In his most recent post, Profit is not justified by entrepreneurial risk, Francois Tremblay appears to be baiting the big-tent Libertarians into defending the current economic system, which they quite wrongly describe as a “free market”. Or maybe I’m just in a particularly polemic mood (it wouldn’t be the first time). I’m not a “Libertarian”, but I’ll bite, if only to clear the air.
I have probably said it before, but in case I have not, let me make myself abundantly clear: the problem is not teh evil “profit”.
In a freed market, the return to labor is profit, when workers produce and sell products, what they receive in exchange for their production is sales revenue, not wages. Any net income (over and above their expended outlays) resulting from these sales is profit, not wages. In a truly free market, we’re all entrepreneurs. The degrees of risk we each accept in exchange for certain returns, of course, will vary widely by individual case.
since the workers take just as much risk as the owners.
The argument that “the workers” take as much risk as the entrepreneurs —in a free market— is patently false. The workers don’t take anywhere near as much risk as the entrepreneurs. The workers receive income for their production even if the ultimate product turns out to be a dud and generates 0 revenue. On the other hand, the entrepreneurs bear nearly all of the risk that others are unwilling to undertake. We know this is true, because if “society” was willing to bear these risks at a lower premium than the entrepreneur, they would’ve already done so, and we wouldn’t be talking about entrepreneurs.
Workers have to contend with losing their jobs and taking a major hit while looking for another one,
Meanwhile, entrepreneurs have to contend with losing everything, property, belongings, family-life, reputation, credit, etc. On the other hand, up until the entrepreneur closes shop, and the employees are pink-slipped, the employees benefitted (in a rather ironic reversal of the zero-sum-game) from the receipt of wage income in gross excess of their contributions’ actual value to society which may in some extremes be 0 or negative.
while the rich owners benefit from lenient bankruptcy laws.
This is a clear-cut example of “poisoning the well”. First, the assumption that the entrepreneur is rich ex ante (or some other primitive accumulation nonsense), the corollary to which of course is the use of “rich” in pejorative [1]. Whatever. Furthermore, the assumption that lenient bankruptcy laws exist to the benefit of the entrepreneur is not really a slam-dunk, and is a statement to which I could offer at least one serious objection [1].
Profit, which in a freed market may accrue to the controlling interests of any factor of production (i.e., land, labor or capital) is indeed justified by entrepreneurial risk. In a freed market, anyone who undertakes any productive endeavor is an entrepreneur. Some may choose to take the relative security of “wage” labor in lieu of pure entrepreneurialism (i.e., the net of my revenue less expenses is my “profit”), but I submit that under these conditions, these individuals are no less entrepreneurs. The only distinction is that they prefer the relative security and stability of a certain type of employment, to other arrangements.
The problem is a disparity between “profit” and “wages”, the result of a perversely unfree market.
1. Of course we know from observation that many entrepreneurs were not rich by anyone’s definition, when they began their undertakings. And we also know from observation, that many entrepreneurs (the vast majority, really) ultimately fail, and never become “rich” enough to vilify. Even if the entrepreneur is “rich” to begin with, this descriptive fact alone says nothing about the legitimacy of his earned, acquired, or found position of wealth with regards to any other.
2. Since the counter-party in any bankruptcy filing consists of either another “rich” entrepreneur, or a banking cartel, it would seem that however lenient are the bankruptcy laws, they result in a total wash. (Unless it could be demonstrated that the bankruptcy laws also are detrimental to the non-entrepreneurs. Plausible? Perhaps. But this argument was put forth, and so I’m not contesting it.)
Uh, okay. You haven't really made any defense of profit, though. All you said was that bankrupcy is worse than I said (a matter of opinion) and that entrepreneurs bear risk (no duh).
I don't think it needs a "defense". Just remove the stigma that "profit" is evil, when in fact "profit" is the natural and originary return to any successful undertaking, in a free market.
No, profit is neither natural or the result of "success," unless you call exploitation a success. Profit cannot exist without exploitation.
Yep. Mutual exploitation.
There is no such thing as "mutual exploitation." In fact, no such thing exists.
I assure you that I am exploiting my employer, and I hope my employer is exploiting me.
If you seriously believe that as a worker you have enough power to exploit your employer, you are under the spell of a serious delusion.
It is likely that your employer is stealing 3/4 or more of your full product for the privilege of having a job. Even if you steal from your job (which I assume you do, since it's pretty much the only "exploitation" any worker could do), I seriously doubt that you can make up for a small fraction of that.
I don't want you as a boss!
That's empty rhetoric, and especially so in light of the explanation and definition of "profit" that I gave in the OP.
Your whole entry was empty rhetoric. You have made no defense of profit, just decided by fiat that it was good.
Apparently you have now gone to the dark side. You don't deserve that black flag any more.
There's a qualitative difference between "profit" which is natural, and economic rent, which is obtained (one could argue, in many cases) through some form of exploitation.
You have chosen (willfully or otherwise) to equivocate these two distinct phenomena. I have not. And for this, you're accusing me of being some sort of phony? Quite charming, indeed.
I have not chose to equivocate them. I believe they are one and the same phenomenon. I believe profit is as "natural" as monogamy.
I'm accusing you of being a phony because you are speaking up in support of exploitation while waving the black flag.
It appears we are working with very different definitions of "profit", and if you are unwilling to use any definition but your own, up to and including the belief that profit and economic rent are the same phenomenon, then there is no room here for discussion. I say this not to dissuade dialogue, I only mean to suggest that under such circumstances, dialogue is not really possible.
There's nothing in the post above, and next-to-nothing in the entire corpus of my work, that could reasonably be construed as "support of exploitation."
What's your definition of "economic rent"?
I will get back to you on this, I've another post in the works on this topic.
No problem!
"You don't deserve that black flag any more."
Humm, this seems too harsh for me, even if I agree with you in substance, François.
There is Zero Exploitation, so long as all parties do the deal voluntarily.
If you freely agree, you are not being exploited.
"If you freely agree, you are not being exploited. "
Voluntaryist bullshit.
You have no choice but to work in the corrupt capitalist system in order to live. I freely agree to do so because I have no choice if I want to live. The capitalist owners take a large part of my full product, because I've got no recourse against them.
To say that I am not being exploited because I chose I wanted to live is insulting and imbecilic.
It seems that you two are using some definition of exploitation that I don't subscribe to, which attaches a negative connotation to the word.
Furthermore, Francois, it's hard to argue with you if you simply contend that the division of labor (along with property rights, apparently) would break down absent a state. I'm no psychic, but I fervently hope you're wrong for everyone's sake.
"It seems that you two are using some definition of exploitation that I don't subscribe to, which attaches a negative connotation to the word."
Oh, give me a break. You must be gravely disconnected from the world.
"Furthermore, Francois, it's hard to argue with you if you simply contend that the division of labor (along with property rights, apparently) would break down absent a state. I'm no psychic, but I fervently hope you're wrong for everyone's sake."
Capitalism is not by far the only means by which one can have division of labour, not withstanding the fact that division of labour is not that great of a thing to begin with, at least if taken to its logical conclusions.
You're right about property rights, but that's another issue.
"You must be gravely disconnected from the world. "
Perhaps, but at least I am connected to a standard dictionary.
"…division of labour is not that great of a thing to begin with, at least if taken to its logical conclusions…"
Oooookay…. Wow. You know, after poking around and doing some reading about you, I think I'll stop wasting my time at this point. Thanks for the (somewhat bewildered) laughs.
By the way, it's cute how after each reply, you "+1" yourself. Downright charming.
Wow, bumping my comments so you can then accuse me of it? You're an idiot.
And pretending to be scared off by an Anarchist commenting on an Anarchist blog?
You are a pathetic poser. Get a life.
Discussions/arguements lose a lot of credibility when people start calling names/etc.
Furthermore, employment is voluntary. If you have a problem with employment, produce your product on your own and sell/trade it. It's even easier now than ever. The problem is, most people do not want to take that inital risk. It's simply easier to get a job for a steady return on your mental/labor capital.
Also, most profits (and I'm assuming you mean net income not just revenues) are used to reinvest in a business, to expand, pay back debt acquired to even start the company, and saved for bad times like these economic times. Here's a great example. A sole proprietorship. You are your own employer. Do you pay yourself 100% of your profits? Absolutely not. And if you do, I'll show you a soon to be failure.
Additionally, you should be exploiting your employer. I do every day. I take advantage of the decades of knowledge from my employer and clients and improve myself constantly and not on my personal time, but on my employer's time and their dime.
"Discussions/arguements lose a lot of credibility when people start calling names/etc."
I don't care how credible you think I am. I'm not on your side.
"Furthermore, employment is voluntary."
I never said otherwise. It only proves that voluntaryism is a bankrupt principle, and that you are operating on the basis of a bankrupt principle.
"If you have a problem with employment, produce your product on your own and sell/trade it."
So your "alternative" to capitalism is… more capitalism?
You're a genius.
"Also, most profits (and I'm assuming you mean net income not just revenues) are used to reinvest in a business, to expand, pay back debt acquired to even start the company, and saved for bad times like these economic times."
Thank you for the business lesson, but I already knew that.
"Additionally, you should be exploiting your employer. I do every day. I take advantage of the decades of knowledge from my employer and clients and improve myself constantly and not on my personal time, but on my employer's time and their dime."
Good for you. Too bad you're a sap and aren't going to use that knowledge for any subversive end.
That's done automatically by the comment system for all registered users.
Come to think of it, Francois, your use of the word "profit" is nonsensical, here and more especially in your own blog. When I use the term "profit," I am speaking of any advantage gained by a certain action (more specifically, it usually refers to a monetary gain caused by a certain market interaction). Without profit, in the sense above, thee would be no market interactions.
But what exactly do you mean by the word "profit"?
Hey I randomly found your blog and I'm glad I did. Very interesting stuff! I'm a conservative writer/grad student/blogger in Chicago (rjmoeller.com). Keep up the good work!
I countered the argument from risk in the past if you care for it. For the record, I agree with Tremblay that profit is based on exploitation, ie the worker earning less that their fair share.
Maybe I'll check it out… Tremblay may be erroneously jumping to the conclusion that my argument is in defense of the current state-capitalist system.
Perhaps my own post needs some tidying up, some clarification, but the crux of my argument above is that in a totally free economy, the natural return to labor is "profit." If you (or Tremblay) want to attack that thesis, you're welcome to do so.
Depends on what you mean by "natural" and "profit" because for me there's nothing "natural" about a free economy and "profit" means all surplus value that remains after the costs of an capitalist production have been paid (ie static & variable costs).
There's nothing natural about an economy free of plunder and coercion? No, sir. Freedom is the default. Any situation in which people are not free to produce in accordance with their needs and abilities, and to exchange voluntarily (without coercion) the product of their own labor with the product of others' labor, is unnatural.
Profit is not unique to state-capitalist production. Profit = Revenue – Expenses. If you enjoy greater satisfaction with the product of your labor, than you would have with the factors of production individually, then you have profited. This applies to syndics, cottage-industries, etc., as well as to the current economy, except the latter is really quite bastardized (and therefore deserves contempt).
If you combine yeast, flour, water and heat, and some other sundries, you'll end up with a loaf of bread. If you believe that the loaf of bread is more valuable than the sum of its constituent parts, you experience the phenomenon of "profit" when you consume the bread in lieu of the water, yeast, etc.
In the sense you're using "natural" in this sentence then, the natural state of society is a communal living, as this is what naturally occurred for tens of thousands of years before human civilization came to be the norm. But you do not mean this by "natural" of course. You're assuming laws of private property as being somehow "natural" and innate to all humans which is very far from the reality.
In which case any form of capitalism would be unnatural as passive coercion is in the system.
In which case as expected you're simply using a different definition of profit than I am. There's no point in playing the definitions war so we can simply go by your definition. What you say profit, I would call surplus value in which case I would agree and point out that in fact, a labourer in a capitalist economy does not earn what is "natural" as part of his "profit" is appropriated by the non-labouring capitalist.
For the last 10,000 years humanity has lived in more-or-less war-like existence, city-states, fiefdoms, kingdoms, nation-states, etc. So what? The mere fact of history tells us nothing about whether such an arrangement is proper.
I do not dispute that the pre-historical state of society was communal living. It may very well be the best we can do, but the mere fact that history played out in such a manner is neither evidence that communal living is the optimal form, nor is the only justifiable form, of human society.
I do not think the assumption of "private property" (as nebulous as that term often is) is necessary, only some understanding as to what one may justifiably do with regards to another's life.
Additionally and for the record:
In that case you have no basis to claim anything as "natural"
On the contrary, the type of property that a society has is THE defining aspect of it.
I did not say that you are defending currently existing capitalism so don't be too hasty to jump the gun. However you cannot consistently support wage-labour (The defining aspect of the Capitalist mode of production) while claiming that the natural reward of labour is its surplus value.
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I've argued against entrepreneurship in my own article. The current thread however is about the rest of my comment which you've felt the need to address.
By "natural" I do not mean "that which has been historically observed". Substitute "unimpeded" for "natural." So, I can say with at least some degree of certainty, that there are things which would naturally (in the unimpeded sense) occur. That these things do not happen as frequently is evidence that other factors within the system impeding what would otherwise be.
In context, above, then we can conclude that in the absence of contravening forces, the "natural" reward for labor is surplus value, where same has been created: Certainly, insofar as one is capable of adding value to objects with his labor, the natural (unimpeded, unmolested) reward for one's labor, as in a Robinson Crusoe economy is surplus value, i.e., profit (Revenue less Expenses/opportunity costs).
Now, if the laborer were to receive the full product of his labor (assume for the sake of argument that this is the case) then within certain broad parameters (i.e., not killing, raping, thieving, etc.), who's business is it (at all) to say what he may or may not do with that product, once produced?
Unless you base this on (current or historical) observation then you really can't.
Sure, but you may find that on some occasions, getting on the same level on what constitutes "surplus value" may be tricky (eg on cultivation of land)
Again, it depends on what the laborer claims is his rightful surplus value. For example, if the labourer were to claim permanent ownership of a piece of land because he put his labour on it, this would go beyond his surplus value which is really the end result of his cultivation (food products probably).
If you can't even define surplus value (and I'm not asking you to do so, you're admitting freely that in you can't define it) then how can anyone ever conclude that any particular laborer has been justly rewarded?
Assume for the sake of argument that his rightful surplus value can be objectively defined and that it is furthermore a reward which all agree to be adequate, fair and just.
Under this assumption, what business is it of anyone else to say what he may or may not do with the fruit of his labor?
Not really. I'm saying that there will probably be disagreement on this point between us. I say that surplus value is whatever is created by the worker's labour.
It isn't.
Then is it not possible that a laborer, under the circumstances set forth above (wherein it is nobody's business to dictate what he may/mayn't do) may produce of his own labor a capital good?
What to do about that?
Nothing? The labourer can only use the capital good himself or sell it.
So, he's not allowed to rent it? To loan it conditionally to a friend or neighbor
No. It is exactly because of this that I said "the type of property that a society has is THE defining aspect of it"
You're suggesting two things that are inherently anti-liberty:
1. I am not allowed to offer some of my belongings for temporary use, to another individual.
2. No other individual is allowed to offer some of his belongings in exchange for temporary use of one of my belongings.
How is it possible to prevent two individuals from participating in a 100% voluntary transaction, without resorting to violence?
1. You are. Just not as usury (ie rent, wage-labour, interest)
2. Again, this is allowed. What is not allowed is to consider to own something you do not use.
And again, this is not about preventing individuals from participating in such a transanction but to convince them not to. If we are to reach a libertarian society, then this kind of mentality will be built up as we progress towards it. It will be internalized.
As such, if you want to find people who will labour for wages for you, you'll have an impossible time. If you grab some land and decide you want to rent it instead of using it, you'll find people opposing you etc.
I've written about this before
I may be moving some of my responses to stand-alone posts. This comments page is getting mighty crowded.
"n a freed market, the return to labor is profit, when workers produce and sell products, what they receive in exchange for their production is sales revenue, not wages. Any net income (over and above their expended outlays) resulting from these sales is profit, not wages. In a truly free market, we’re all entrepreneurs. The degrees of risk we each accept in exchange for certain returns, of course, will vary widely by individual case."
It's not a real defense of profit.
sounds to me like someone doesn't like the sound of free market arbitrage.
In fact, I'm an anti-capitalist free-marketer, somewhat like mutualists. So, I have no problem with free market arbitrage.
I'd put myself in that camp, too. Perhaps others might disagree with this self-description, but IMO it describes my POV as accurately as any other out there.
An Anti-Capitalist? I thought you were more of the Rothbardian type.
I appreciate Rothbard's work as a monetary theorist and as an economic historian, those being the areas of his work that I've actually read.
It seem that you're more intelligent than Cork!
"the rich owners benefit from lenient bankruptcy laws. "
I agree with François. Thief is often justifiy by so-called "bankruptcy"!
"The workers receive income for their production even if the ultimate product turns out to be a dud and generates 0 revenue. "
And the workers recieve the same fucking low salary even when big profit occurs….
If such circumstances persist absent state-capitalist coercion (and I'm not suggesting that they would), wouldn't it be appropriate to conclude that they prefer it this way? That they might possibly prefer the reduced but regular stream of income to the very real possibility that a slow week (or two) would put them helplessly behind on credit terms, or some other financial catastrophe?
Yeah, in the free-market (even if it's the proprietarian type) context, this situation would be less bad than in a capitalist context.
But again, I consider profit as a non-criminal vice. Workers should have the right to all the compensation for their production.
From which it necessarily follows that they should have the right to dispose of that product as they see fit?
Yes, if bosses and workers aren't in an hierarchical scheme.
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