Thursday, April 17, 2014

The Labor Theory of Value and American politics

Republicans keep asserting that there are too few net taxpayers and too many net tax recipients. Alongside democrats, they also assert that people are too lazy, and unemployment is too high.

Unintuitively, republicans are promoting an extremely Marxist viewpoint.

To simplify, let's use an ideal example society. In Nation A the top 10^-4 percentile of wealth holders own all but 10^-2 percent of the economy. IE, one person in a million owns 9999 units of wealth for every ten thousand units of wealth in the nation. Despite the wealth gap, the bottom sixty percent and bottom one percent in Nation A are both richer than their equivalents in America. Let's also add that the government is wildly popular, so, for the most part, it can do whatever it feels like.

Nation A has a government and uses some means of force to garner some amount of wealth.

Who should it gather it's funding from?

A populist would, almost by definition, target only the hyper rich. To understand the mechanism at play here, consider RPG A. In RPG A, you kill monsters, reach bosses, and earn levels, get new abilities and repeat. In the early game, you only have one or two abilities. Later, you can choose between hundreds of abilities and use upwards of twenty at a time.

If you were a game designer, planning on putting a boss with high stats relative to the player, where would you put it?

In the early game, the player is helpless against this monster. Since he only has two abilities, he only really has around 3 attack patterns. Or maybe six, or ten. He can rely on ability A, or B, or some combination thereof. In other words, the game designer must ensure one of these ten attack patterns will win the fight. Most likely, a early game high stat boss, would have to have special rules written into his mechanics that ensure he'll die after some specific dance.

Late game, the player has far more options. With literally trillions of attack patterns, millions of viable strategies can exist even for a highly skewed encounter.

In many RPGs, the early game is easy. The mid game is often the hardest, and contains the best gameplay. And, the end game is actually relatively easy. This is because-

Early game- the player is presented with few options. As such, he can simply try every option, and thus win every fight. At least one option must work.

Mid game- The player has more options. Enough that trying them all isn't viable. Bosses can be powerful, and the mechanisms to defeat them might not be all that obvious.

Late game- So many options exist, that even in difficult situations, there is probably a set of options that clearly and fully apply to the situation at hand. Abilities work together in strange ways, multiplying the player's power to extreme levels.


This world isn't so different. A poor person can beg, look for manual labor, or learn some marketable skill. Without any capital, his income is limited. However, a rich person has geometrically more options. He can found a company, or buy one. He can move to other countries, or at least operate a business abroad. He can invest his money. He can buy physical goods such as housing, solar cells, 3d printers, etc. that replace the need to spend anything.

Progressive tax systems are, therefore, intellectually intuitive. For a government that simply wants to collect funds with which to pursue its various pursuits, without causing too many side effects, progressive taxation is the clear and obvious solution.

However, most people oppose that setup. They either want to achieve some goal or other through taxation, or they wish to adhere to some arbitrary moral law not grounded in any form of utility.

To start with- fairness. Many people would claim, even if only one point of wealth out of 10^10000^10000 belonged to the bottom 99% that everyone should still pay an equal share of their wealth.

There is no reason why a fair society is necessary or desirable. Even if fairness is accepted, a priori, as a moral good, it should not infinitely outweigh other possible benefits. For instance, if the bottom 99% don't pay taxes, they might feel better on tax day. Or, if the system puts more weight overall on the rich, starvation might be reduced.

Setting that aside, a non-progressive tax system is, generally speaking, unfair to the poor. Or, to put it another way, the rich receive a disproportionate percent of the benefits.

Unless the poor receive massive welfare checks (in which case, why tax them to begin with, if you're just going to give it back?) we can assume most spending is on, general welfare. AKA infrastructure, law enforcement, military, environment, etc.

But, the police are protecting orders of magnitude more for the wealthy than the poor. In fact, the very lives of the wealthy are more valuable than the poor, so just keeping everyone alive is charity to the rich. (If, other factors being equal, a rich person's life isn't, to at least some degree, more valuable than a poor person's, then wealth itself is a joke, and our debate can end, since any and all tax systems are equivalent.)

For a poor person, typically, a change of government isn't that big a deal. Sometimes it's even an opportunity. For the rich, it's normally a disaster. Hence, the military can be thrown in with the police.

Even roads and the like, serve the rich more than the poor, since they travel further, and send freight over more miles.

Even education tends to serve the rich over the poor, since:
A- the rich are smarter and better learn high end material.
B- Education is, fundamentally, learning things that would make your labor more valuable to a rich person.

In the end, the rich just have a larger economic presence. So, any activity that improves the economy, improves the wealth of the rich over the poor. And, even programs like SNAP which ostensibly favor the poor, often transfer very little actual wealth, since the poor have to use their SNAP benefits to buy from stores and farms owned and operated by the rich.

A "Fair" tax is incredibly slanted against the poor.

Setting aside fair taxation, we finally reach social engineering.

Namely, taxes are used as a tool, to force the poor to earn more. Of course, the reverse is also true- spending is allowed to benefit the rich, but not the poor, because the poor might be incentivized to stop working if they had more wealth.

This viewpoint is basically parallel to that held by democrats. Both believe in the virtue of labor, and etc.

The difference between republicans and democrats, is that the republicans believe that poverty is caused by the poor, and the only way it can be solved, is through the poor's own actions. Democrats tend to favor vicious cycle models, and propose increases in education or whatever, to break the cycle.

Each version is kind of stupid but not entirely wrong.

The republicans are supported by iq, inherent differences in personality and the general availability of social mobility.

However, republicans miss that, even a super genius, hard working entrepreneur, cannot catch up to what Warren Buffet makes, simply through common sense investments like Coke, Chevron and Walmart.

Basically, the republican idea that anyone could become Steve Jobs if he was smart/rude/entrepreneurial/etc. is just as absurd as the democratic notion that anyone could become Steve Jobs with enough luck and funding.

That said, programs that improve employment, are rarely, particularly regarding republicans, presented as mass spigots of Steve Jobs. Getting more people to become janitors will reduce the amount of people who become ultra-rich, because the career path is, by its nature, a dead end, or at least, far too slow to reach any meaningful goal. Thus, from the perspective of Steve Jobs mass production, it is a mere distraction.

And yet, both parties support an increase in low wage jobs. So, they don't want simply to inflate the ranks of the elite. They want to maximize the earnings of the poor.

Herein lies the absurdity-

The reason a rich person's life is so valuable, usually has little to do with his internal world. Rich people are not particularly moral people, nor are they all Plato. They're rarely even particularly happy. Rich people are valuable because they affect poor people. Namely, given a choice between saving one genius surgeon, and ten poor people, the surgeon may be correct, but only because he will, if saved, perform more than ten life saving surgeries that would have otherwise failed, or not have been attempted.

A poor person's work is practically worthless. The lowest 80% of Americans own around 15% of the nation's wealth. In regards to stock ownership, the bottom 80% own 9% of the nation's wealth. Around two thirds of the bottom 80%'s stocks is owned by the 60-80% group. IE, poor people own very little, and most of what they do own, are just the prerequisites of their own consumption, namely, housing.

The nation's productive assets are owned and operated by the rich.

This is a clear declaration by the market that the efforts of the poor mean nothing to it.

Yet republicans refuse to simply trust the market. (of course, democrats never even claimed to trust the market.)

They instead cling to the labor theory of value, and assume blindly, that somehow, the work of janitors across the nation, magically produce a hundred times what our system of measurement says they produce.

This is like asserting that a room must be hot, because the heater is on.

It is a logical absurdity to ever, use an inferior correlant when a superior correlant is available. In turn, it is absurd to state that a person's labor is worth X, when the market has clearly stated that it is worth Y.

That said, a poor person's time, spent, not working, is as valuable as any time, spent not working. Since, production exists for the sake of consumption (practically by definition) consumption must be valuable in order for production to be valuable.

And yet, the general political consensus, is that, everyone should do an equal quantity of work.

Why?

Usually, the people espousing these arguments do not claim that janitorial work is uplifting and a necessary part of a fulfilling life. They cite economic reasons.

In essence, this is the labor theory of value. The statement that, people are working, so it must be productive.

This assertion, is easily testable.

Reduce the availability of low wage workers.

Either, wages will rise, because the work is actually valuable, so people will pay for it. Or, the work will cease to be done, because it never mattered to begin with.

There are many ways to reduce the availability of low wage workers. One of the most direct would a higher minimum wage.

Republicans consistently repeat that a higher minimum wage would raise unemployment.

How about they listen to their own logic, and stop complaining that the poor don't do enough for the nation? (that there are too many tax recipients compared to tax payers?)

The poor can't do anything for the nation.

The republican idea of fair taxation, is just as Marxist as the democrat's tirades against income inequality.

The political debate will maintain its absurdity, until a faction emerges, that does not pursue arbitrary equality of results between unequal original data. IE, until marginal utility replaces the labor theory of value.