Capitalism
One definition ...
Wikipedia -
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Capitalism generally refers to an economic system in which the means of production are mostly privately or corporately owned and operated for profit and in which distribution, production and pricing of goods and services are determined in a largely free market. It is usually considered
to involve the right of individuals and groups of individuals acting as "legal persons" or corporations to trade capital goods, labor and money (see finance and credit). The term also refers to several theories that developed in the context of the Industrial Revolution and the Cold War
meant to explain, justify, or critique the private ownership of capital; to explain the operation of capitalistic markets; and to guide the application or elimination of government regulation of property and markets. (See
economics, political economy, laissez-faire.)[1]
Capitalist economic practices became institutionalized in Europe between the 16th and 19th centuries, although some features of capitalist organization existed in the ancient world.[2] Capitalism has emerged as the Western world's dominant economic system since the decline of feudalism,
which eroded traditional political and religious restraints on capitalist exchange. Since the Industrial Revolution, capitalism gradually spread from Europe, particularly from Britain, across political and cultural frontiers.
In the 19th and 20th centuries, capitalism provided the main, but not exclusive, means of industrialization throughout much of the world.[3]
The concept of capitalism has limited analytic value, given the great variety of historical cases over which it is applied, varying in time, geography, politics and culture. Some economists have specified a variety of different types of capitalism, depending on specifics of concentration
of economic power and wealth, and methods of capital accumulation (Scott 2005). During the last century capitalism has been contrasted with centrally planned economies. Most developed countries are usually regarded as capitalist, but some are also often called mixed economies[4] due to
government ownership and regulation of production, trade, commerce, taxation, money-supply, and physical infrastructure.
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I view it like this .....
Capitalism ...
Producers produce to the point where marginal cost and marginal revenue intercept. Thats it. The preceding implies producers live in a world where there is a total revenue function describing their revenue and a total cost function describing their costs.
I hate math because I'm stupid - but once underderstood
the word margin simply means first derivative of some function.
So marginal cost and marginal revenue curves are simply first derivatives of the total cost and total revenue function curves of the producer.
Whats not seen from above is that capitalism will do everything it can to: (this becomes important later)
(a) Drive down costs or change (lower)
its total cost function thereby lower its marginal cost curve
(b) And on the flip side do everything in its power to drive (up) revenues per widget thereby affecting its total revenue function i.e. maximize its marginal revenue curve
In summary - move the point where they both intercept
to the max optimal place ...
Sidebar:
Capitalism (in its purest form) exists today and is
called Walmart. More succinctly Walmart really should
be called ChinaMart - though this is changing to
AsiaMart.
We have *lived* the history so lets get the facts right.
China was out in the cold. Once we allowed China
in the game ... What happened was:
Walmart looked at China's total cost function and said
man - am I loving this i.e. their marginal cost curve.
and all this mumbo-jumbo sounds better than SWEAT SHOPS.
Walmart dragged China to America. Its not that they didn't
want to go. Its simply that if you've been in a coffin for
50 years and someone finally lets you out ... your legs are
a little wobbly and you need help walking. Walmart grabbed
them by the throat and said follow me.
That trillion dollars in China's coffers *mostly* is due to
Walmart's helping hand with the subsequent effects of the
resultant multipler effects withing China's GDP.
Years ago a TV show tried to tease out of Walmart how much
they were importing from China. I recall the number 33 billion.
This was years ago.
End sidebar.
Ever widget ever produced needs 3 components.
The Yada, Yada, and Yada.
I forget the first two but lets focus on the
3rd Yada called labor because you mentioned it in your post.
Unionism - the thing - is not about economics.
Unionism is a legal thing.
Either the 3rd Yada is allowed to bargin collectively with
the other Yada (Capital) or its not.
Once it is - it changes the total cost function and hence the
marginal cost curve and hence the POINT where marginal revenues cross marginal cost.
If you take the above and read this .....
Galbraith wrote:
"In making economics a non-political subject, neoclassical theory destroys the relation of economics to the real world. In that world, power is decisive in what happens. And the problems of that world are increasing both in number and in the depth of their social affliction. In consequence, neoclassical and neo-Keynesian economics regulates its players to the social sidelines. They either call no plays or use the wrong ones. To change the metaphor, they manipulate levers to which no machinery is attached."
johnkennethgalbraith.com
Well - I am guilty.
Moreover, that LINK if full of goodies by which you can *crucify* me with.
John Kenneth Galbraith - JKG -
Although unionism maybe dear to your heart - at the heart of
it - JKB was a total revenue kinda guy.
Its NOT that he wanted to impact the total revenue function.
He wanted to call the shots on WHICH WIDGETS would be
produced.
Many years ago hula-hoops were hot. Millions were sold.
Or - discreancy after tax income voted for hula-hoops.
The nub of the problem boiled down to this - whats a better
use of discretionary income -
(a) Hula Hoops
(b) Incremental funding for education or whatever hot cause
is going on at the moment.
To repeat - to make a widget or anything else
takes 3 Yada's.
If you decide that your widget is incremental funding for
higher education - then you need the Yada called Capital to
jump start it.
At the end of the day the only way to get Capital is
taxation. Specifically - take the hoola-hoop money out
of my pocket and give it to JKG.
Based on my (a) and (b) choices I think you'd be real
comfortable with (b). But how about this choice?
(a) Hula Hoops
(b) F22 Stealth Fighter ....
Do Hula Hoops look better?
or this choice
(a) Incremental funding for education or whatever hot cause
was going on at the moment.
(b) F22 Stealth Fighter ....
No brainer? LOL
What did we just FORGET thats true in all these scenarios?
We forgot about the Total Cost function. More importantly
its marginal cost curve.
Lets say our choice is education in all 3 scenarios above.
What is the Total Cost function?
TC = Budgeted Amount
What is the marginal cost curve?
MC = Budgeted Amount = TC
Yikes - the same thing.
Going forward to achieve 100 utils of educational thingies
what is the cost?
Its an easy answer.
If the budgeted amount is 1 million then cost will be 1 million.
If the budgeted amount is 2 million then cost will be 2 million.
And so on .....
More importantly, irrespective of the total budget spent to achive the 100 utils of education - do the 100 utils have to be produced?
No.
There is NO FEEDBACK in this kind of system.
And if their not produced what happens?
The Total Cost Curve is attacked as being to low. And I can just see you leading the charge on this ... LOL
i.e. We up the subsequent budget to 3 million and so on.
Why do we do this?
Because some "CONTROLLING HAND" as opposed to "INVISIBLE HAND"
has decreed that education is better than hoola hoops.
And if the UTILS ain't produced we change the cost function.
Maybe F22's are better than education? -
- maybe its better to produce an F22? If for no other
reason something *comes out* the other end.
Lets look at the F22 by looking at the F16.
Years ago an F16 cost $25 million. Today about $50 million give or take.
Whats the cost of 1 brand spanking new F22?
A fair number would be $440 million for 1 airplane.
Lets say that slowly ... Four hundred and forty million for
1 airplane ....
In 2006 we just bought 24 or 26 - its on the Web and I
don't have the link.
Yawzer ... $440 million a pop.
Well, the F22 has stealth technology so maybe that accounts
for the $440 million. And it can launch vertically.
Is it worth it?
It might be. I don't think so. I think whats changed
is the economics.
We're past the post war consolidation phase.
The old oligopolies don't exist.
Said another way - there is -0- PRESSURE on the marginal
cost curve.
Sidebar:
A bunch of *liberals* did a wonderful piece on the rise
in executive salaries at defense contractor companies as'
the industry consolidated.
The numbers are mind-numbing. They are outrageous. And these
labor costs are probably horrendous accross the board.
Whats my point -
Whether its education or F22's
TC=budgeted amount.
Getting back to JKG - I really didn't leave him -
JKG wanted to play with policy. And if neoclassic economics
couldn't spit out the right condition - then he wanted
intervention.
This opens up the door to lots of mischief.
By any standard today - the budget mayhem that Clinton polices
might have engendered are *miniscule* to the budget mayhem
of the last 8 years.
Some important points about this to note:
(1) Forget Bush - this is an alleged conservative republican
congress that signed off on this.
(2) The VP of the country has a mantra in his head the
deficits don't matter.
(3) These 8 years have 3 high points:
* Katrina - about $300 billion
* Homeland Security - I don't know do you
* Iraq - lets call it a trillion a year
Katrina is what - a 30 year mis-que?
Kennedy got 15 billion for a bridge and a tunnel but
the South couldn't finesse a lesser amount for
a dike? Which lead to a $300 billion and counting
fiasco.
In closing JKG got his wish.
MC=TC=Budgeted Amount
The ONLY argument today is what to spend the
money on.
A Prologue put at the end:
When I posted you I was after something.
I *miss* - miss very much the banter between
you and E.C.
I am way to old to give a shit about all of the above
junk related to economics.
In my opinion SI made a mistake in insisting that
posts be on topic.
Its the off topic stuff that keeps the mind sharp.
I want the off topic in the place where I eat ....
and this is where I eat.
If you missed it - in about 1 nano-second E.C. came
back with a beauty ... they can build their
own sweat shops .... he makes wit look easy ...
Anyway - like the song says - thats the good stuff
and there just ain't enough of it anymore.
It was a dumb move on my part to try and instigate ...
and I see that now.
regards,
John |
