Friday, January 26, 2024

Rothbart and Mises Have Some Things to Say on School, But Less So on Economics

Assorted retorts from yahoo boards and elsewhere: Rothbart and Mises Have Some Things to Say on School, But Less So on Economics · New blog on the kid: Kimberley Josephson Tried to Defend Mergers and Acquisitions · Being Outspoken is a Virtue in a Writer

Why Marx's Exploitation Theory Is Wrong (Joseph Salerno explains Böhm-Bawerk)
V for Voluntary Library | 25 Sept. 2011

1:01 St. Thomas view of time preference is this.

1) You cannot both enjoy (a k a spend) the 10 000 during the year and retain them at the end.
2) You can make a reasoned choice on whether you need them better during the year or after the year.

Say you know a real estate is going to complete work one year from now and you want to buy then, lending 10 000 to someone else during that year is reasonable, since it means you have the money after the year, you don't risk losing it, if the borrower loses it, you can sue him.

What if he is late? What if you miss the real estate purchase because he pays after 14 insted of 12 months?

THAT is a very different proposition. You can charge for the profit you missed out on after the agreed payday, by charging him more back, because his delayed payment foiled your purpose in lending to him. But that's different from a rate of interest agreed on in advance.

1:25, Yes, precisely, you are exploiting by taking more money than you gave.

And I mean buying power.

If the inflation is 10 % in the meantime, that's another matter. The extra 1000 are a compensation for inflationary loss.

But at zero inflation, and, as said previously, zero missed business opportunity that you had planned before the agreed but delayed pay day, the sum owed back after a year is 10 000, not 11 000.

Now, this presupposes that the lender has a fairly stable economy apart from lending. Lending is not his business. The lender already has real estate that he enjoys for his life and uses for a living. He did not in any way shape or form need the 10 000 in the meantime.

This may make the opportunities for loans a bit scarce.

Montes pietatis are another option.
1) They are partly built from donations.
2) They compensate for non-payed debts, apart from donations, by selling collateral (so, they are pawn shops). NOT by taking extra money from the ones borrowing and paying back.
3) They are run by local authorities.
4) The office clerks doing that paper work (and obviously the cleaning ladies of the offices) are owed a decent, but modest living, and this can be supplied either by very moderate interest or by the tax money the local authorities dispose of.

1:38 There is no such thing as "future dollars are less worth than present dollars" except for those who shouldn't lend out in the first place.

"I could have partied all this year for those 10 000 dollars more, I was sober so you could have satisfaction, now it's your turn to be sober so you pay me 1000 for my sacrifice over and above the 10 000 I handed you."
"No, Sir. I didn't ask you to forego pleasures, I asked for 10 000 dollars. Here they are."

It stinks to hypocritically claim to have made a sacrifice one arguably really hasn't made, just so one can get an advantage.

2:33 The workers do not have simply a time preference.

They have a need for it.

You cannot compare your own time preference (hypocritically stated in the abstract in contravention to the preferences you actually made instead) to their actual need to have a rent this month or 30 full meals this month and 31 the next. Plus the smaller meals.

"I could theoretically have partied instead" doesn't compare to "I concretely need that money today."

3:34 "to remove the burden of waiting for the workers"

This presupposes there is a mass of people for whom waiting would indeed be a burden.

If you are a small farmer, and you inherited the farm before your dad died in return for giving him a small hut where he's kept alive and well and leaves you alone with your family until he dies, before you were a farmer, you already had harvests from back when your dad was the owner.

Such people are obviously less exploited than people who go empty handed to a capitalist and ask for work.

And let's not forget, there was a time when such people were more normal than those who were asking for work.

Then the Capitalists of diverse types, starting with English major landowners looting monasteries and small churches, started making it less easy to remain such a man who wasn't a Capitalist, but also wasn't asking the Capitalist for work. It took some political and religious revolutions to get there. And that means the shedding of often enough innocent blood.

4:08 Assume there is no capitalist. They would not have to wait for five years to have that income.

They would have remained small owners instead.

That's not economics in the abstract, that's history as it happened in the concrete. Your example presupposes that it's perfectly normal and has gone on that way since Adam and Eve for one huge mass of people to be able to work, but to own nothing, and a much smaller mass of people who own so much they can pay others to work by relieveing the burden of waiting.

Not only is that not normal, it's also a state of affairs that's highly derived from other states of affairs in which that logic doesn't work. Or when it does, it does so in a smaller and gentler way.

4:27 "a capitalist who has already done the saving"

No capitalist ever started out like Uncle Scrooge saving his first penny and doing menial works and saving on that until he was able to put up investments for five years in advance. Many may have saved a first penny when they were children, but that's not the source of their monetary wealth. The real source is usury and speculation. And enjoying the benefit of inheriting without inheritance duty dilapidating the enterprise, as they would typically do for many a mom and pop shop.

5:41 "was a saver first"

Do you mean the kind of micro-capitalist in Singapore who is a loan shark on micro-credits? He's not putting up 5 years of money in advance, OK.

Many Capitalists have proven themselves savers, shown off their willingness to forego consumption, but mainly as a rite de passage.

6:00 Oh, wait, it was not a question of foregoing consumption one would normally need, it was a question of that theoretical foregoing of consumption involved in putting up the money in advance.

That kind of foregoing of consumption.

A man who goes to gym each week, takes yoga classes each weak, eats health food, drinks world class coffee from the best roasteries is considered as foregoing consumption because he didn't take his family on a five year long travel around the world on top of all that, but invested in a car factory instead. Even if the workers he's paying can afford none of these things.

7:00 St. Thomas argues, the borrower removes the burden of uncertainty in the lender.

"Will I still have those 10 000 dollars a year from now, when I can buy that apartment?"

If he keeps the dollars, he may overconsume and be 1000 dollar short when the time comes.

Or he may be robbed, and it is his responsibility to ward off robbers.

If he lends over a year, all the uncertainty falls on the borrower if he can pay back, and if he can't, the lender can often get his money back by evicting the borrower from his property at least from the collateral.

As for the argument in favour of the capitalist here made, it basically presumes it is normal that few rentiers own the means of production where the rest of the people do work for wages. It presumes that small inherited property is abnormal. It presumes that small enterprises starting from scratch are abnormal. And in fact, many capitalists make sure it remains uncommon enough to be regarded as abnormal.

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