Off-shoring is not a black and white issue.

It’s neither categorically wrong, nor categorically acceptable. In its purest form, off-shoring is simply the international division of labor, and although I prefer to think of things not in terms of nations and borders, the concept of divided labor really is morally neutral: no better or worse than the division of labor between you and your barber, or your butcher, or your ISP or the guy who changes your oil. Smith noted that you could open a vinyard in Scotland, but the grapes would be awful and the wine terrible unless you spent an enormous sum on greenhouses. But why do that when you can grow perfectly good grapes in California, the Loire Valley in France, Traverse City MI, etc.

What about profits going overseas and vice-versa?

On both sides of the aisle people complain about “profits going overseas”.  For instance, they don’t want you to buy Toyota cars because the “profits go to Japan”.  Hypocritically, many people (let’s call them Republicans) also consider “free markets” the environment in which American giants of industry can continually exploit cheap labor in developing economies while slashing labor in the US. You can’t have your cake, and eat it, too.

There’s nothing necessarily bad about someone (foreign or otherwise) who’s willing to sink millions/billions in to capital investments, creating jobs, infrastructure, and productive capacity. So even if you buy in to the argument that the “profits are going overseas”, the infrastructure, the knowledge base, and the employment is happening here and you need to reckon that. Besides, they created the jobs and opportunities, and so they are entitled to profit (there are serious objections to why we depend upon the grace of a privileged few when it seems we ought be able to provide for our own well-being; these are presently outside of scope). That’s how it works.

But the last I checked, Toyota was publicly traded. If you want a slice of Toyota pie, just call your broker and place an order.

But that’s not how off-shoring really works. Is it?

So far we’ve been talking about off-shoring in its purest form. Actually existing offshoring is quite often another story altogether and this is where we need to start examining those objections to which I alluded, above.  A critical examination would fill many volumes.

The reader’s digest version is: transnational companies are able to offshore mostly because of US imperialism and the remnant of European colonialism which basically pillaged the resource-rich countries now known as “the third world”.

When you start peeling back the layers of this rotten onion, what you’ll see (if you can fight back the tears) is a system in which you and I are expendable.  On the backs of our labor, Uncle Sam bails out the banks that caused so much havoc.  We pay for their mistakes, but don’t profit from their success, instead we chase higher and higher prices caused by inflation.  It is a system in which you & I pay taxes to fund a military force which keeps the volatile “third world” safe — safe for the very same profiteering corporations (which our taxes also subsidize) who continue to off-shore the jobs that used to be ours.

We’re paying for (and many of us don’t even know it) an empire which is jeopardizing our well-being, our livelihoods, and our security.

A dollar an hour to park in royal oak..I bet businesses love that…not! (via Twitter)

If I had my druthers, the city would stop collecting property taxes and say to all the people and businesses: “You figure it out. The roads, the parking lots, the meters, they’re all yours now. Do with them (or not) as you wish.” So, this is not a defense per se of the proposed increase.

With that qualifier out of the way, I responded with a little Econ 101 knowledge: especially on a Thursday-Friday-Saturday evening, they could easily charge $3-4 per hour that much and there would be no shortage of people willing to pay. This is fundamental economics: when the price of a good or service is set lower than the market will bear, there will be a shortage of that good or service vis à vis the number of people who want to consume that good or service.

If parking were nominally “free”, it would be even more difficult to find a parking spot. Right now, parking is inexpensive, at fifty cents per hour during normal business hours and it’s still very difficult to find a parking spot. This is the number 2 reason why I don’t visit Royal Oak.

The number 1 reason is a preponderance of douchebags. I think the douchebags are attracted by low parking fees.

Stephen responded that, “As a rule, merchants resist parking price increases… they have a tendency to drive away business, but your point is well-taken.”

The notion that these customers (the same people who gladly pay $6 for a pint of beer and $190 for a pair of jeans) are going to be off-put by a 25-cent per hour increase in the meter fees is as retarded as a football bat, by the way.

Let me rephrase that: The business interests downtown oppose any change to this fee structure which would result in them bearing a greater amount (i.e., their fair share) of the burden for maintaining public parking lots in the city. The taxpayers in the City of Royal Oak are providing corporate welfare to the businesses in Royal Oak, predominately in the city’s downtown district. It is a direct transfer of wealth from the people who live and pay taxes in Royal Oak, to the people who only visit Royal Oak.

In a free market, there would be no taxpayer subsidized parking lots just like there would be no taxpayer subsidized bank bailouts, because there would be no taxpayers in the first place! How the parking situation might resolve itself, if I had my druthers (see above) is anyone’s guess. Here are a few options:

• Parking lots could be strictly private: belonging to a person or group of people who may (or may not) choose to explicitly charge for their use.
• An independent parking lot would probably charge daily or hourly fees to maintain the parking lot.
• A restaurant might charge a daily or hourly fee for entry, and validate the charge (or a portion thereof) for any restaurant patrons, or a restaurant might keep the lot for patrons only, building the cost of maintenance/upkeep in to their menu prices, just like they do with the amortization costs of the establishment proper.
• Or parking lots could be communally owned and operated — perhaps by a group of neighbors/citizens, but more likely by a group of commercial establishments with less absolute need for parking lots may pool resources together and establish shared lots, perhaps managed by the group or by a third party.

But instead, we have this pseudo-marketplace where the state or city zoning board sets (more-or-less arbitrarily) a uniform price for all places & times. The fact of the matter is that, although business interests may unanimously oppose fee increases, raising the parking fee is not necessarily “bad for business” or “bad for downtown Royal Oak”. The effects either way are probably de minimis, but I would argue that at least on principle of basic economic theory, subsidizing parking lots is a harmful distortion to market prices.

The results: parking is a clusterfuck during weekends and high-traffic events, and there are too many idiots wearing Ed Retardy jeans and fist-pumping all night long in sunglasses after dark.

The former justifies all manner of economically backwards, window-breaking make-work schemes; the latter represents the exchange of value for value, of productivity for productivity.

What you are willing to pay is determined your disutility of labor.

A cost is what you give up in order to obtain something else.

A price is the cost of something that you didn’t produce.

All costs are opportunity costs.

That is all.

Menger makes it abundantly clear, however, and takes pain to repeat himself on several occasions in Principles, Ch.3, that no such property or characteristic as “value” exists in the first place.

Value is therefore nothing inherent in goods, no property of them, but merely the importance that we first attribute to the satisfaction of our needs, that is, to our lives and well-being, and in consequence carry over to economic goods as the exclusive causes of the satisfaction of our needs…

The value of goods is therefore nothing arbitrary, but always the necessary consequence of human knowledge that the maintenance of life, of well-being, or of some ever so insignificant part of them, depends upon control of a good or a quantity of goods…

[Value] is a judgment economizing men make about the importance of the goods at their disposal for the maintenance of their lives and well-being. Hence value does not exist outside the consciousness of men.

At a glance then, it is not the Subjectivists who are guilty of equivocation. It is exactly the opposite.

The problem for Jones is that, since he requires daily fish to survive, he can’t forgo his current production in order to invest his time otherwise in the development of this tool. Jones mentions the idea to Smith, lays out his plans and estimations and asks to borrow two fish in order that he may bring his invention to fruition.

Smith agrees to advance Jones the two fish he requires, but on condition that he repay him two plus one fish (despite the fact that smith does not maintain any position of “authority” over Jones on the island, according to some, Smith is guilty of usury); the extra fish being pledged in good faith because both men know that Jones’ invention may not work. In effect, he says “I will give you two fish, and you will repay me with three fish because there is a non-zero probability that you will be completely unable to repay me, in which case, although I will ask for a good-faith payment of whatever you can afford, we both lose. I accept only your promise in exchange for bearing this risk, and also for advancing your sustenance during the time you devote to your invention.”

Jones begins production forthwith, and after a day, has created a primitive net. Let us assume that this net then allows him to catch seven fish in one day, after which its useful life is exhausted. On the morning of the second day, Jones consumes the second fish loaned to him by Smith, and sets out to go fishing with his new net. He catches seven fish before the net falls apart in the surf. Of his bounty, he repays Smith the two plus one fish, four remaining to himself.

Smith: I could have enjoyed two days of repose immediately, but loaned my excess instead, realizing a gain of one. Now I may enjoy three days of leisure in the future.

Jones: Although it requires only two to produce, its value-add is five.  I paid three therefore realizing a gain of two; now I may enjoy the “weekend” for once.

Both men are better off as a result: Smith needed only work five days this week (as a result of his previous thrift), but works four instead. And Jones who otherwise would’ve worked seven days, works but five.

Question 1: What justification is there, if any, for denouncing the initial grant of loan (two fish to be repaid plus one)?

Question 2: The question of usury hinges upon some sort of exploitation. How precisely has Jones (or Smith) been exploited by the other, under the above scenario?

Question 3: At what price would the loan from Smith to Jones not be considered “usury”?

Concluding Remarks:

If both men enjoy their leisure to its fullest, their reserves will be exhausted and in order to survive each will be compelled by hunger to work the full seven days next week.

On the other hand, if they are wise and cooperative, they will in short time realize that they may obtain the same amount of food with far less effort in the following manner: Jones works twice weekly to produce nets, and Smith uses those nets twice weekly to catch fourteen fish, divided equally between them. Each man may then enjoy five days of leisure where he previously enjoyed none.

Marx imagines two sorts of abstract circuits of exchange: C-M-C’ and M-C-M’. In the former, Peter brings to market a commodity, C, and sells it in exchange for money, which he then uses to purchase another commodity, C’. In the latter, Paul brings to market money, M, and sells it in exchange for a commodity, C, which he then sells in order to obtain M’.

From the former Marx concludes that, “The circuit C-M-C comes completely to an end, so soon as the money brought in by the sale of one commodity is abstracted again by the purchase of another,” which is to say that Peter has exchanged one commodity for another commodity of equal value. In the latter circuit Marx objects to the “surplus value” created by capitalist Paul, who merely exchanged £100 for £110, the difference of £10 being “surplus value”.

Now let us examine the circuit M-C-M a little closer. It consists, like the other, of two antithetical phases. In the first phase, M-C, or the purchase, the money is changed into a commodity. In the second phase, C-M, or the sale, the commodity is changed back again into money. The combination of these two phases constitutes the single movement whereby … a commodity is bought with money, and then money is bought with a commodity. The result, in which the phases of the process vanish, is the exchange of money for money, M-M. If I purchase 2,000 lbs. of cotton for £100, and resell the 2,000 lbs. of cotton for £110, I have, in fact, exchanged £100 for £110, money for money

At least two objections come immediately to mind:

1. The M in C-M-C may at any time be either M or M’ in the circuit M-C-M, and that as such, these are not independent circuits but rather interlocking parts of a greater whole.
2. What Marx is really describing is an arbitrageur, although painted as a thief and usurer.

In the first instance, Peter does not keep the money he receives any longer than is needed for his own security. He may of course immediately effect the C-M-C by exchanging the money he receives for another commodity item. Or, he may enter into an M-C-M circuit, exchanging the money for a commodity, to which he adds his labor over a period of time, the completed product which he expects to exchanges for M’ in the future. The farmer, for instance, spends money M on the purchase of new seeds, stock and tools with which to work the soil, in hopes of selling them in the future for M’.

Is the lack of transformation (as in the example of the farmer) what riles Marx? If so, this is barely worthy of scorn: where the farmer creates value, the arbitrageur has at the very least prevented the destruction of value, thus allowing its creator to realize value in exchange far greater than he could’ve on his own accord. The “capitalist” function in this instance is, if nothing else, Pareto efficient. One must not lose sight of the fact that the arbitrageur performs a valuable service of allocating scarce resources across an economy. Without the “capitalist” in Marx’s M-C-M circuit, the commodity is sold at a steep discount (if it is in-fact sold at all) and the most urgent need as measured by opportunity cost remains entirely unsatisfied. The problem of “surplus value”, posed by the M-C-M appears only as a result of Marx’s imaginary demarcation.

In the real world, C-M-C and M-C-M, are indistinguishable parts of a complex economy, in which economizing individuals are to some extent, constantly in the midst of performing both roles.  Even Marx’s vulgar capitalist holds and acquires money in order to satisfy some future need to consume.

Or, to put it another way, even the vulgar capitalist, at some time in the past had to provide valuable goods; he had to contribute materially to the economy in order to earn that first chunk of money, which Marx scorns.  What he does with it after that is of no man’s concern but his own.

In times long gone-by there were two sorts of people; one, the diligent, intelligent, and, above all, frugal elite; the other, lazy rascals, spending their substance, and more, in riotous living. The legend of theological original sin tells us certainly how man came to be condemned to eat his bread in the sweat of his brow; but the history of economic original sin reveals to us that there are people to whom this is by no means essential. Never mind! Thus it came to pass that the former sort accumulated wealth, and the latter sort had at last nothing to sell except their own skins. And from this original sin dates the poverty of the great majority that, despite all its labour, has up to now nothing to sell but itself, and the wealth of the few that increases constantly although they have long ceased to work.

This condemnation neglects to account for entrepreneurial failure in a competitive economy, rather, it assumes that capital itself is self-perpetuating: having become possessed of capital one need only sit back and watch wealth multiply (violating the laws of thermodynamics, the idea of self-perpetuating capital is so patently absurd as to deserve no further consideration).

Marx ignores competition between capitalists in a free market (the type of place no “Capitalist” wants to be!), the basis of which should tend towards generally less “exploitative” working conditions, as it would be in any individual capitalist’s best interest (economically speaking) to deviate from the oligopoly’s practices, and therefore even in light of primitive accumulation, one must question how the the oligopoly came to exist, in the absence of a state or pseudo-state. Both Marx and Rodbertus before him observed that some members of the working class will accomplish success, and that these successes are occasionally to be tolerated by the capitalists in order to preserve the illusion of freedom, but as a general rule, he neglects the possibility of entrepreneurship among the proletariat, by means of which they may lift themselves from the alleged depths of poverty they are forced to endure.

And yet we know from experience, that individuals of humble backgrounds have created fortunes with little more than an idea, and that capitalists do fail: fortunes are squandered, resources mis-allocated, projects undertaken which never fulfill their plans of grandeur, etc.

In other news: Marx is damn near unreadable.