but it's not that simple. In reality the worker who actually makes the widget is just one expense. The company has many other expenses involving design, materials purchase and acquisition, production facilities, maintenance, security, transportation, marketing and sales. The employee represents a 10$ expense in the manufacture and sale of the widget, but the other departments represent let us say another $14 in expenses for a total of $24 in expenses. In the end the company only makes $1 per widget.Who does that $1 belong to? The company's owners. That is the company's contribution to wealth creation.What was the employee's contribution to the value of the widget? $10.What was the compensation to the employee for making the widget? $10.Therefore the employee created wealth in the amount of $10.Now let's follow the widget through the supply chain. The company sells the widget to wholesalers for $25. The wholesalers sell the widget to retailers for $30. The retailers sell the widget to customers for $35. What is the value of the widget? Interesting question, isn't it.The answer is that the value is different to different companies. The widget company would love to sell directly to retailers for $30, but it doesn't have the warehousing and inventory controls of the wholesalers, so it sells the widgets to wholesalers for $25. The wholesalers would love to sell directly to customers for $35, but they don't have the retail distribution and advertising channels of the retailers, so they sell to the retailers for $30. So the widget has a different value at each stage of the supply chain, and each stage provides an additional $5 in value.Of course the customer would love to be able to purchase the widget for $25 directly from the company, but the company cannot short circuit the other stages of the supply chain without suffering consequences. By selling directly to customers it might find itself shut out of the large retail outlets where high volumes are possible. Sure, if it sold a million widgets for $35 it would make more money than if it sold five million widgets for $25, but it might lose some of its economy of scale, its cost of production per widget might increase, its brand recognition might decrease due to its absence on stores' shelves, causing it to sell even fewer widgets the following year. It's a risk on which way to go, a real balancing act.Similar problems accrue to wholesalers who try to sell directly to customers. This is just nonsense. Were there infinite employers then the demand for workers would be infinite and so would the salaries, but what you're alluding to is the law of supply and demand. In the current economy, and in the economy of four years ago before the mortgage security crisis, and in the economy of the dot-com boom, and in the economy of the Carter stagflation (in other words, in all capitalist economies everywhere always but taking into account government regulations), employees have always had the same value: what employers are willing to pay, which is determined by the current market. On the flip side, employers have always had to assign employees the same value: what employees are willing to accept, which is determined by the market.In other words, just like Wikipedia says, "An economic value is the worth of a good or service as determined by the market."--Percy

Let's say you have $100,000. You're the owner of this wealth. You now invest it by buying shares in a company. You have just risked your capital to become a part owner of the company. If the company does well the value of your shares increases. If the company does poorly the value of your shares decreases.Let's say the company does well, the shares rise 50%, and you sell your shares with a profit of $50,000. That is your share of the wealth created by the company.Or let's say the company does poorly, the shares drop 50%, and you sell your shares with a loss of $50,000. That is your share of the wealth lost by the company.There's no confusion with ownership and wealth creation except on your part. Owning a business, in other words, investing in a business, means risking your capital. And risking your capital is one way to create wealth in a capitalist system.These are simple concepts from economics 101. It is a great surprise to discover so much resistance to them.--Percy

And what determines whether the company does well or poorly?

I notice you're doing a good job of acknowledging my questions, but not a very good job answering them.

And later on it says: "price and value are not seen as equal".I think I have shown why this is a more sensible view, in that it keeps us from talking nonsense.The idea of value is disputed. The fact that one person writing one paragraph on wikipedia says something silly is not a reason to follow him.---Re your example of widgets, would you like to answer mine from post #83? Edited by Dr Adequate, : No reason given.Edited by Dr Adequate, : No reason given.

Again I would point out that no-one is disputing the fact that capitalists get the money which they get.