RE: [Futurework] One aspect of our future

[Harry Pollard]

Title: Message

Arthur,   As you know the returns to Land, Labor, and Capital, are Rent, Wages, and Interest.   Not a mention of ‘profit’. This, because profit is not an economic, but an accounting term meaning an excess of income over outgo.   However, profit is a highly charged political word. It’s often – perhaps always – exorbitant, definitely unfair when wages are low and leads to such comments as “produce for use and not for profit”.   Hence the “Entrepreneur” – the one who fairly gets the profit.   However, the Entrepreneur is clearly labor. How can we separate him?   The description of the defined concept to which we attach the label “Labor” is (you’ll note how careful I am):   Human exertion, whether mental or physical, used to produce Wealth.   Wealth, in turn is the material product of human exertion, produced for the satisfaction of human desires and having exchange value. (This last provision to remove the inconsequential.) Further, the study of Political Economy begins with the first arms length exchange. This to remove family exchanges. Doesn’t have to , but is an example of a useful scientific tool – elision.   So, how is the Entrepreneur different from Labor – human exertion whether mental or physical, used to produce Wealth.   The answer is that he isn’t.   So, it was necessary to make him different. I remember watching with amusement the writhings of text book writers as they made the entrepreneur a “manager”, or a business owner, or a creator of a business. I think most of them introduced risk as the determining factor. Thus, I suppose, a salesman on commission is an entrepreneur.    It doesn’t matter – the entrepreneur only confuses the perfectly valid function of production - Labor. Here’s a Classical look (remember the three Factors – Land, Labor, and Capital and their returns – Rent, Wages, and Interest).   You have a downtown lot. You borrow money from a bank to erect a stand, and buy newspapers and publications. You hire someone to sell the papers. At the end of the year, you have $10,000 “profit”. The $10,000 doesn’t include Wages – paid to the employee, it doesn’t include Interest – paid to the bank. It does include the worth of the excellent downtown location, which returns you Rent. Your “profit” is actually Rent.   This time you don’t own the lot – you rent it. You hire an employee. You invest in the stand and stock. At the end of the year, you have made $10,000 “profit”. This isn’t Rent, or Wages. Your “profit” is actually return from your Capital. It is Interest.   You Rent the lot, borrow the Capital, but work the location yourself. At the end of the year, You’ve made $10,000 “profit”. It is actually Wages.   Finally, you own the lot, you own the Capital, and you work all year to get a profit of $10,000. This is actually a mixture of Rent, Wages, and Interest. I suppose most “profit” is a mixture.   The introduction of Profit and the Entrepreneur to what might have been a science is a purely political move designed to make profit look good.     It also separates management and employees. They are both Labor, but often find themselves in ferocious opposition. But, that’s another analysis.   Why is all this important?   If a science doesn’t get its basics correct, it will carry the flaws upward in its development. When things don’t work out in later analysis, the science is ‘patched’ to make it fit. Soon, the discipline becomes a monstrous entity which reacts to the latest problems with new amendments rather than laying down a course of analysis based on what is known and confirmed.   Economists should go back to the drawing board. They have things wrong.   Nothing could be sillier than making Land part of Capital. Land that was here before we were and will be here after we are gone is somehow combined with Capital which wouldn’t exist without the exertion of humans.   I think this is shown by the “housing” bubble. Houses don’t bubble, but Land does. Yet, it is only lately that the economic pundits are barely beginning to notice Land.   The practice of defining concepts and labeling them is both a science and an art. When politics intrudes it becomes neither. Scientists should beware of such intrusions.   Harry   ******************************** Henry George School of Social Science of Los Angeles Box 655  Tujunga  CA 91042 818 352-4141 ********************************     From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] On Behalf Of Cordell, Arthur: ECOM Sent: Monday, December 12, 2005 7:29 AM To: [EMAIL PROTECTED]; [EMAIL PROTECTED]; futurework@fes.uwaterloo.ca Cc: Keith Subject: RE: [Futurework] One aspect of our future   Economics 101 used to trumpter the factor of  Entrepreneurship.  -----Original Message----- From: Harry Pollard [mailto:[EMAIL PROTECTED] Sent: Sunday, December 11, 2005 2:42 PM To: [EMAIL PROTECTED]; Cordell, Arthur: ECOM; futurework@fes.uwaterloo.ca Cc: 'Keith' Subject: RE: [Futurework] One aspect of our future Lawry,   I would just love to know what you mean by “quaint”.   Land, Labor, and Capital are all you need to produce the material things we need..   Has this somehow changed with modern economics?   Probably the greatest initial accomplishment of Classical Political Economy was to draw together the manifold activities of production into four classifications – Land, Labor, Capital, and Wealth. Everything on earth, or for that matter - in the universe – comes under the umbrella created by those terms.   They are all you need to examine the production of Wealth.   However, you say they are obsolete. What has taken their place?   I await in trembling anticipation.   Harry   ******************************** Henry George School of Social Science of Los Angeles Box 655  Tujunga  CA 91042 818 352-4141 ********************************    From: Lawrence de Bivort [mailto:[EMAIL PROTECTED]] Sent: Saturday, December 10, 2005 11:47 AM To: [EMAIL PROTECTED]; 'Cordell, Arthur: ECOM'; futurework@fes.uwaterloo.ca Cc: 'Keith' Subject: RE: [Futurework] One aspect of our future   What a quaint and obsolete view of economics!   Lawry   “[T]he three traditional factors of production – land, capital and labour....”

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