Keith,
I approach it slightly differently - but say the same thing.
Where labor is both producer and consumer (such as picking an apple and
eating it - the product is Wealth. However, the Science of Political
Economy begins (by definition of the study) with the first exchange.
Elision is a useful tool in any science. Leaving out the unnecessary
simplifies thinking - but one must be careful.
Exertion we try to avoid. We will not exert for no purpose. When we exert,
we expect a return. We always expect a consumer - either ourselves or others.
So, the consumer is a given. There will be no production without a consumer.
So let's not include him in our discussion except perhaps in a descriptive
non-important category. However, when you remove the consumer, you also
remove Wealth, so we need not include these finished products in our study.
The Science of Political Economy (Classical Political Economy) is the study
of the Nature, Production, and Distribution of Wealth, so important is how
we get to Wealth - not the Wealth itself. (Distribution doesn't mean
transportation - it means how the completed product is distributed to the
producers - Land, Labor, and Capital.)
When the completed product arrives in the hands of - for example - Labor,
it becomes Wealth. So? Of much greater interest, is how it gets into the
hands of Labor and, perhaps, how much of the completed product gets to him.
So, we can concentrate on Land, Labor, and Capital and put Wealth to one
side. This will never do - we are finding agreement!
Your point about protection of land title is well made. However, protection
applies to Labor and Capital as well.
The history of American land titles is a history of force, theft, and
fraud. After the theft, the possession would be legalized - but the land
was still stolen. That the thief would claim protection for the stolen
property is to be expected - but it doesn't, even if "legalized", change it
from being swag.
I don't want to get into ownership of land for the moment (or maybe we'll
have to). We can discuss ownership in general.
There is no "natural right" to ownership. When people cooperate with each
other, I would argue that any ownership right is contractual. I would hope
that the contractual right is sensible. How can my exertion not belong to
me? Even if I'm chained and forced to use my exertion for the benefit of
someone else.someone else, it is still my exertion. I would expect sensible
contacts.
By extension, the things produced by my exertion also belong to me. Who
else could they belong to? In other words, contractual ownership follows
from commonsense interaction of people in community. This is known,
incidentally, as the "Labor Theory of Ownership".
Of course, the theory doesn't apply to land - except perhaps in the case of
God. A title deed to land is part of a contractual community arrangement -
even though landed property may have a murky past. However, protection of
land isn't separate from protection of other things.
Trade involves comparison of two values - market and personal (the
Austrians call it subjective). At the point of exchange the market values
of the goods are the same. If I swap my book for your chair, their values
are equal. The market value (at that time and place) of the book is one
chair. The market value of the chair is one book. So, why trade? All you
get is something which has the same market value as the thing you gave?
Why exert (trading takes exertion) when all you get nothing more than you
gave? The answer lies in personal value. I trade because your chair has
more value TO ME than my book. You trade because my book has more value TO
YOU than your chair. Both of us finish the transaction with increased
personal values. Values enough to make the exertion expended worthwhile.
Trade is the great multiplier of production and, as you have said, no
trade takes place unless both sides gain an advantage from it.
Harry
_______________________________________
Keith wrote:
>Hi Harry,
>
>Our exchanges, I'm sure, will bore some FWers, but I think it's
>sufficiently important (because of jobs) to examine them carefully. I've
>been simmering your latest posting while taking a brief holiday this
>week-end. Now that I'm back at home with my morning pot of tea before me, I
>hope I can explain my reservations about your assumptions so far. Also, as
>a brief preview of what I'm about to write, I'll mention an important
>factor of production which you (and all other economists so far) entirely
>exclude from their basic assumptions. But let me introduce this at the
>right stage a little later below.
>
>At 18:43 18/10/01 -0700, you wrote:
>(HP)
> >Just one point with regard to Capital and Wealth. They too are mutually
> >exclusive. The product from the time raw materials are hauled out of the
> >ground and sent to the factory is Capital. It is still Capital as it
> >assumes the shape of a car, is worked on, painted and eventually arrives in
> >the holding lot outside the factory.
> >
> > From there it continues to the local car dealer, who waits hopefully for
> >me to arrive.
> >
> >When I take possession of the new car, once production has finished, the
> >car is in the hands of the consumer, it is no longer Capital but Wealth.
> >This gives us the basic four mutually exclusive defined concepts that begin
> >the Science of Political Economy.
>
>Now I'm bothered about the transformation that you say takes place when
>Capital changes to Wealth.
>
>Let me examine the production process alone before any sort of transaction
>takes place. It is Land (Resources) + Labour (Skills) = Capital
>(Product). (I have written my preferred terms in parentheses.) We're agreed
>that these are mutually exclusive.
>
>In shorthand the production process is:
>
>R + S = P (I hope you won't mind if I use my shortened terms)
>
>Now I haven't put your term Wealth in here because it is not involved in
>the production process. If a person lives in a habitat which happens to
>contain all the resources that are needed for survival and reproduction
>then he could survive by the basic production process alone. Thus, in my
>view, Wealth cannot be a primary term in economics. It doesn't come into
>existence until trade, at least, has taken place.
>
>It is significant, I think, that the important time-dependent consequences
>of the production process which you mention (Rent, Wages and Interest) are
>also only three in number -- corresponding directly to the 'big three' (and
>not the 'big four'). We needn't discuss Wealth just at the moment.
>
>Now there is an important component of Rent which is scarcely ever teased
>out (as far as I'm aware) by economists. This is the cost of protecting the
>ownership of land. When I rent a piece of land or other resources from
>someone, I am paying a rent which means that not only am I using the land
>for the time being but also that I am making an acknowledgement that the
>owner has a personal right to it. But the owner only has that right because
>he is protected from having his land taken away from him by force -- either
>by neighbours or by marauding forces from abroad. The ownership right is
>protected because he pays taxation to his government. His government spends
>this taxation on paying for a system of justice and for the forces
>necessary to maintain it from internal and external depradations -- the
>police and military.
>
>(In a prehistoric situation -- the hunter-gatherer tribe -- the cost of
>protection is still involved in the production process. The government [the
>leader and his immediate cohort] protects the tribe from other tribes or
>predators and expects, and receives, a 'rent' in the form of grooming and
>the supply of the bulk of their [vegetable] food from the womenfolk and
>younger members of the tribe.)
>
>I think it's important to consider this protection component of rent right
>at the beginning of our definitions. Otherwise, both legitimate and
>illegitimate aspects of gvoernment taxation become confused in further
>discussion of economics. I appreciate that Political Economy, as you
>describe it below ("the Science that deals with the Nature, the Production,
>and the Distribution of Wealth") involves trade as well. But before trade
>can take place, production has to take place first. Even if trade didn't
>occur, production would have to.
>
>The protection component of rent also means that, unlike the basic
>definition of land (so far) we can now put a price on land. All three of
>the basic factors of production can now be properly valued before any trade
>takes place. Without protection, the other components of land (area,
>resources, location, solar energy, etc, etc) are all fundamentally free,
>given to us by the Good Lord, and no objective cost can be scientifically
>attributed to them. Without the cost of protection, the basic formula, R +
>S = P simply wouldn't make sense because one of them, Land (Resources),
>lacks a unit of measurement. The formula would be unscientific. And we are
>both trying to make economics into a scientific subject are we not?
>
>(You could object at this point and say that, without trade and other
>ramifications of a modern economy, such as money, there are no suitable
>scientifically measurable units. But there are. It is one of the basic
>units of science, energy. Energy is directly involved in all three basic
>factors of production. Energy is needed in the creation of resources [but
>these are outside the human purview so we can ignore them and treat them as
>free], energy is needed in the act of protection, and energy is needed to
>build the body and brain of the producer. If these can be measured in
>energy units -- and they can, in principle -- then the energy of making a
>product can be easily calculated.)
>
>I could now proceed to discuss trade between person A and person B by
>showing the following formula:
>
>P(A) = P(B)
>
>where P(A) is a product of A
>and P(B) is a product of B
>
>I could now show that P(A) and has less value than P(B) within the economy
>of A, and P(A) has more value than P(B) within the economy of B -- that is,
>each party to a voluntary transaction gains from it -- and thus derive, and
>validate, the notion of profit. However, I won't proceed for the moment.
>
>Are you prepared to criticise where I've got to so far? (As to the rest
>of your posting concerning money, I largely agree with it, so let me leave
>this on one side for the moment.)
>
>Keith
>
******************************
Harry Pollard
Henry George School of LA
Box 655
Tujunga CA 91042
Tel: (818) 352-4141
Fax: (818) 353-2242
*******************************
