Friday, February 01, 2013

A purely aha! moment

I've been watching a few different classes at the Lecture Kings site on my Roku Box, and of particular interest has been ones from Yale.  One series that I finished just a week or so ago was on Ancient Greece and it was full of all sorts of interesting information on era of the pre-Polis Greek civilization and then the rise of the Polis and then its fall.  A very good series of lectures that were both entertaining and enlightening, both.

After going through a number of course titles and brief overviews from various institutions, I wound up back at Yale for a series on the moral underpinnings of political thought.  This course starts just at the end of the Enlightenment and during the Classical period and after a brief intro utilizing the Eichmann trial to illuminate what the role of a citizen is in a State and what are the moral boundaries of a State with regards to its citizens.  That, in itself, is a thought provoking set of classes and it will be used as a touchstone to examine how the Classical and Post-Classical formulations of modern political theory play out over time.  This starts out with Jeremy Bentham and the concept of utilitarianism which he pushed as not just a legal formulation (which is to say laws based on a concept) but a moral formulation for society.  Utilitarianism has a core tenet that is called 'the greatest happiness principle' in that man, for any action or decision, will make decisions to maximize pleasure and minimize pain.  For a State, then, the goal is to maximize happiness for the majority of its members and that is a standard that follows for all decisions of government.  He put forward that nature gives us these two masters, pleasure and pain, and that we are driven in all decisions by them.

It is fascinating that for a man who declaimed that there was no 'natural law' or 'natural rights' that he has put forward both a natural law (that nature inflicts pleasure and pain) and a natural right (man to choose between them so as to maximize pleasure).  Yes there are some problems with utilitarianism, but it does serves as a basis for other political thought (such as libertarianism) although not through Bentham but through his friend James Mill and particularly through his son John Stuart Mill.  If Bentham would put forward raw utility (which is to say the maximizing of pleasure for the majority in society) to its limits, then John Stuart Mill would shift that towards the maximization of liberty for the individual and out of State control.  Neither Bentham nor Mill saw much from government as being necessary, and Mill shifted the conception from government utilizing laws so that individuals could maximize pleasure to a set based on the harm principle, where so long as someone is not harming others or property, they should be free to live their lives without interference.  Mill also adds in a community principle in that harming oneself or one's property may put the community at disadvantage as a form of intervention particularly for those incapable of self-government.  Otherwise freedom, particularly freedom to discourse, is a necessary precondition in society amongst individuals.

If libertarianism can trace its roots to a strong foundation point, that point is laid by John Stewart Mill.  It is a utilitarian point, however, and one that rests on legal not natural rights.

After utilitarianism under Bentham, Mill and others, comes Karl Marx as the next of the Classical political philosophers and it is in watching the first lecture on him that I received an aha! moment and it is because of the context of the time that Marx lived in that I had not fully considered before.  Marx lived at a time when science was coming to the forefront of industry in that items that had only empirical meaning in the 17th and 18th century were now getting practical application.  Going from theories of pressure to utilizing steam as a motive source of power and a replacement for stationary power sources, was seen as a liberating concept for mankind.  Being able to place real values based upon empirical equations (and through that also note other things going on that were outside of theoretical concerns) meant that areas of learning in the natural sciences of physics, chemistry and astronomy were all moving into practical concerns for industrial design. 

Adam Smith had done a good job in describing how divided labor in a pin factory (one man to move a wire reel to a cart, another to start the unspooling process, another to run the cutting machine, etc.) meant that production for all of the workers involved jumped by orders of magnitude by concentrating on single tasks.  Smith calculated that 18 men could turn out something on the order of 48,000 pins a day (all put into paper, boxed and then put into a shipping crate) while if they all did the entire production of each pin themselves, their production might be in the dozen per person.  Labor reduced to a task process created efficiency, in other words.

Now if you are able to place real valuation on labor, you should then have a Labor Theory of Value in which value is meant as exchange value (a commodity).  There is a lot to go into on the LTV but its setting due to time and place puts it in an era when science was moving to engineering, which is to say that the lovely empirical stuff was getting real nuts and bolts put to it to see if it could work.  The work force of, say, steam pressure was once just an empirical thing, which meant you had so much steam in so much volume at a certain temperature and it could be said to have a force behind it that could be calculated from those parameters.  Hydraulic power would utilize similar equations (pressure, volume, fluid density) which are applied to pneumatics, and those equations (and even some of the meanings of terms) are applied to electricity (the pressure or volume of electricity as an example).  So it should be obvious that if natural laws pertain to such things then it is perfectly natural that man and his activities conform to similar laws for labor and production.

Setting aside the rest of Marx for a moment, the late Classical and Neo-Classical thoughts on political morality (and economics as well) had something else to deal with: it was understood that profits were declining.


Any school of thought either had to incorporate that as part of its basis or explain it in some way by its process.  This had been an understood phenomena seen across economies.  Profits were declining.  And since that really sounds like a natural function of an economic system, which is to say industrial capitalism, anyone wanting to put forward any sort of theory on politics and the economy had to take this into account.  Utilitarian thought put it at a nexus of individual response and freedom of discourse so as to maximize pleasure... yes, difficult to comprehend in those terms, but you can see at least some glimmer of how that works.  Marx puts it as the centerpiece of the overall analysis of capitalism and how it has the seeds of its own destruction buried within it.  Further there is a natural value of a commodity that is different from its market value and that is the intrinsic value of that commodity.

Given the pre-condition it is impossible not to get an aha! moment out of this sort of thing.  If declining profits are a natural function of industrial capitalism, then there must be something driving that function.  Just as heat creates steam which in a confined vessel raises pressure, so there must be some natural force behind capitalism which causes declining profits.  This is the 19th century, after all!  Why soon man would have everything explained...

As the formulation of socialism that results from this is scientific socialism, isn't the very first place to see if it is well founded is upon its preconditions?  Really, if the decline in profits is due to some other function not directly related to labor or value in a direct and immediately corresponding way, then a LTV will have problems standing.  That is to say that if profits are declining for other reasons outside those of the given system of analysis, then the system of analysis must be revised, re-done or just scrapped... just like scientists do.

Off-hand I can think of a number of analytical basis known in the 19th century and used by scientists and engineers to test out declining profits.  First is to have exactly the same test and experimental baselines and to control the unknowns in an experiment.  This is known as 'repeatability' and if you can't find equivalent conditions or ones with known differences that can be described, then your chances of actually describing a phenomena in a precise way is nil.  You will get different vapor pressures if water has different soluble compounds in it, therefore you test with pure water to find vapor pressure and the amount of energy to move from water to vapor.  Similarly if profits are declining in multiple industries, they must be comparable on an unadulterated basis: changes to composition mix will give you different and non-conforming results.

An observable phenomena is only of note if you can verify the circumstances of each observation and compare the differences between them, especially if you are examining the exact, same phenomena.

After that there are variables to each experimental arrangement, which is to say some of the differences involved in each experiment.  This is related to the first, but in a slightly different way, in that the measurement of profits is one that is performed slightly differently for different parts of the economy.  Within each sector profits will vary on a number of axes based not just on traditional supply and demand curves, but also things like the number of competitors and the efficiency (and productive capacity) of each one.  Profits will tend to maximize when there are few competitors in a given sector or when market share is seen as 'captured' by certain firms.  With that said the ability to open new markets within a sector or expand markets means increased opportunity to build competition which will effect the bottom line.  While one large firm (A) will have maximal profits, when it gains two competitors (B & C) profits for (A) will suffer due to competition and pricing will be changed to reflect that.  The two competitors (B & C) will go from zero profits to the potential of some profits and perhaps even positive profits, which will still be less than (A) alone.  Taken as a whole amongst all three firms (A, B & C) profits have declined and production of goods has increased and prices have adjusted for that.

What is fun is that the amount of labor per object or commodity may have actually increased due to lack of initial experience of the competitors unless they have a way of increasing productivity that the first firm could not implement.  Suddenly declining profits is not a problem of capitalism, per se, but a function of competition, new entrants, expanding markets, market share, and a whole host of other vectors that each must be considered separately for each sector of the economy.  But if you consider declining profits as a principle and guiding effect (like the energy garnered when water flows downhill over a certain grade or the amount of work energy it takes to haul something uphill or hoist it up into a building) then you get a wholly different viewpoint on what sort of economic theory is possible.  When it is made a constant, which is to say a natural invariable, and not something amenable to other functions but part of the guiding of how a system works, you get very different results.

That was the aha! moment of seeing how the confluence of the natural sciences and industry were moving into economic and political thought and morality.

All it took was one sentence about the requirement to explain declining profits and all the rest just followed.  It is that one minor piece that, once added, suddenly makes so much so very clear.

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