Tom Walker said:
>Ed Weick wrote,
>
>>If I remember my economics, profit is not a reward to capital, but to
>>enterprise. It is the reward going to the entrepreneur, the person who is
>>successful in putting capital, labor and land together to some productive
>>purpose. Capital accrues interest, which is the price which must be paid to
>>the owner of the capital because, while it is in production, he cannot use
>>it for any other purpose.
>
>The problem with this definition is that it covers only a minor proportion
>of what TODAY counts as profit. It also refers to only a small proportion of
>what HISTORICALLY has counted as profit. Monopoly rents and seizures of
>traditional common property are far more significant sources of wealth
>accumulation than profits as Ed defines them. Contrary to Ed's recollection,
>even Marx didn't scorn profits in the sense of a reward to the entrepreneur.
Tom is right. My economics is not only some distance away in time, it is
getting a little sloppy. My definition says nothing about the so-called
"quasi rents" or excess profits earned by the monopolist and oligopolist,
both of which are a dominant factor in today's industrial structure. He is
also right in pointing out that it is the little fellow, the supplier to
both larger business establishments and to the consumer, who is always in a
potential squeeze from big firms, labor and government. I'm not sure that
he is right about Marx, but I will take his word for it.
However, my point was not about whether we are or are not defining things
properly, but about whether we have a proper understanding of the situation
we are, ever so often, ranting and railing against. The medieval church saw
interest on borrowed capital as "usury". Who to blame? Why the Jews of
course! The result, often, was persecution and pogrom. The Zionist
conspiracy was a major factor in Hitler's Germany and continues on in
various forms today. Today the arch-villain is the TNC. There is no
question but that many corporations have abused their position, but I have
worked for at least one which behaved equitably toward its many small
suppliers. It treated them fairly and paid its bills. The freer flow of
capital internationally is another villain. It's true that speculative
capital is disruptive, but capital that is needed to finance trade, business
development, and the provision of infrastructure has always played a very
useful role in the international economy. To condemn it, and to condemn
measures such as the MAI which want to put some rules around its use and
abuse, is, in my view, short sighted.
>People who demonize profits also tend to lump the entrepreneur's return
>together with monopoly rents and "primitive accumulation". The same people
>like to think of all wage earners as "exploited". Perhaps the problem is
>that the polarized concepts of "capital" and "labor", "profit" and "wages"
>have come to connote ideals that are simply not applicable to the modern
>economy. They are worn out metaphors. However, since these terms form the
>basic vocabulary of "economics" -- both mainstream and marxist -- we are
>compelled to somehow fit our discussion into the procrustian bed of an
>inappropriate vocabulary.
I would agree that we are still slaves to Alfred Marshall, Joan Robinson,
and Keynes even though the models we have inherited from them, and the
vocabulary, may not really fit anymore. Is there something better around?
Several years ago, while working on a project that dealt with agricultural
pesticides, I ran into a paper by Carolyn J. Tuohy entitled "Regulation and
Scientific Complexity: Decision Rules and Processes in the Occupational
Health Area" in the Osgoode Hall Law Journal (Vol. 20, 1982 ). I have
remained impressed by the core idea of that paper. Touhy made a distinction
between two different ways of making policy. The "analytic process" proceeds
by comparing probable costs and benefits of a range of alternative policies
and choosing the alternative with the greatest expected net benefit. It
implies that we have a model and sufficient data to allow us to proceed
analytically. In contrast, the "cybernetic approach" envisions events as
evolving via dynamic processes which are only partially understood and which
are fraught with uncertainty. There is neither the appropriate model nor the
data. Economic actors must behave a little like the player of a pinball
machine. To get the ball to move to the right pins, the player must tilt
the machine a little this way and a little that. Touhy proposed that a
cybernetic approach often seems more sensible than an analytic one in
today's world. Business firms and government institutions try to behave
cybernetically, but they carry a lot of baggage, including defunct economic
models, which may inhibit their effectiveness.
I'm sure that up-to-date economists have developed the cybernetic approach
into a theory and have written textbooks about it with titles such as
"decision-making under conditions of extreme uncertainty" or "how to keep
playing even though you don't know what will hit you or when", perhaps as an
extension of game theory. However, as Tom Walker has discovered, my
economics is not only cozy, it is becoming a little archaic. If there is a
textbook, it is probably loaded with mathematics, so I couldn't understand
it anyhow.
Ed Weick
