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Sunday, March 25, 2012 - 6:02amSanction this postReply
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According to Karl Marx, free market capitalism is an immoral economic arrangement. What arguments did Marx offer in support of his position? Was he right? Thoughts...

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Sunday, March 25, 2012 - 10:33amSanction this postReply
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The root of his argument was his corrupt concept, surplus value. He was wrong.

In Marx's view an entrepreneur is nothing except an exploiter (link).

(Edited by Merlin Jetton on 3/25, 11:11am)


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Sunday, March 25, 2012 - 11:05amSanction this postReply
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Yes, as I understand it, Marx adhered purely to a "labor theory" of value rather than a "market theory" of value. The idea is that all value arises ultimately from physical labor. This totally ignores the value of the mind in creation.

I am not a Marxist scholar so perhaps I oversimplify, but I doubt it.

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Sunday, March 25, 2012 - 1:47pmSanction this postReply
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Marx saw history as a social progression that involved a class struggle. The good he saw in capitalism was its destruction of feudalism. But he saw the capitalist stage as one where the owners of capital exploited the workers - and that made their wealth immoral and he felt that human nature demanded people labor with their hands least they become alienated. In the class struggle, he believed that capitalism led to inequality - one assumption being that the economy represents a fixed pie and if one class gets big pieces, the others get smaller pieces or none. The additional assumption being that inequality of outcome, in and of itself, is morally wrong and justifies redistribution of the wealth. He thought that capitalism would fall apart of its own flaws and also thought that the workers would somehow naturally organize and bring about socialism.
Was he right?
No, he wasn't even close. His proposed economic system won't work since there is no market to determine price it becomes impossible to match demand and supply. Because it calls for taking away from some to give to others, it is immoral - it is theft. His view of history is contrived and not justified by the facts. And his view of human nature is warped. It has always struck me as an elaborate construct built to justify envy and hatred of the rich.

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Post 4

Sunday, March 25, 2012 - 1:48pmSanction this postReply
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Luke: "This ignores the value of the mind in creation." The Austrian value theory doesn't care what resources were consumed in order to create an object. Its only the question of "What would a men offer to trade to gain X more of Y?", which determines the value of something in the free market.

The major flaws of Marx's economics are:
1. Without free trade, there are no prices to indicate to entrepreneurs the profitability or loss of any production method and product. Productivity is not measurable. Products are made in great excesses and shortages.
2. Without free trade, with forced wealth redistribution, its in a worker's self interest to only work hard enough to avoid punishment. This results in major slacking off.
3. Capitalists (owners of capital/tools) either do not exist, or laughably exist, there is no incentive for a person to have a tool, since one cannot gain from its use. Better to sell the capital on the black market if possible. Better to not work to gain capital, nor work to maintain it, nor any incentive to utilize it.

Compare to a capitalist system:
1. Free trade establishes market prices, which an entrepreneur can use to calculate gains and losses of his past production methods and products. Productivity is measurable. Excesses and shortages are quickly identified and the most successful entrepreneurs divert production to the most efficient value creating production & products.
2. A worker gains what he negotiates his compensation to be, and has self interest to maximize his productivity in order to maximize his negotiation position. This results in major productive effort.
3. Capitalists can gain profit from renting their capital (tools). They will try to acquire the best means of production. Capital will be sought after, maintained, and utilized.

Marx thinks entrepreneurs (people who choose how to use capital) deserve no compensation for his work. He also thinks the capitalist (people who own capital) deserve no compensation for the rent of their capital. Clearly he has no clue what value is, or how to create valuables productively.

In a free market society, everyone has the chance to take on all of the above roles: worker: whatever job he wants. Entrepreneur: choose which stocks and tools to invest in with some of his savings. Capitalist: ownership of the stocks and tools.

=========

The Fed has destroyed the US in two ways. 1. By destroying the incentive to be an entrepreneur by choosing the winners and losers with its bailouts instead of letting the consumers choose which company creates value productively. 2. By destroying the incentive to become a capitalist by reducing the inflation adjusted interest rate below zero (now capitalists can't compete with the fed's rent rate) and reducing the purchasing power of savers by printing money. No wonder we are in a recession! Duh! The US is no longer a capitalist country with entrepreneurship and capitalist roles of the economy destroyed. Its highly communist, free trade is still allowed, yet highly regulated.

(Edited by Dean Michael Gores on 3/25, 1:55pm)


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Post 5

Tuesday, March 27, 2012 - 1:24amSanction this postReply
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According to Karl Marx (and Adam Smith), in pre-capitalist society, workers simply produced commodities and sold them for money, which they used to buy other commodities. The income they received for the sale of these commodities was wages. However, with the advent of capitalism, entrepreneurs spent money to buy materials and labor in order to produce commodities, which were then sold for a larger sum of money. According to Marx, this ushered in an era of exploitation.

The income the capitalist receives is profit, which Marx viewed as a deduction from wages. He thought it was a deduction from wages, because, according to him, the capitalist pays the worker a wage that corresponds not to the full value of his product, but only to that part of it which is required to pay for the worker's necessities -- to keep him alive and productive. The capitalist then sells the worker's product for a price corresponding to the larger number of hours required for the worker to produce it, and pockets the difference -- the "surplus value" -- as profit. Thus, the worker is robbed of the full value of his product, because he receives only part of its value -- the part required to keep him alive and working -- while the capitalist keeps the rest. This is the so-called "exploitation theory."

The problem with it is that in pre-capitalist societies, the income workers received for producing a commodity and selling it was not wages but profit. Profit is sales revenue minus monetary costs. In pre-capitalist society, when producers didn't pay money for materials and labor in order to produce a commodity, they had no monetary costs of production, which meant that the money they received for the sale of a commodity was all profit. If profit is sales revenue minus monetary costs of production, and monetary costs are zero, then profit is 100%. The income that producers received in pre-capitalist society was not wages but profit, because wages are the money that producers pay for the labor of workers helping them to produce a product. Wages, which are a monetary cost of production, did not exist in the pre-capitalist era.

So, the workers in a capitalist society are being paid their full value, insofar as they're being paid only for their labor, not for the value of the product they're helping the capitalist to produce.

(See in this connection, George Reisman's essay "Classical Economics Versus the Exploitation Theory," which is available on his website at capitalism.net.)

(Edited by William Dwyer on 3/27, 1:31am)


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Post 6

Wednesday, March 28, 2012 - 7:28amSanction this postReply
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Marx also totally fatfingered the concept of value.

For example, when a worker receives a guaranteed ROI for work as wages, Marx places no value at all on the guarantee, nor does he recognize the risk/reward value of ROI offered at risk. Guaranteed ROI is ultimately dependent on ROI at risk; risk, in the universe, is unavoidable, and can only be managed. Shedding it unwillingly onto others is immoral(and is a modern crime of both the left and the right these days.)

Marx has a child-like view of the universe. He is like the child, standing at the dock on shore. Men in boats have sailed off to sea, and have weighed the risk of either fishing the deep that day, or fishing the shallows. The answer isn't the same every day. Some boats come back empty, and some boats come back full, and some boats don't come back at all.

Marx directs his focus only on the boats that come back full and then demands a full share of the catch as his right, as a child. Not via value-for-value, but as his right, enforceable simply by his mere existence. The bearing of risk is for others. He does not acknowledge the boats that come back not at all, nor the boats that come back empty.

The fact that there is fish on the dock at all, as a consequence of others managing risk, is ignored by Marx; in Marx's child like calculus, the fish on the dock are a fact of life; 'resources' -- and all that is left is for the labor of carting the fish to market, of cleaning and preparing the fish, without the labor of dockworkers and fish cleaners and cooks, etc., would simply be rotting 'resources' on the dock.

He and his acolytes totally ignores the unavoidable nature of risk in the universe, as it is.

Theirs is a very childlike grasp of reality, formed, as it is, standing safely on the dock among all the abundant fish. Their view is formed mainly from their stomachs and the existential fear that there won't be enough fish on the dock to feed all of their child-like wants, and so, they imagine justifications for placing guns at the heads of fishermen and demanding of them "fish."

Marx's very foundations of economics are flawed from the start. His blindness to the role of risk in creating value is what leads him to his child-like conclusions.



(Edited by Fred Bartlett on 3/28, 7:30am)


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Wednesday, March 28, 2012 - 8:00amSanction this postReply
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For all of those who want to take what others have produced - for all tyrants, thugs, socialists and parasites... risk is what they want to avoid. Risk of failing to succeed in a marketplace where you have to offer value in exchange for value. Their secret fear is that they have no value.

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Post 8

Wednesday, March 28, 2012 - 8:31amSanction this postReply
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Luke:

re: the role of the mind.

Exactly-- especially in the intelligent assessment of unavoidable risk in the universe. The role of the mind is key in the intelligent assessment of risk, else all such activity at risk is just drunk louts at a gaming table in Las Vegas or Atlantic City or some floating barge in Mississippi.

The perversion of risk in our economies was front and center in the recent financial crisis, and the fatfingering of government was instrumental in the fatfingering.

There is no such financially engineered beast as a Mortgage Backed Security without the fatfingering of government.

There is no such thing as systematic moral hazard and Too Big To Fail without the fatfingering of government. 2008 was more than setup by the quiet backstopping of LTCM in 1998 and the realization of a new game, the systematic widespread shedding of risk onto others via government.

So, look at the perversion of 'the mind' that was implicit in all of that creative 'financial engineering.' There are ads for 'quants' offering million dollar salaries, so that PhD trained physicists and mathematicians and so on can be siphoned off of (doing nothing and going nowhere)to shade the gaming of risk in the market and value-proxy plays. In our perverted economies, that is what 'the mind' is today tasked with doing...

'The mind', today, stares at the noise on an electronic scoreboard for a game once actually played by others, and dreams up ever less latent plays on the plays of others just like them, an intense battle of minds making nothing and going nowhere and employing few, all in the service of gaming the value-proxy marketplace...

Predictive silicon risk arbitrage, going to battle against the only slightly more latent silicon of others, sharks feeding off the clueless yet analyzable noise of the slow chum of day traders, willing energy for the feast.

I laugh when I see those E-Trade commercials. That is the sharks, fishing for fresh live bait to slowly churn the waters in a sluggish...and predictable...fashion.

Financial engineering...engineering nothing but plays on value-proxies, yet barely exchangeable in a world sufficiently filled with schmucks struggling to create actual value at risk...

It's good work, while it lasts.
(Edited by Fred Bartlett on 3/28, 8:32am)


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Thursday, March 29, 2012 - 6:05amSanction this postReply
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So, look at the perversion of 'the mind' that was implicit in all of that creative 'financial engineering.' There are ads for 'quants' offering million dollar salaries, so that PhD trained physicists and mathematicians and so on can be siphoned off of (doing nothing and going nowhere)to shade the gaming of risk in the market and value-proxy plays. In our perverted economies, that is what 'the mind' is today tasked with doing...
Ouch!!

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Thursday, March 29, 2012 - 7:17amSanction this postReply
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Merlin:

I hope you don't misinterpret my 'doing nothing and going nowhere' remark.

I meant that in a tribal sense. PhD physicists and mathematicians have launched themselves at some of the most demanding intellectual hills imaginable. There was a time -- generations ago -- when the tribe at least paid lip service to the ideals of 'doing something and going somewhere,' and where such minds would find abundant fertile tribal ground.

Today...the tribe has them all about decreasing latency in predictive risk arbitrage, in pursuit of magic risk-free silicon plays on the value-proxy marketplace.

Said another way, the tribe is not paying them a million dollars a year to re-invigorate geopolitical gradient and restore mankind's broad economic opportunity growth paradigm, for example, by pushing past the 40 year old colonies on the Moon towards Mars.

The tribe is paying them a million dollars a year to focus on the high ground in what is at most an end-game.

And that is what I meant by 'doing nothing and going nowhere.'

regards,
Fred

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Thursday, March 29, 2012 - 8:51amSanction this postReply
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The market for jobs for quants seems healthy and the jobs pay well, but I suspect very few more than $200,000 per year (link) and most are in high-cost-of-living locations.
Quantitative analysts often come from physics, engineering, or mathematics backgrounds rather than economics-related fields, and quantitative analysis is a major source of employment for people with physics and mathematics Ph.Ds. Typically, a quantitative analyst will also need extensive skills in object oriented computer programming, most commonly C++ and/or Java.
This demand for quantitative analysts has led to the resurgence in demand for actuarial qualifications as well as creation of specialized Masters and PhD courses in financial engineering, mathematical finance, computational finance, and/or financial reinsurance. (Wikipedia: financial engineering)
Quants get jobs because they have the advanced math skills, e.g. for solving partial differential equations by numerical methods and matrix algebra used for options and other derivatives.

In my opinion those who create the turmoil are the ones who hire/manage the quants, but couldn't do the math and believe the answers the quants get are shrouded in certainty.

(Edited by Merlin Jetton on 3/30, 4:25am)


Post 12

Sunday, April 8, 2012 - 4:18amSanction this postReply
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FYI, Jeff and I used to have a Q&A section on Importance of Philosophy where people could send in questions and we might respond and post it.  We got some serious questions, but many were obviously students looking for answers to their homework.  The first post on this thread looks like this.  Of course, giving Objectivist answers to homework questions is not likely to give someone a good grade!


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Sunday, April 8, 2012 - 6:57amSanction this postReply
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I would much rather see a student come here for answers than a Marxist site.

Post 14

Sunday, April 8, 2012 - 7:47amSanction this postReply
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Joe, Haha, that's what I thought. But I didn't mind. I read Human Action a few months ago, and it was time for a little refresher for me to rehash some of what I learned. :)

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Monday, July 23, 2012 - 7:03amSanction this postReply
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Excoriating Karl Marx does not establish a positive statement of business ethics. Also, I have advocated for a clearer distinction between morality and ethics.  Yes, we use the words interchangeably in common English, but if you look at other languages, the meanings are obviously different: morality is a general philosophical (or religious) framework for deciding ethical (behavioral) issues. 

At the bottom is the Code of Ethics that I helped create for the Michigan State Numismatic Society.  We require that members provide each other with the best possible information for making choices.  That would be silly in a poker game  or even baseball - though those games have their own strict ethics, of course. (In baseball, deception is allowed, but gambling is wrong, which is inapplicable to the poker table.)

For a class in Social Problems, I wrote a paper on business ethics.  The business college of my alma mater, Eastern Michigan University, makes a big deal out of Ethos Week (read here). Mostly, it is a bunch of altruist nonsense.  Even Deirdre McCloskey's rhapsodies (Bourgeois Virtue, Bourgeois Dignity) are more rigorously derived and cogent - and would be problematic at EMU where they are still trying to blend Achilles and St. Francis without Benjamin Franklin. And Ayn Rand is just not on the radar. 

So, I was happy to find an exchange of articles and letters in The Academy of Management Review. It started with a weak-willed paper calling for consensus morality.  Thomas E. Becker of the University of Maryland replied with “Integrity in Organizations: Beyond Honesty and Conscientiousness.” Then came replies to the replies...  (The paper is stored on Google Documents.  I provide a link on my website.)

Note, as detail, that MSNS members allow "a reasonable time" to correct mistakes.  Also, we have one code of ethics for all members.  The American Numismatic Association has two codes, one for collectors, and stricter one for dealers.  Dealers  are never in the clear. They must stand behind every transaction forever (or at least for their lifetime). 

MSNS CODE OF ETHICS

We, the members of the Michigan State Numismatic Society, pledge ourselves to the highest standards of service to our hobby. 
Our desire is to use the arts and sciences that support numismatics to discover and promote the essential facts and information about numismatic objects and processes and to make these facts and information known to other MSNS members and to the general public where applicable. As members of the MSNS, we agree to the following:
 
1) To base all of commercial dealings on the best available numismatic information.
 
2) To the best of our ability, to furnish our clientele with the numismatic information necessary to make an informed decision.
 
3) To fulfill all contracts, whether oral or written.
 
4) When purchasing numismatic items, to make prompt payments upon receipt of the items and to return immediately any item that is not satisfactory.
 
5) To take immediate steps to correct any error made in any transaction.
 
6) To conform to accepted standards of advertising.
 
7) To refuse to buy or sell any item of which the ownership is questionable.
 
8) To represent a numismatic item to be genuine only when, to the best available knowledge and belief, it is genuine.

  • i) Not to sell, exhibit, produce or advertise a counterfeit, copy, restrike or reproduction of any numismatic item if its nature is not clearly indicated by the word "counterfeit," "copy," "restrike," or "reproduction," incused in the metal or printed on the paper thereof, with the exception of items generally accepted by numismatists and not in any way misrepresented as genuine.

  • ii) To not knowingly handle for resale forgeries, counterfeits, unmarked copies, altered coins or other spurious numismatic merchandise that is not clearly labeled as such.

  • iii) Not to buy or sell any counterfeit item or any item with an altered date or mintmark.

  • iv)  Not to intentionally misrepresent the grade, condition, provenance or other material fact of object.
 9) To allow our customers a designated period of time in which to return numismatic material for a refund and to provide a refund or replacement for any item that is misrepresented whether or not the misrepresentation was intentional.
 
10) To abide by all local, state and federal laws relating to numismatic matters and, when applicable, to assist in the prosecution of violators of those laws.


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